New Report: Passing the Baton – Shareholder Resolutions & their Contribution to Investor Climate Pledges

New Report: Passing the Baton – Shareholder Resolutions & their Contribution to Investor Climate Pledges

In a newly released report, “Passing the Baton: Climate-Related Shareholder Resolutions and their Contribution to Investor Climate Pledges,” the 2° Investing Initiative sheds new light on the investors’ demands for climate action. See our key findings below:

 Key figures:

  • We analysed over 7,500 resolutions and identified 500 as climate related
  • From 2006-2019, over 150 shareholder resolutions involving some form of requirement to set climate target or a related business plan were introduced
  • Explicit references to the Paris Agreement are on the rise, with 11 resolutions pushing for consistency with the climate goals of the Paris Agreement
  • For the first time, in 2018, 3 companies subsequently adopted these targets. While the analysis does not prove causality, it represents a first step in understanding the potential impact of engagement.

Key takeaways:

  • These figures show the potential of resolutions to turn words into actions, “passing the baton” from investors who committed to aligning their portfolio with Paris goals to their investees
  • They illustrate the need to further organize and engage in collective shareholder actions, such as the Climate Action 100+ coalition
  • They also reveal the gap: among 500 climate-related resolutions, only 11 resolutions requested consistency with a 2°C pathway or better. Given the recent investor pledges, we expect Paris-aligned resolutions to rise dramatically in the next few years

Next steps:

  • 2DII will keep tracking “Paris-aligned target-setting” shareholder resolutions and the level of support they receive. In parallel, 2DII will leverage its asset-level database to track how these resolutions translate into changes in companies’ capex plans and asset base: Do they align? Does it lead to emission reductions on the ground?
  • InfluenceMap will continue tracking and reporting on the engagement and voting record of the main asset managers through its Finance Map research.

The paper: “Passing the Baton”

These figures can be found in a newly released report: “Passing the Baton.”

The paper classified climate-related resolutions into three main categories: transparency, governance, and target-setting. The third category is then broken down into “Paris-aligned targets” and other requirements that are either ambition-agnostic or where ambition is unclear.

This classification has been applied to a dataset of over 500 climate-related shareholder resolutions filed since 2006, targeting companies worth roughly $1.3 trillion in market capitalization and representing around 20% of global production in the power and oil & gas sector.

We found that an overwhelming majority of investors supported management-backed proposals, while only 3% of climate-related proposals were similarly successful. However, investors are increasingly supporting climate-related shareholder resolutions. Additionally, they have been expanding the variety of climate-related resolutions: for instance, shifting away from calling for general sustainability reporting to setting emissions reduction targets and disclosing risk.

Perspectives

We hope this classification can help asset owners, asset managers and observers (such as InfluenceMap) steer and track the emergence of “Votes for Paris” that we expect to become the new normal for investors who pledged to align their portfolio with the Paris agreement.

Coupled with 2DII’s historical database going back to 2016 of changes to companies’ investment and production plans over time, this tracking exercise can help build evidence as to the impact of shareholder engagement in terms of actual greenhouse gas (GHG) emissions reductions in the real economy: Did the companies actually change their investment plans? Are coal-fired power plants sold or retired? Are announcements of new windfarms associated with new permits or existing ones? Do we see a material difference between the companies targeted by resolutions and their peers?

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Jakob Thomae, managing director at 2DII, said: “Many large investors around the world have adopted no-coal policies, yet comparable policies are still largely missing in the shareholder engagement sector. By classifying shareholder resolutions, this report can help introduce ‘engagement rules’ as part of asset managers’ mandates and policies, ensuring that investors’ climate pledges can push companies to reduce their GHG emissions.”

Vincent Jerosch-Herold, lead analyst on the report at 2DII, said: “The classification we developed is a way to build evidence as to the efficacy of climate resolutions. But we also recognize that it’s ‘built in the lab’. We clearly need more work and a broader process to create a common market definition and details of how to classify shareholder resolutions, and look forward to building on the strong work by InfluenceMap and ShareAction in this field.”

Dylan Tanner, executive director at InfluenceMap, said: “This work highlights a growing trend of shareholder resolutions intended to transition company behavior in line with the Paris Agreement. At the same time, changes in regulation and accelerated public interest in the climate emergency will make it increasingly difficult for asset managers to vote against change and ultimately beneficiaries’ best interests.”

This report has received funding from EIT-Climate KIC. The project is implemented in partnership with InfluenceMap.

 

 

 

 

 

 

2019-12-10T12:35:19+00:00