Pressure mounts on companies to allow annual climate vote at AGMs

Unilever, IIGCC and LAPFF are the latest to back the trend

Pressure has continued to mount on companies to let investors vote on their climate progress in recent days, with consumer goods giant Unilever pledging yesterday to amend its bylaws to introduce a three-yearly shareholder vote on the topic.

The £118bn firm says it will put its climate strategy on the standard ballot from next year, offering its investors a vote on its plans to cut all emissions from its operations and those of its suppliers by 2039. The move has been widely praised, although Andrew Behar, CEO of US campaign group As You Sow, said it was “disappointing that shareholders will not be able to cast a vote annually”.  

The move comes just days after the UK’s Local Authority Pension Fund Forum (LAPFF) threw its weight behind a new ‘Say on Climate’ campaign being led by billionaire Sir Chris Hohn’s hedge fund The Children’s Investment Fund Management, with support from NGOs ShareAction and CDP. Akin to the ‘Say on Pay’ vote that gives shareholders the right to regularly vote on the compensation of top executives, the initiative is pushing for more climate disclosure, planning and management, accompanied by an AGM vote. 

“It seems only right that on an issue that is so fundamental as this that investors have an opportunity on an annual basis to express their support, or otherwise, for the approach of the company” – Adam Matthews

“LAPFF considers that companies’ failure to manage climate risk presents a significant threat to shareholder value,” it said in a statement last week. “Members have been filing resolutions on environmental and climate issues since 1997. However shareholders’ ability to use their voting rights to specifically address climate change remains very limited at present time.” 

“The Forum believes filing resolutions at a limited number of companies of high carbon impact is no longer enough. All listed companies need to present a clear strategy for reducing their entire carbon footprint (across Scopes 1, 2 and 3) on which investors can vote on annually at the AGM.” 

The Say on Climate campaign landed its first victory last month, when Spanish airline operator Aena agreed to introduce the vote to its standard ballot. 

TCI has filed resolutions on the topic at seven firms, including rating agencies Moody’s and S&P Global, and Google’s parent company Alphabet. Hohn recently said he expected the ratings agencies to support the proposals. TCI is also pushing asset owners and managers to incorporate the concept into their investment and voting policies, and demand their asset managers file and vote for AGM resolutions.

Adam Matthews, Director of Ethics & Engagement Church of England Pensions and Co-Chair of the Corporate Programme for Europe’s Institutional Investor Group on Climate Change, told RI that “investors need to have confidence in the transition plans of a company”. 

“It seems only right that on an issue as fundamental as this, investors have an opportunity on an annual basis to express their support, or otherwise, for the approach of the company. The opportunity is for company management to receive the support of their investors to go further and faster. This in turn would address a concern that sometimes you feel companies are trying to ride two horses and being pulled in different directions. A vote will provide clarity to the Board.”

Former Bank of England Governor and current climate envoy to the UN, Mark Carney, has also expressed enthusiasm for the trend, saying at the UK’s Green Horizon Summit recently that annual shareholder voting on company climate plans “would establish a critical link between responsibility, accountability, and sustainability”. 

The push comes at a crucial time for shareholder rights in the US. Regulators appear to be clamping down on the ability of investors and others to file and support ESG-related resolutions at listed firms, with the Department of Labor finalising one set of rules on ESG voting last week. Another set of rules is expected from the Securities and Exchange Commission, which is seeking to increase the threshold for filing proposals. Having companies include regular votes on the ballot could be a means of circumventing such rules in relation to climate strategy.