‘Follow This’ are using the Very system to change 'The System' and it does feel like finally we are hacking capitalism! Read on to understand how filing AGM resolutions are spearheading the change we want to see.
“Shell faces shareholder rebellion over climate activist resolution” caught my attention like a nosebleed. Does this news sound like the bolt out of the blue? Did you know that there are strategies that can be used to make the fossil fuel giants (specially too slow to change) understand that the common shared knowledge of Climate change is not for the Few to transition but for all to make way for the better life on and of this planet. We can not save the life as we know it on this planet by just using paper straws & cups!
So what do we do? We file resolutions as shareholders, and much more.....
It is heartening to see that large investors including the UK’s biggest pension scheme prepare to back a climate activist resolution. The work of ‘follow This’ who are champion campaigner now and transformed into a major international player pressuring the oil industry, filing resolutions in five different oil majors in Europe and the U.S.!
You can read more about Follow This, here - https://www.follow-this.org/our-story/
Shareholders such as NEST, French asset management firm Amundi, which holds almost €2tn (£1.7tn) in assets, as well as Candriam, Scottish Widows, and Rathbones Group are backing the resolution. Shell is being asked to set a credible scope 3 absolute emissions target, between now and May 2024, when it has its AGM, there will be mounting pressure.
We need ‘Faster than expected’ ways to bring about change because the Climate crisis in an existential crisis which does and will continue to harm deprived communities more, if left in the current state. Which brings me to an interesting point in this conversation on how investors may use screening (exclusion and inclusion policies), client engagement, shareholder resolutions and voting to steer decision-making, in the right direction.
Investment screening: Traditionally, Negative screening (a form of sector exclusion policies) have been used to exclude firms or sectors from an investment portfolio if they (or a significant proportion of their overall portfolio) do not meet a set of environmental criteria. E.g. a certain bank may not build portfolio in Tobacco sector because of its detrimental to health, similarly Exclusion policies might apply to carbon-intensive industries or heavy polluters. Positive screening, however, is using refined EU taxonomy to create a positive approach to screening, using “white lists” of low-carbon, environmentally sustainable sectors and firms to identify potential investments.
As the costs of climate-related physical, liability and transition risks grow, and as the impact of stranded assets becomes more apparent, the balance of financial returns between environmentally sustainable sectors, firms and technologies and their high-carbon alternatives seems likely to shift substantially. 2. Investor engagement:
In addition to investing in environmentally sustainable sectors, firms and technologies, and disinvesting from high-carbon alternatives, investors are pursuing other means to grow sustainable investment and support firms and sectors transitioning to lower-carbon business models. In particular, increasing individual and collective investor engagement (through groups such as the Investor Agenda, the Net Zero Asset Managers Initiative, Climate Action 100+ and the Portfolio Decarbonization Coalition) is prompting many sectors and firms to do more to address and disclose climate risks, try to better understand the impacts of different climate change scenarios and adopt more sustainable business models and strategies.
Climate Action 100+ is another initiative led by institutional investors to engage systemically important GHG emitters to drive the clean energy transition and achieve the goals of the Paris Agreement. This requires investors to engage with companies to improve their governance on climate change, curb emissions and strengthen climate-related financial disclosures.3. Share holder Resolution:
Climate Action 100+ introduced a new flagging process to enable the initiative to flag relevant shareholder votes related to the initiative’s goals, and circulate information from investor signatories filing resolutions at Climate Action 100+ focus companies.
Since 2021 there has been an increase in climate-related shareholder resolutions, particularly in the US where there were over 147 climate-related resolutions filed, with 47 going to a vote and vote results averaging 40% (in 2021 alone).
4. Boards and accountability:
And, for those who are on Boards/in NED roles/ on committees - this may be of interest to you.
Since 2021 investors are demonstrating their willingness to hold boards accountable on climate change. E.g ExxonMobil shareholders elected three new board members to the company’s board. This was backed publicly by three of the largest pension funds in the US and Climate Action 100+ signatories – CalPERS, CalSTRS and the New York State Common Retirement Fund.
Following investor engagement 18 Climate Action 100+ target corporates agreed to put their climate transition strategies to a voluntary shareholder vote.
So what you read about Shell’s upcoming AGM is a wave of change in the seemingly ‘hard to achieve’ but definitely in the right direction.
And, it may seem like activism to you but to me this is all ‘Action-ism’ – our collective ability to not only move the needle but cast a wider net and transform the road to success by building a better transition method.
After all, you do need to break few eggs to make an omelet!
Click on 'How principle-based voting on shareholder resolutions can contribute to clear, effective and accountable stewardship' to learn more about voting on shareholder resolution.
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Thank You