Climate action – 2019 AGM resolutions
“We have not come here to beg world leaders to care. We have come here to let you know that change is coming, whether you like it or not.”
School strike for climate activist Greta Thunberg is making waves with her stark message for political and corporate leaders. Since the Intergovernmental Panel on Climate Change’s (IPCC) most recent assessment report, it has been clear that efforts to address climate change at all levels requires even greater urgency. The investor community is doing its part, working with a degree of global coordination never before seen to push for faster action from the corporate sector.
As members of the Institutional Investors Group on Climate Change, Rathbone Greenbank is playing its part through Climate Action 100+ (CA100+). Through this investor initiative, we have been leading engagement with several of the largest corporate greenhouse gas (GHG) emitters and helping to co-ordinate recent shareholder resolutions on climate change.
Climate-related AGM resolutions
At BP’s annual general meeting on 21 May, two climate-related resolutions were debated. Resolution 22 was co-filed by a number of large institutional investors and clients of Rathbone Greenbank. Its aim was to push the company further and faster in its efforts to align its business model with the goals of the 2015 Paris Agreement.
The resolution specifically asked the company to make clear how the need to limit warming to ‘well below’ 2 degrees Celsius aligns with its capital expenditure plans and carbon emissions targets. This resolution was developed in dialogue with company management and presented a challenging ambition.
In contrast, resolution 23 was co-filed by a number of individual shareholders under the banner of Dutch campaign group Follow This, which had previously attracted attention by filing demanding resolutions with Royal Dutch Shell.
This resolution focused on the specific issue of emissions reductions targets relating to the end use of BP’s oil, gas and petroleum products. This is important as BP’s direct emissions from the operations of its drilling rigs and refineries are dwarfed by those from the use of its products. So far, only Royal Dutch Shell has committed to take responsibility for such emissions – and the Follow This resolution was seeking similar commitments from BP.
However, BP’s board – along with several proxy voting agencies advising large institutional investors – recommended that shareholders vote against the resolution, stating that the goals of resolution 23 were best served by supporting resolution 22. They also believed that the wording of resolution 23, if adopted, would unduly restrict the ability of BP to make strategic decisions without seeking further shareholder approval at future AGMs.
Our voting decisions
While we accept this argument in the short term, the principle that the company should take responsibility for all its emissions – direct and indirect – is sound. Indeed, Royal Dutch Shell has pledged to halve its entire carbon footprint, including that from the use of its products, by 2035.
In this instance, therefore, we withheld our vote on resolution 23 due to concerns about its wording and the lack of flexibility afforded to the company with regard to its long-term strategy. However, we believe that BP must act firmly and decisively over the coming year with regard to setting wide-ranging, long-term targets if it is to enjoy continued investor support.
Resolution 23 was supported by 8.4% of votes cast.
We voted in support of resolution 22, which passed with the board’s backing, and 99.14% of votes cast in favour.
The importance of climate targets
Targets were also a matter of debate at the AGM of Norwegian energy giant Equinor (formerly Statoil). CA100+ was in negotiation to file a resolution on climate risk, but eventually reached a compromise with Equinor’s board which will see it take significant additional action on climate change.
In a joint statement agreed through engagement with investors, Equinor committed to pursuing a business strategy ‘consistent with the goals of the Paris Agreement’. The company will set out new climate-related ambitions beyond 2030 for its business activities. It will publish its updated targets and ambitions in 2020, and thereafter report annually on the progress to achieve them. Equinor will also regularly review its climate-related ambitions, targets and key performance indicators.
A resolution on emissions targets filed at Equinor’s AGM by Follow This was supported by 1.66% of total votes cast.
Continued engagement efforts
Investor efforts are moving companies further and faster than they would otherwise go, but progress remains patchy. We are committed to encouraging CA100+ towards stronger and more effective action across its entire target list, which covers not only oil and gas companies, but those in other industrial sectors including chemicals, utilities, transportation and mining. In addition, the original focus list of 100 companies, which represented up to two-thirds of annual global GHG emissions, was increased by a further 61 in July 2018.
CA100+ has a major role to play in ensuring that the world meets the Paris Agreement’s goals, and we will continue to play our part in this major global initiative. For carbon-intensive industries, “change is coming whether they like it or not” – and those at the forefront of efforts to respond to the climate crisis will be best placed to enjoy continued success.