Proxy season in full swing: Investors press for net zero action but with limited results

Institutional investors are continuing to flag votes during this proxy season to bring attention to key shareholder resolutions that encourage more robust climate action. 

Interestingly, director votes increasingly seek to improve corporate governance on climate issues to mitigate exposure to climate risk.

So far this season, about 17 shareholder proposals and signatory-declared votes were slapped on management proposals at six companies related to company progress. 

In addition to more robust corporate governance on climate, investors are calling for disclosure on key issues including greenhouse gas emissions targets, transition plans including policies to ensure a just transition for workers and communities, and reporting on methane measurements.

Despite the engagement noise and pro-active stewardship efforts, net zero and climate-related motions rarely make it. 

Director accountability

Mercy Investment Services is urging shareholders to vote against the reelection of three directors at Valero for failure to adequately manage the risks that climate change and the energy transition pose to its core business of refining and selling fossil fuels. 

After nearly a decade of dialogue, and more than four years of engagement with Valero’s senior management, there has been limited progress on aligning with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). 

Forecasts from the International Energy Agency indicate that the global demand for petroleum liquids, including refined products such as Valero’s core transportation fuels, is expected to shrink in the coming decades, and Valero lags its peers in setting out a transition plan that includes lower carbon energy sources. 

The motions did not make it during Valero’s annual general meeting on May 9.

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At Chevron, Wespath Benefits and Investments is urging shareholders to vote against the election of two directors. 

This is due to the company’s failure to provide a meaningful response to a shareholder resolution approved by a majority of the company’s shareholders concerning climate-related lobbying and a failure to establish sufficient governance to address risks from misalignment between the company’s lobbying practices and its stated support of the Paris Agreement. 

Chevron’s annual general meeting is scheduled for May 31.

Meanwhile. the Church of England Pensions Board is calling for votes against the re-election of members of the supervisory board at Volkswagen due to failure to produce requested disclosure on lobbying as well as an update to their targets during fiscal year 2022. 

The Church of England Pensions Board has been engaging with Volkswagen for over four years on its approach to climate change, urging the company to set stronger emissions reduction targets and to provide public disclosure on its lobbying activities regarding climate change policy. 

VW’s GHG targets and transparency regarding climate lobbying lags its German peers—including Mercedes Benz and BMW, which both have produced lobbying disclosures and have been independently assessed as having stronger short- and medium-term emissions reduction targets by the Transition Pathway Initiative. 

A 2021 study by BlackRock showed that 75% of proposals that garnered at least 30% of votes resulted in companies taking action, while proxy advisor Glass Lewis recently recommended that any resolution winning 20% or more of votes should lead to engagement between investors and company boards.

At Engie, 24% of investors voted for a resolution on the modification of the articles of association on the company’s climate strategy, reflecting a growing request for comprehensive climate strategies presented as climate transition plans.

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At Lockheed Martin Corporation, 35% of shareholders voted for a resolution filed by As You Sow for the company to set net zero targets and implement climate transition planning. This is especially important as proposed legislation will require federal contractors to set science-based targets.

At Marathon Petroleum, 16% of shareholders voted for a resolution filed by International Brotherhood of Teamsters for a report on a climate-related just transition plan, an important signal as investor expectations reflect inclusion of Just Transition as a key measure of corporate progress towards net zero.

Also at Marathon Petroleum, 22% of shareholders voted for a resolution filed by the New Jersey Division of Investment Fund for a report on asset retirement obligations. As an emerging area of concern for investors regarding stranded asset risk, this is an encouraging outcome for a first-time resolution type.

Finally, at PACCAR, 46% of shareholders voted for a resolution filed by Calvert Research & Management asking for the company’s climate lobbying practices to be in line with the Paris Agreement, signalling growing investor support for climate lobbying disclosure.

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