Five influential institutional investors from France, representing €93bn in assets, will support the climate change resolution promoted by share-owning activist group Follow This at Shell’s AGM tomorrow, RI has learnt.
The investors are Edmond de Rothschild Asset Manager (€57bn AUM); Ircantec, the supplementary SRI pension scheme for the public sector managed by Caisse des Dépôts (€9.8bn); PRO BTP Finance, a social protection scheme for the construction sector (€12.5bn); Independent SRI specialist Mandarine Gestion (€4bn); and Ecofi Investissements, asset manager of France’s Groupe Crédit Coopérative (€9.7bn).
Jean-Philippe Desmartin, Head of Responsible Investment at Edmond de Rothschild Asset Manager, told RI that the shareholder resolution is in line with his firm’s voting policy, which recommends supporting proposals that demand more transparency and better recognition of corporates’ environmental responsibilities.
While acknowledging that Shell has already declared its “net carbon ambition”, Desmartin said: “We see this resolution as a way to support this transformation and to encourage the company to go a step further by transforming this ambition into a goal aligned with a 2°C scenario. It is also a signal for other companies in the sector.”
The five investors are all clients of French proxy voting agency Proxinvest, which founded the Expert Corporate Governance Services (ECGS) network, comprising European proxy advisors including Switzerland’s Ethos and Germany’s DSW.
ECGS recommended to support the resolution because oil majors such as Shell, it said, should play a fundamental role in promoting a low-carbon future.
“This starts by honoring the commitments under the Paris Agreement. Although the Company has made progress in reducing its GHG emissions in recent years, the unwillingness to set tangible reduction targets for GHG emissions makes it difficult to truly measure Shell’s progress towards transitioning to cleaner energy,” ECGS stated in its voting report.
ECGS added that Shell’s plan to invest a yearly average of $1-2bn in New Energies like renewables “pales in comparison to its total non-GAAP capital budget of $22.2bn and total capital employed of almost $283bn at the end of the year.”
On Friday, the National Employment Savings Trust (NEST), a UK government-owned occupational pension scheme with £7m invested in Shell, announced it will support the resolution.
“We commend Shell’s ambition to reduce its carbon footprint, but believe it can and should go further in the interests of all shareholders, including six million UK workers who invest in the company via their NEST pension,” NEST Chief Investment Officer Mark Fawcett said.
Additional recent support has emerged from Canada’s Shareholder Association for Research & Education (SHARE), which recommended voting in favour of the proposal, and €17bn Pensioenfonds Detailhandel – a Dutch pension fund from the retail industry – which confirmed it will be backing the resolution after its Chairman, Henk van der Kolk, publicly expressed his support.
The Sustainable World Index Fund, a passive SRI fund from InsingerGilissen Asset Management, which currently holds Shell, announced it will also back the resolution.Others to have already confirmed their support include Aegon, Pensioenfonds van de Metalektro, Candriam Investors Group, Sarasin, Actiam, the UK Church Commissioners, The Church of England’s pensions board, the Environment Agency Pension Fund and four UK local authority pension funds.
But support is far from ubiquitous among investors and advisors. The two largest proxy advisory firms, Glass Lewis and ISS, have recommended to vote against the resolution.
“We do not believe that the Company should be directed by shareholders to establish goals for activities outside of its own organization that it has no ability to direct or control,” Glass Lewis’ advice stated.
“The main practical concerns with this proposal are that it would bind the Company to Paris Agreement targets and would prevent it from responding to any number of constantly evolving external factors through the energy transition without further shareholder approval,” ISS said.
PIRC, which advises the UK Local Authority Pension Fund Forum (LAPFF) representing £200bn in combined assets, recommended to abstain.
Mark van Baal, Founder of Follow This said abstentions are important signals of dissent, adding that last year at the same vote, the abstention rate was around 5% or 100 million shares. The same vote received around 6% in explicit support.
Climate Action 100+, the much-cited investor initiative which seeks to engage with firms on climate issues, does not have an official position on whether its members should support the resolution, despite Shell being one of its target companies.
Instead, it said many of its members will attend the AGM in person and make their own statements to set out their position.
Oliver Grayer, Project Director at the Institutional Investors Group on Climate Change (IIGCC), one of the coordinators of Climate Action 100+, told RI that Rathbones’ Matt Crossman, who has led IIGCC’s engagement with Shell in recent years, will be making a statement “that is supported by IIGCC members with over $5trn in assets”.
CalPERS, a member of Climate Action 100+, has already disclosed that it will vote against the resolution. Mercy Investment also plans to come out against the proposals, on the basis of advice from ISS.
Legal & General Investment Management and Norges Bank Investment Management both voted against the proposal last year, and told RI they would not disclose their plans for 2018’s vote, which has been amended since 2017 to make it less prescriptive.
Aberdeen Standard Investments, BNP Paribas Asset Management and Vanguard also declined to disclose their plans.
Aviva, Hermes Investment Management and Hermes EOS, BlackRock, State Street Global Advisors, the New York State pension fund, CalSTRS, BMO Global Asset Management, Universities Superannuation Scheme, the Interfaith Center on Corporate Responsibility and Jupiter AM were among those who did not respond to requests for voting plans.
Note: This article was updated to clarify that both the Church Commissioners and Church of England Pensions Board are voting in favour of the resolution, not just the Pensions Board.