Helen Wildsmith, then Head of Ethical & Responsible Investment at CCLA, had what she calls her “Clerkenwell Moment” in Spring 2011, when the idea for the shareholder proposal at BP “Aiming for A” popped into her head.
This wasn’t the first of her dealings with BP, of course. CCLA worked through several initiatives with the company just after the Gulf of Mexico disaster, mostly concerning CDP and the Climate Impact Group. Then, towards the end of 2010 she was working on a potential health & safety resolution with US church and charity investors at BP, but the company asked them to “have faith in Bob Dudley,” the new CEO. If they felt the company had not moved forward on the issue then it would understand if the group co-filed in 2012.
This level of cooperation, not just between shareholders, but with the target firm encouraged Wildsmith (who now has a strategic advisory role at the CDP) to work on a supportive resolution rather than an oppositional one. So she continued major negotiations with BP throughout the next 18 months or so and launched the shareholder coalition in 2012. She also initiated engagement with all 10 major European oil and gas companies to get all them to CDP grades of A and B. With each, there was always the possibility of a resolution, in the background.
Before describing how Aiming for A came about, it will be useful to discuss how shareholder resolutions, which are rare in the UK, get filed. There are two ways it can happen in the UK, either with a couple of large shareholders or a large collection of smaller holdings. “For example,” explained Wildsmith, “the top five shareholders in BP are BlackRock, UBS, Capital Research and Management, State Street, Legal & General, just two or three of these would have represented enough stock to file a resolution. The other way we needed a hundred co-filers but we still had to meet the minimum ownership requirement.”
The relevant section of the Companies Act 2006 is Section 338 and the requirements for a shareholder resolution are shares representing not less than 5% of voting rights, or there must be at least 100 shareholders with nominal holdings of not less than £100. The nominal value of a BP share is $0.25 so the 100 shareholders must have shares with a total nominal value of $10,000. NGOs, unions and charities seeking to file resolutions are most likely to follow this second route and this is where the coalition building came in.
There was collaboration with ICCR (Interfaith Center on Corporate Responsibility) in the US, the Swedish AP funds as well, and ICCR worked with many of the state funds.Eventually there were 50 institutional investors and co-filers from three partners who each had 40 large individual investors with them.
Wildsmith’s regular round of meetings with BP continued, of course; the large responsible investment meeting at the end of the year, with board and chairman involvement, the carbon risk roundtable meetings with engaged shareholders in the first half of the year. “On top of this,” said Wildsmith, “there were lots of working level meetings and calls, a couple of senior meetings, letters, phone calls, nudges.” Her main point of contact at BP was Dominic Emery, VP, Long-term Planning and Policy.
In mid-September 2014, with the coalition behind her it was decided that the resolution would go forward. “It took two months to write,” she said, “and we finished it in mid-November, testing the wording with BP and Shell all the way. Not that BP ever suggested wording – it was simply that we used these conversations to test ideas that would work for both companies [Shell included].” The two resolutions are as identical as they could be; only tailored slightly to match the companies’ own descriptions of their environmental disclosures. “If you’re feeling comfortable you’ve found a sweet spot for one major oil and gas, you’ve probably found the sweet spot for them all,” commented Wildsmith.
Once the resolution was written there were several meetings with BP’s chairman Carl-Henric Svanberg, and then, following a board meeting at the beginning of December last year, he told them the company would support the resolution, largely because it did not represent micromanagement but a joint strategic approach.
Once BP confirmed its support, the AP funds rapidly filed in April at Norwegian major Statoil, “And it’s a much easier process to co-file in Norway,” added Wildsmith. So, what’s next? “Discussions, no decisions yet. But we are working with the Investor Network on Climate Risk (INCR) and state funds to push the movement forward in the US.”
So, what happened to similar proposals in the US? Wildsmith noted that she was not in contact with As You Sow which filed at Chevron, where the resolution – to Adopt Quantitative GHG Goals for Products and Operations – was not only opposed by the company, it was also opposed by ISS. A similar resolution also failed at Exxon Mobil.
“It’s different in the US,” said Wildsmith, “largely because of geography. There have been many changes with proxy access but US shareholder resolutions tend to be oppositional not collaborative.
Regular conversations are just normal in the UK. Even the Houston Chronicle has been writing articles about how different it is in the US.” On the other hand with some companies supporting shareholder resolutions on proxy access in the US, Wildsmith asked: “Is there going to be a new normal?”
While there was enormous support for the Aiming for A resolutions from US investors, there is less traction for similar proposals at US companies. Julie Tanner, Assistant Director for Socially Responsible Investment at Christian Brothers Investment Services, which owns shares in BP and Shell, was among many involved in raising US investor support for Aiming for A. She felt that such resolutions did not automatically translate to the US – though that is not to say that progress is not to be made.
The ICCR’s Director of Communications Susana McDermott said that ICCR members have a lot more traction with companies than they have had in the past, largely due to its 25-year history engaging with corporations. Its relationships and discussions that are ongoing about human rights, for example, are much less adversarial than they once were. “Talking to a fossil fuel company, however, about climate change is a very different process.”
Anne Simpson, CalPERS’ Director of Global Governance, also commented that any US Aiming for A-style proposals would face a tough environment in the US due to the weak regime for shareholder rights.Conversely, shareholder resolutions requesting additional disclosures about climate impact have done reasonably well, even among oil and gas companies.
“It’s a dynamic situation here, but proxy access took its place last year,” she added, “and our campaign with the New York retirement funds focused on energy companies. Even at Occidental and ExxonMobil, we only lost by a whisker, but, at most of the others, the resolution passed. Our big focus has been on opening up these boards to climate competent directors and we see the initiative as complementary to the CDP.”
So perhaps the key is that in the US it will be “Aiming for B”, with “B” standing for “Board”. If investors can start to move the agenda at the board level towards accounting for and taking action on climate risk it might have even more profound effect than Aiming for A.
There is clearly some distance to go, however. At Exxon Mobil’s May annual meeting this year, in response to questioning by Sister Pat Daly, representing the Roman Catholic Sisters of St. Dominic of Caldwell, among others, CEO Rex Tillerson mocked climate change, saying that: “The [scientific] models simply are not that good”. He added that the company isn’t interested in diversifying by investing in renewable energy, saying: “We choose not to lose money on purpose.”
Paul Hodgson is an independent governance analyst.