RI Comment: CA100+ needs to heed the calls for greater transparency

Today’s letter from campaign groups including Greenpeace, ShareAction and others is a wake-up call for the Climate Action 100+ initiative as it shifts into gear.

The initiative stems from a CalPERS project to target what were initially termed Systemically Important Carbon Emitters (SICEs) and has grown into without doubt the biggest and most coordinated investor engagement on climate change with companies yet.

RI has been covering it since before it was born and was there at its official launch in Berlin in 2017.

Another factor in the development of CA100+ was the Aiming for A initiative which had extraordinary success from 2012 onwards in corralling investors around agreed climate resolutions at BP, Shell and other oil & gas firms.

This highlighted two key elements. First that it was possible to herd cats (investors), and second, that it was possible to work with the boards of receptive companies to hammer out what in EU parlance would be called a “common position”.

As Helen Wildsmith, the CCLA Stewardship Director who spearheaded Aiming for A, would point out, the strength of the resolutions was in their “weakness”: they were “supportive but stretching”; non-confrontational and worded so that all parties could support them.

This inclusive approach built a culture of trust and a foundation for dialogue.

It is worth noting that Aiming for A itself built on the channel of communication that was opened up with BP by Wildsmith and Julie Tanner of Christian Brothers Investment Services to file a resolution in the wake of the Deepwater Horizon disaster.

At the time, almost a decade ago now, shareholder resolutions in the UK were – and still are – a rarity. There was a lot to learn, on both sides.

It is this spirit of trust that CA100+ is trying to retain target companies’ confidence by not running to the press every five minutes.

But we can attest that CA100+ lacks transparency. For an initiative of this magnitude, it can be frustratingly difficult to pin down. The NGOs have a point.

There can be times when a reasonable confidentiality slips into opacity. CA100+ needs to be wary of this.

Trust and confidence between companies and investors can become too ‘cosy’. Companies and investors have aligned interests. That is what the NGOs are highlighting.

We accept that CA100+ is a five-year project and that it should be judged on that basis. But it risks losing the trust – that word again – of the civil society groups that do so much work to lay the groundwork for investor action.Privately, some of the campaign groups will use less measured language than in the formal letter today, feeling that they are shut out of the process and in effect being pressurised. These issues have been building for some time.

I have asked some ‘big investors’ whether they feel that the oil companies are negotiating in good faith. The response has been that they are responding as well as they can in what one figure likened to ‘a game of chess’.

But that implies that there are ‘rules of the game’. However, campaign groups rightly keep their focus on the ‘issues’. They are noisy and disruptive and the mainstream ESG community, if we can call it that, can sometimes feel uncomfortable with this.

So what are we to make of the fact that BP’s annual meeting this year will be held in Aberdeen, the UK’s North Sea oil capital which is 800 miles by road from London, its financial capital and home to many of its investors? Coincidentally, it takes place on the same day as the Shell AGM – which takes place in The Hague, the Dutch capital.

Louise Rouse, the former ShareActioner who now runs her own investor engagement consultancy, tweeted that it was “Almost as if they are trying to make it impossible for people focused on both oil and gas companies to attend.”

There are clearly limits to this new-found ‘partnership’ between companies and investors.

Quiet engagement can be very effective. For example, ClearBridge is reporting that companies are becoming “increasingly more predisposed to reach out to us” and that they are interested in feedback “on everything from executive compensation to supply chain monitoring programs to environmental initiatives”.

The letter from the NGOs comes as there’s an increasing trend for big investors saying it is up to governments and policy-makers – and not investors – to solve climate ills. Witness Amundi saying recently that asset managers do not have the power to address global climate change risks. LGIM has today called for “clear and co-ordinated policy action”.

This is a highly nuanced argument – see our interview with the Amundi CIO Pascal Blanqué – but it risks the investment community being seen as “passing the buck”. It would be a tragedy (of the horizon) if CA100+ is not able to demonstrate its value to everyone.

“Companies are more proactive about meeting us halfway,” says Mary Jane McQuillen, ClearBridge’s Head of ESG in its new impact report.

Maybe CA100+ should do the same with the campaigners.