Proxy season: Growing number of investors seek to deepen corporate engagement

As the 2023 proxy season is in full swing, a growing number of asset owners are highlighting proposals and other votes at British, European and North American corporates, primarily to inform fellow shareholders about priority issues at companies that are lagging behind peers in their management of material climate risks. 

The votes come as early proxy season 'wins' include seven agreements between investors and companies on climate action in exchange for withdrawals, including three agreements on greenhouse gas emissions targets and four on climate lobbying practices.

Net Zero Investor looked into a number of shareholder proposals from investors that are worth monitoring as pressure and lobbying is in full swing in the runup to AGMs.

This year's motions include calls for companies to reduce greenhouse gas emissions, improve climate governance and disclosures, and support global efforts to achieve a zero emissions economy. 

Notably, there are also two flagged proposals calling for oil and gas companies to report financial risks of asset retirement obligations.

According to data by Ceres, investors in North America have filed 216 climate-related shareholder resolutions so far this year.

This record number exceeds the 210 resolutions that were filed in 2022 and shows an increasing trend of investors acting where they see opportunities for companies to improve and mitigate climate risk.

The following votes that are scheduled to take place in the next few weeks are worth mentioning (in alphabetical order); 

Berkshire Hathaway
California Public Employees' Retirement System to withhold votes from Audit Committee members Christopher Davis, Susan Decker and Meryl Witmer.

Also, adopt board oversight of material sustainability issues. Filed by Robeco and The Office of the Treasurer for the State of Illinois as Trustee of the Bright Start College Savings Trust.

Again Berkshire Hathaway, a report on physical and transition risks and opportunities. Filed by California Public Employees' Retirement System.

Boeing
Another motion worth paying attention to is at Boeing. Shareholders  want to know more about how the aircraft manufacturer spends its political capital. The proposed resolution targets “grassroots lobbying communication” at all levels of government. 

The phrase is used by the investors to imply any communication that attempts to alter public perceptions of a given regulation.

CRH 
Sarasin & Partners plans to vote against Resolution 1. To review the Company's affairs and consider the Company's financial statements and the Reports of the Directors - including the Governance Appendix - and Auditors for the year ended 31 December 2022 and Resolution 6. Ratify Deloitte Ireland LLP as Auditors.

Engie 
Resolution on the modification of the articles of association on the company's climate strategy. Filed by MN and ERAFP and 14 others.

ExxonMobil
Investor LGIM wants answers on a range of net zero-related issues, as the investment giant is not satisfied with earlier explanations from the company board and feels engagement efforts have led to no results.

Also read
Proxy push: LGIM has had enough after years of engagement has led to no results

Imperial Oil
Calls to adopt GHG reduction targets. Filed by Bâtirente and Ferique Fund Management with the support of Æquo. 

Also, Imperial Oil: report on impact of energy transition on asset retirement obligations. Filed by British Columbia Investment Management Corporation.

Marathon Petroleum
Report on asset retirement obligations. Filed by New Jersey Division of Investment.

Again Marathon Petroleum 
Report on climate-related just transition plan. Filed by International Brotherhood of Teamsters General Fund.

Paccar
Investors have filed a resolution requesting a report that discloses the company’s climate lobbying both direct and indirect, calling recent lobbying activity from the company "a concern".

Suncor Energy
Report on capital expenditure alignment with GHG reduction targets. Filed by Investors for Paris Compliance.

Valero Energy Corp
Report on GHG targets and transition plan. Filed by Mercy Investment Services, Inc.

Also read
The pressure is on: More and more investors demand transparency on climate lobbying

Looking at the list of motions, Kirsten Spalding, vice president of the Ceres Investor Network at Ceres, said that, rather than via behind-the-scenes dialogues, asset owners increasingly look for direct, public motions.

"For investors looking to spur action on addressing the material financial risks posed by the climate change, flagging shareholder resolutions is more and more a powerful tool for change," she noted.

"As investors assess a focus company's progress towards achieving a zero emissions future, they are considering a plethora of metrics from climate lobbying practices and emission reduction targets to climate accounting and capital expenditures." 

Spalding pointed out that "shareholder proposals are a clear signal to companies that they must work with investors on specific topics that will help them reduce climate risks and prepare their businesses for the low carbon future."

Anti-ESG movement

This monumental proxy season action continues despite the backlash in the U.S. against investors and companies who factor climate and sustainability risks into decision-making. 

It also comes in the wake of another sobering report from the Intergovernmental Panel on Climate Change (IPCC) that reaffirms urgent action is needed in order to meet our global goal of limiting average temperature rise to no more than 1.5 degrees Celsius. 

It called for embracing deep, rapid, and sustained transformative action to reduce emissions.

One noteworthy action from this year's proxy season is California Public Employees' Retirement System (CalPERS) move to withhold votes-the only mechanism for dissent on the Berkshire Hathaway proxy-for three directors on the audit committee due to failure to "provide accurate and timely disclosure of environmental risks and opportunities."

This action builds on shareholder proposals that CalPERS and others have co-filed previously requesting TCFD-aligned disclosures.

Berkshire Hathaway has recommended voting against CalPERS' proposal for enhanced climate disclosure, and as noted in CalPERS' filings, is not responding to investors' multiple requests for engagement on this topic. This will also prompt scrutiny from other quarters.

As the U.S. Securities and Exchange Commission prepares to finalize its mandatory disclosure for publicly traded companies in the US, Berkshire and other companies that fail to disclose will find themselves out of compliance.

In addition to CalPERS' flagged vote, the Office of the Illinois State Treasurer has filed an exempt solicitation in support of their proposal for improved governance at the company.

"Disclosure of a company's material financial risks will allow investors to make informed decisions about their portfolios. This is why investors are requesting this information, and those requests are simply not going to go away," added Spalding.

"Investors can support companies willing to address these risks, but information is key," she concluded.

Also read
Black is the new green as anti-ESG sentiment swells