Shareholder power driving the agenda
Based on current trends, the theme and direction of support for climate-related resolutions at AGMs (Annual General Meetings) of US firms likely revolves around the following:
Theme: Increased Scrutiny and Pressure for Action on Climate Change
Investors and activists are increasingly pressuring companies to take responsibility for their environmental impact and implement strategies to mitigate climate change.
Resolutions focus on areas like:
Disclosure of Climate Risks: Demanding companies to comprehensively disclose their exposure to climate risks, including physical risks (extreme weather events, rising sea levels) and transition risks (changes in regulations, consumer preferences).
Emission Reduction Targets: Pushing companies to set ambitious and measurable targets for reducing greenhouse gas emissions and aligning their operations with the Paris Agreement goals.
Investment in Sustainable Practices: Encouraging companies to invest in renewable energy, energy efficiency, and other sustainable business practices.
Direction: Shifting Towards Stronger Support and Action
While historically, shareholder support for climate resolutions was lower, recent years have seen a rise in voting in favor.
This suggests growing investor and public concern about climate change and a willingness to hold companies accountable.
The focus might be moving from simply requesting reports to demanding concrete action plans and measurable progress towards sustainability goals.
Additional Considerations:
Specific resolutions and their direction will vary depending on the industry and company in question. For example, resolutions for energy companies might focus on transitioning away from fossil fuels, while those for manufacturers might target supply chain sustainability.
The success of these resolutions depends on factors like the strength of the proposal, investor activism efforts, and overall market sentiment towards climate change.
Some companies are pre-emptively adopting more sustainable practices to avoid shareholder pressure and gain a competitive advantage in the low-carbon economy.
Overall, the theme and direction of climate-related resolutions at AGMs of US firms point towards a growing demand for corporate accountability and action on climate change. Investors are increasingly wielding their voting power to push companies towards a more sustainable future.
While dramatic changes through shareholder votes haven't been universally achieved, there are growing instances where shareholder pressure is leading to significant shifts in corporate climate action. Here are a few examples:
Europe Taking the Lead:
Shell (2023): A landmark case in May 2023 saw a Dutch court order Shell to cut its global CO2 emissions by 45% by 2 compared to 2019 levels. This decision was heavily influenced by a lawsuit filed by environmental group Milieudefensie, backed by nearly 18,000 shareholders. While not directly a shareholder vote, it highlights the potential impact of investor pressure on corporate climate action.
Several European Oil & Gas Companies: In recent years, shareholder resolutions in Europe have pushed companies like BP and TotalEnergies to set stricter emission reduction targets and increase transparency around climate risks. While not always achieving a majority vote, these resolutions have sparked significant debate and forced companies to acknowledge investor concerns.
The Rise of Activist Investors:
Engine No. 1 & ExxonMobil (2021): A small activist hedge fund, Engine No. 1, secured two seats on ExxonMobil's board in 2021. This unprecedented victory demonstrated the growing power of activist investors pushing for change on climate issues. While not a direct change through voting on a resolution, it represents a significant shift in strategy and board composition.
Change at Investment Firms: Large asset managers like BlackRock are facing increasing pressure from their own investors to take a more active role in pushing portfolio companies towards sustainable practices. This could lead to more frequent voting support for climate-related resolutions in the future.
Looking Ahead:
While dramatic changes haven't been the norm yet, the trend is clear: shareholder pressure on climate action is growing. Here's what to watch for:
Increased Scrutiny of Lobbying: Shareholders are likely to demand transparency and potentially vote against companies lobbying against climate policies.
Focus on Transition Plans: Resolutions might shift towards demanding concrete plans for transitioning away from fossil fuels and into renewable energy sources.
Rise of Proxy Advisory Firms: These firms advise large investors on voting decisions and are increasingly factoring in climate considerations. Their recommendations hold significant sway.
The future of shareholder voting on climate change remains to be seen, but the trend towards greater accountability and action is undeniable. As climate change concerns intensify, shareholder pressure is likely to be a major driver of corporate change in the years to come.
