Shareholder Rebellion: environmentalism on the rise in the boardroom

Written by Rebecca Jones on 18th Jun 2019

While Extinction Rebellion has been grabbing all the headlines for their traffic-stopping environmental antics, in annual general meetings across the land there has been another kind of climate uprising going on: a mass shareholder rebellion.

The Church of England (damned troublemakers that they are), made one of the biggest waves seen in shareholder climate activism back in December. Alongside global investor initiative Climate Action 100+ and a group of other investors including Dutch asset manager Robecco, the Church’s pensions board successfully forced Royal Dutch Shell to link carbon reduction targets to executive pay – a major win.

This was soon followed by a campaign against BP, again led by Climate Action 100+, which successfully tabled a motion for the May 2019 general meeting that would force the firm to describe how its strategy was consistent with the goals of the Paris Agreement. As we reported a couple of weeks ago, the motion was backed by an incredible 99 per cent of shareholders.

We have also seen numerous initiatives at the big banks, with investors calling out HSBC for its epic funding of coal expansion in South East Asia, while in America the US senate has been all over BlackRock – the world’s biggest investor in fossil fuels – to do more to decarbonise. ESPECIALLY when it is trying to frame itself as a leading environmental investor.

Upping the ante

The latest move, however, comes from a mammoth investor group backed by the Carbon Disclosure Project (CDP), which is targeting over 700 companies for not reporting environmental information.

Exxon Mobil, Amazon and Volvo are among the mega-corporations that the group of 88 institutional investors are honing-in on. With combined assets under management of $10 trillion (£8 trillion), the activist group includes some of the biggest, richest asset managers in the world such as (funnily enough) HSBC Global Asset Management, Candriam and Investec Asset Management.

Commenting on the action, Vincent Hamelink, chief investment officer at Candriam, says:“It is of the greatest importance that companies disclose and manage their environmental impact and we are proud to be taking a leading role as a loyal supporter of CDP. Collaborative initiatives are crucial for effective impact, as they ensure a consistent message from asset owners. These will continue to increase in importance, as awareness gains momentum.”

The investors are targeting 707 companies with $15.3 trillion market capitalisation across 46 countries, highlighting failings such as not reporting their climate change, water security and deforestation data.

Alongside the big boys named above, BP, Chevron, Alibaba (China’s Amazon), Qantas Airways as well as palm oil company Genting Plantations Bhd are all targets for the campaign.

According to CDC, these companies have been selected because of their high environmental impact and lack of transparency on these issues to date.” The firm says that 546 companies are being targeted to disclose on climate change, 166 on water security and 115 on deforestation.

Other investors engaging these companies include the Environment Agency Pension Fund, Cathay Financial Holdings, Amundi, NN Group and Washington State Investment Board.

 

Long term goals

The move is part of CDP’s 2019 Non-Disclosure Campaign, which aims to drive further corporate transparency around climate change, deforestation and water security, by using shareholder influence to push companies to respond to CDP’s disclosure request.

The most targeted industry for climate change disclosure this year is the services industry at 27 per cent of all companies, followed by manufacturing (18 per cent) and fossil fuels (12 per cent).

For water security, the most targeted industries are manufacturing (26 per cent), retail (23 per cent) and fossil fuels (11 per cent), while for deforestation retail leads with 30 per cent of resolutions, then food, beverage and agriculture (26 per cent) and manufacturing (16 per cent).

Overall, the US is home to the most companies being targeted in the campaign, with 20 per cent of all action heading towards American firms, closely followed by Australia at 16 per cent.

Emily Kreps, Global Director of Investor Initiatives at CDP, commented:“Companies must disclose their role in addressing the climate crisis we face.  We know that climate change, water security and deforestation present material risks to investments, but these risks cannot be managed without proper information.

“For companies that say their investors do not care about these issues, this campaign demonstrates that is simply not the case. Investors are asking for this information and using it – for corporate engagement, selecting stocks and building investment products.

“A total of 7,000 companies are already disclosing through CDP and providing the market with the information it is asking for – the ‘vow of silence’ from non-disclosing companies cannot go on.”

This is the first time that CDP has reported publicly on its Non-Disclosure Campaign, which has been running for four years and has been successful in driving more transparency from companies on climate change, deforestation and water security.

CDP says that companies targeted in last year’s campaign were more than twice as likely to disclose than those that weren’t.

Risky business

Alongside the obvious need to preserve a planet for the human race to exist on, the group is also highlighting the huge risks involved in poor environmental reporting and – more importantly – a lack of climate action.

These risks have been highlighted by no less than Governor of the Bank of England Mark Carney, who in April wrote an open letter to the world’s financial institutions warning of the critical risks that “catastrophic climate change” poses to financial system.

This has been echoed by many an institutional investor, including Schroders, which has been banging on about the need to redefine old ideas about financial risk (defined as investing in anything that isn’t oil and gas, mining and tobacco because they are the biggest and so ‘safest’ companies) since 2017.

Thomas O’Malley, global head of corporate governance at HSBC Global Asset Management, comments: “Good disclosure enables investors to assess how well companies manage their environmental, social and governance risks.

The CDP now reflects Taskforce on Climate Related Financial Disclosures (TCFD) requirements and is a model disclosure framework on climate change, one of the broadest risks facing companies. We encourage all companies to respond to our calls for more information.”

The CDP says that more investors are taking part in this year’s Non-Disclosure Campaign than ever before while more companies are also being targeted than in previous years (707 compared to 622 in 2018 and 416 in 2017). Investors will be engaging with companies over the summer while CDP’s disclosure system is open. Companies will be asked to submit their response to investors via the CDP online response system.

Commenting on the project Beau O’Sullivan, head of communication at activist investor group Share Action, says: “It’s great to see these financial behemoths, which wield such influence in the boardroom, calling out companies like Exxon and Amazon for hiding their contribution to the climate emergency.

“The next logical step surely needs to be action: pushing for these companies to set real, science-based climate targets which are aligned with a 1.5 degree world. In fact a good number of large investors across Europe – including Candriam – are already demanding corporate decarbonisation to protect the wealth and health of people everywhere.”

The climate revolution, then, might be on the way after all. And it’s not just angry 12 year olds and left wing newspaper readers leading it: it’s suits in boardrooms. We live in exciting times indeed.

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