Members of $68trn investor coalition on climate accused of failing to leverage influence for low-carbon economy
The Climate Action 100+ investor initiative, convening members with more than $68trn of managed assets, is being urged to support members to vote against directors at companies failing to show climate leadership.
US-based non-profit Majority Action has this week launched a new report outlining the successes and failures of Climate Action 100+ in measuring and reducing systemic climate-related risks through engagement with the public sector.
One of the major failures flagged in the report is the fact that the initiative does not make recommendations regarding proxy voting on environmental sustainability. It does not require investors to support specific shareholder resolutions or other votes – nor does it facilitate or require investors to collectively make decisions on these votes.
Climate Action 100+ has stood by this approach, but Majority Action believes that a failure to intervene in voting means that these investors are continuing to support, with minimal objection, companies whose emissions do not align with their financed emissions commitments.
Majority Action assessed the proxy voting involvement of 104 Climate Action 100+ members in 2022 and found that most supported 90% or more of the ‘flagged’ directors at US-based companies in high-emission and/or hard-to-abate sectors on climate-related issues. Votes in favour of these directors often indicate that an investor is happy with the current or proposed approach, despite pressure for improved ambition and action.
Some large investors including State Street and Blackrock, Majority Action claims, actually increased support for flagged directors in these cases year-on-year, despite many other smaller investors decreasing their support.
Companies with votes covered in the report include Chevron, ExxonMobil, Bunge and the General Electric Company.
More than two-dozen Climate Action 100+ members are accused, in the report, of supporting the entire board at the 17 US-based companies that failed to set any kind of public net-zero emissions goal ahead of their 2022 AGM despite investor requests to do so. Companies included in this cohort include Marathon Petroleum and Kinder Morgan.
“Laggard companies will only begin to shift their behavior along the timeline required when their large shareholders—including Climate Action 100+ signatories—set Paris-aligned expectations and hold corporate boards accountable through their proxy votes,” said Majority Action’s executive director Eli Kasargod-Staub.
Majority Action is recommending that Climate Action 100+ sets out to members that high-emission companies included in portfolios must deliver absolute emissions reductions by 2030 in line with the global transition to net-zero by mid-century. In tandem, it wants to see the initiative improving the climate requirements and accountability pathway that lead engagers put to high-emission companies.
This should foster a culture where members are more likely to adopt proxy voting policies encouraging cotes against directors at companies failing to align climate plans with science and with business strategies. Majority Action’s report also recommends new requirements for Climate Action 100+’s investor signatories to privately disclose their proxy votes in advance of AGMs and to publicly disclose them “in a timely fashion” following AGMs.
A Climate Action 100+ spokesperson told edie that it maintains that its investor signatories “have played a significant role in accelerating the net zero journey and improving board oversight of climate-related financial risks of the focus companies”, without it setting strong proxy voting requirements.
The spokesperson cited the initiative’s recent Net-Zero Company benchmark, which states that 75% of focus companies have now committed to achieving net-zero emissions by 2050 or sooner across all or some of their emissions footprint; 92% of focus companies have some level of board oversight of climate change; and 91% of focus companies have aligned with the Taskforce on Climate-related Disclosures’ (TCFD) framework for measuring and disclosing climate risks.
TCFD-aligned reporting became mandatory for large firms in some sectors in the UK last April and is also set to become mandatory in the coming years in Switzerland, New Zealand and the G7 – Canada, France, Germany, Italy, Japan and the US.
The Climate Action 100+ spokesperson concluded: “It is also important to recognise – and clarify – that Climate Action 100+ is an investor-led initiative. While we welcome all feedback and suggestions from a variety of stakeholders, the future strategy of Climate Action 100+ is ultimately set by the initiative’s global Steering Committee in consultation with investor signatories.”
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