Record Number of Climate Change Shareholder Resolutions Filed This Year
(3BL/Just Means) Climate change is a big issue facing the world. It is also one of the key issues investors will consider in 2016 proxy statements.
Environmental issues and sustainable governance make up 40 percent of the total of shareholder resolutions, according to a joint report titled Proxy Preview 2016 by As You Sow, Sustainable Investments Institute, and Proxy Impact. A record number of shareholder resolutions address climate change, with 94 this year compared to 82 in 2015. Twenty-two of them ask fossil fuel extractors and suppliers to provide details of how climate change will affect their operations and how they will respond if governments follow through with the commitments they made in Paris in December to keep fossil fuels in the ground.
Or as Proxy Preview 2016 states, “There is a new emphasis on...what will happen to fossil fuel producers if governments enact restrictions on burning their products—as promised in the landmark December 2015 climate treaty in Paris.” Simply put, climate change remains the main focus of all environmental shareholder resolutions, and one of the biggest drivers for the record number of climate change resolutions is the Paris climate treaty governments agreed on in December.
The record number of climate change resolutions also speaks to the “urgency of climate change,” as Michael Passoff, co-author of the report, and CEO of Proxy Impact, told Justmeans. “The focus has been on fossil fuel companies,” Passoff said. “If you are a shareholder there are concerns.”
“Investors in fossil fuels are concerned how the companies can transition to low-carbon economies,” Passoff added. And the two main main issues in climate change shareholder resolutions—carbon accounting and risk management disclosures—reflect that concern. Some examples include:
- Eleven oil and gas companies are being asked to report on how a world focused on keeping global temperature increase to two degrees Celsius would affect them.
- Eighteen of the climate change resolutions ask companies using hydraulic fracturing—commonly known as fracking, to extract energy from shale deposits—to focus on the risks. Twelve of those want methane reduction targets.
- Nineteen resolutions ask companies to set greenhouse gas (GHG) emissions reduction targets.
- Eleven resolutions ask for energy reserves accounting to be changed at two companies, with one suggesting that executive bonuses should be linked to accounting changes re. fossil fuel reserves.
Stranded assets are a focus in two resolutions, and both of them are from As You Sow. One of them asks Anadarko Petreleum to report on “how the company will address the risk of stranded assets presented by global climate change and associated demand reductions for oil and gas, including analysis of long and short term financial and operational risks.” Another one asks Hess to include in its report “a range of stranded asset scenarios,” including “scenarios in which 10, 20, 30, and 40 percent of the Company’s oil reserves cannot be monetized.”
The unsuccessful challenges of ExxonMobil and Chevron
There are two companies that tried to challenge climate change shareholder resolutions; ExxonMobil is one of them. The oil and gas giant tried to prevent shareholders from being able to vote on a resolution asking for the company to commit to increasing the amount authorized for capital distributions to shareholders "as a prudent use of investor capital in light of the climate change related risks of stranded carbon assets.”
Chevron is the other company that tried to fight a climate change shareholder resolution identical to Exxon’s. The Securities and Exchange Commission (SEC) recently ruled that neither company could keep shareholders from voting on the resolutions.
The Ceres coalition coordinated most of the climate change shareholder resolutions. Justmeans asked Shanna Cleveland, Senior Manager of Ceres’ Carbon Asset Risk Initiative, why some oil and gas companies seek to prevent shareholders from voting on climate change resolutions. “Some fossil fuel companies dodge shareholder resolutions on climate change because they are in denial and think the status quo is safe,” she said.
The reality is that while some fossil fuel companies try to dodge their responsibilities to inform investors of the risks of climate change “coal and oil demand growth has been significantly undercut by rising production costs, cheaper renewable energy, and efficiency advances,” she added.
The bottom line is that shareholders need to have all the facts concerning the risks of climate change. “Shareholders have a fiduciary responsibility to ask questions and push for long-term sustainability of their portfolios, and they can’t do that if companies are unwilling to engage and disclose,” Cleveland pointed out.