The business risk of voting against climate change proposals

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Shareholder proposals to support policies around climate change mitigation have had some recent wins that deserve celebrating.

Earth_protect_780In April, Equinor agreed to make strengthened commitments on climate change, following engagement with Climate Action 100+, an initiative created by investor and shareholder groups to work with 100 of the world’s largest emitters. Investor signatories led by UBS Asset Management, HSBC Asset Management and Storebrand Asset Management engaged with Equinor.

In May, BP’s shareholders voted to require the oil and gas company to disclose how its strategy matches the goals of the Paris climate agreement. And we have also seen Shell announce Scope 3 greenhouse gas intensity reduction goals, Total has invested substantially in solar energy, and Danish company Orsted has sold its oil and gas portfolio.

But against the positive changes, still some companies and shareholders are dragging their feet. Last month the majority of shareholders in ExxonMobil and Chevron voted against climate resolutions, for example. While the voting was largely heralded a success – a third of Chevron’s shareholders supported a resolution asking the company to report on how it plans to reduce its full range of greenhouse gas emissions and transition its business model to align with a decarbonizing energy market – it means yet another year will roll by for the remainder of shareholders to get on board.

Amazon

It was therefore refreshing to note what went down at Amazon’s AGM. For the first time ever, thousands of employees made a stand. Some 7,700 Amazon employees signed a letter asking the company to provide details on climate risks and fossil-fuel use, and used the AGM to make their case known, as stockholders in the company.

This is important as it shows a vote of no-confidence in larger shareholders to take care of the matter – in this case the largest shareholder is CEO Jeff Bezos and the top two institutional holders are Vanguard and BlackRock.

Despite the letter, the votes and the recommendations to support their proposal from the likes of proxy voting firm and investor advisor ISS, the shareholders voted the proposal down, but one has to imagine that these large asset managers, and Bezos, may now start to rethink their slow pace of change. While oil and gas firms may be at risk of stranded assets, it’s a huge business risk to any firm if younger generations start to consider you irrelevant, archaic and acting against their interests.