UK investors to scrutinise managers over ‘perceived misalignment’ on EU oil majors

UK asset owners including Brunel Pension Partnership, Scottish Widows and the Church of England Pension Board (CEPB) are set to scrutinise the voting practices of major fund managers at European oil majors this proxy season, reflecting concerns over a “perceived misalignment”.

In a LinkedIn post today, Brunel’s chief responsible investment officer, Faith Ward, revealed that the UK Asset Owner Roundtable, which she chairs, will convene large asset managers at the end of the proxy season to “review how asset owners’ long-term interests have been served by their managers when exercising their stewardship and proxy voting at major European oil and gas companies”.  

Several members of the asset owner group, she added, are “concerned at a perceived misalignment between our long-term interests and how investment managers are exercising proxy voting at key annual general meetings”. 

The meeting with managers is intended to be a “constructive dialogue” to support asset owners and “ensure that their needs are understood by their managers”, Ward wrote. 

Ward highlighted the dangers to pension funds of prioritising short-term profits.

“Delayed action on climate increases the chances of a disorderly climate transition and missing the goals of the Paris Agreement,” she wrote. “This in turn increases the risks to pension funds’ long-term interests and the ability of those funds to serve the interests of their members/beneficiaries.” 

Last month, 17 percent of BP shareholders supported a climate proposal from Dutch climate activist Follow This which called on the energy giant to align its 2030 Scope 3 emissions reduction goals with the Paris Climate Agreement. 

Close to 10 percent also voted against the re-election of BP’s chair, Helge Lund, following the firm’s decision to roll back on its climate commitments amid record profits. 

Responsible Investor understands that a number of large asset managers did not support the climate resolution at BP over concerns about its binding nature.

The same Follow This proposal will go to the vote at Shell and TotalEnergies next week.

Influential proxy adviser ISS supports the non-binding version at Total but not the binding one at Shell in its main advice.

Colin Tissen, engagement analyst at Dutch investor PGGM, told RI on Tuesday that he “regrets” that ISS is not supporting the Follow This proposal at Shell and said he believes the text is worded such that it leaves the company “sufficient freedom” to determine how to meet it.

In addition to meeting with managers, Brunel’s Ward said the asset owner group will commission a “leading academic” to review how managers “have interpreted their clients’ long-term interests in the exercise of their stewardship duties”, with a particular focus on votes at key company meetings in Europe.