The year 2022 has been marked by continued rise in greenhouse gas emissions, increasing climate change impacts, and record profits particularly in the financial and energy sectors. In this context of climate crisis, it is imperative that investors seize the opportunity of the 2023 proxy season to take action and scale up their engagement initiatives with the most carbon-emitting companies. In order to guide investors in integrating climate into their votes at 2023 AGMS, Reclaim Finance publishes a briefing which highlights the key climate-related resolutions to support, indicates how to vote on Say on Climate resolutions supported by management, and explains how to use routine resolutions to condemn the lack of ambition or disclosure of executives and board members on climate issues.
Sanction inadequate climate strategies by opposing Say on Climate
A Say on Climate resolution is proposed by a company’s management to the agenda of an AGM to obtain shareholders’ opinion on the climate strategy. In theory, this is a good governance and accountability practice. In practice, Say on Climate resolutions generally fail to achieve their initial purpose. Past Say on Climate resolutions have shown that published climate strategies were generally incomplete and did not allow investors to assess their alignment with a trajectory aiming to limit global warming to 1.5°C, with low or no overshoot and a limited volume of negative greenhouse gas emissions. The lack of information often indicates a lack of climate ambition.
Yet, many of the past Say on Climate resolutions have been approved by the majority of shareholders. For instance, 89% of TotalEnergies’ shareholders voted in favour of its Say on Climate in 2022, while the major is still developing new oil and gas fields and intends to increase its fossil fuel production in the coming years, in contradiction with the projection of the International Energy Agency’s and other robust 1.5°C scenarii.
Investors that vote in favour of climate plans that are incomplete or misaligned with a 1.5°C scenario might give the appearance of climate action, but in fact send the opposite message to the companies by enabling them to pursue a strategy which contributes to an unsustainable level of GHG emissions.
To avoid the risk of greenwashing and ensure the completeness of Say on Climate resolutions, investors must vote against Say on Climate resolutions that lack of transparency and strategies that are not aligned with a 1.5°C scenario. For example, Reclaim Finance calls on investors to oppose this year’s Say on Climate at TotalEnergies’ AGM.
Support climate-related shareholder resolutions that promote climate action and transparency
Some climate-conscious investors are filing resolutions at AGMs with the aim of expressing their expectations on climate-related issues and influencing the company’s climate strategy. Dozens of climate-related shareholder resolutions were submitted to companies, mainly in North America and Europe, ahead of the 2023 AGM season.
Some encourage companies to be more transparent about their climate strategy. This is the case of the resolution filed by 15 investors to encourage ENGIE to submit its strategy to a vote every three years and its implementation to a vote every year and to publish a comprehensive climate strategy, with the integration of key climate-related information. Reclaim Finance calls on investors to support these efforts considering that analysis of ENGIE’s climate plan shows that it remains very incomplete and does not provide enough evidence regarding ENGIE’s capacity to meet its climate goals [1].
Other resolutions might address various elements of the strategy, such as alignment with the Paris Agreement or a 1.5°C trajectory, adoption and publication of greenhouse gas emission reduction targets, or investment plans related to the decarbonization strategy.
For instance, resolutions were filed at energy majors TotalEnergies, BP, Shell, Chevron and ExxonMobil requesting alignment of greenhouse gas emission reduction targets (including Scope 3) with the Paris Agreement by 2030. Reclaim Finance urges investors to support these resolutions because none of these companies are aligned with a 1.5°C trajectory. Analysis by Reclaim Finance shows that none of them has committed to stop oil and gas expansion despite the IEA’s projections in its Net Zero Emissions by 2050 Scenario and IPPC and UN recommendations, and their 2030 oil and gas production targets are much higher than required in the IEA’s Net Zero Emissions by 2050 Scenario [2].
Investors must support the above-mentioned resolutions, as well as any resolution that help improve transparency and alignment of climate strategies with a 1.5°C trajectory.
Integrate climate into routine resolutions
The climate crisis requires companies to make fighting against climate change a strategic priority. It is therefore crucial that investors take advantage of non-climate-specific routine resolutions to ensure that climate change and decarbonization are at the heart of companies’ concerns.
Investors can integrate climate issues into several routine resolutions:
- Re-appointment of directors: The board of directors is directly responsible for developing and implementing the company’s strategy, which includes the climate strategy. If the company does not disclose sufficient information about its climate strategy, or if it pursues activities that are clearly inconsistent with a 1.5°C scenario, such as oil and gas expansion, then investors should sanction the outgoing board by voting against reappointment resolutions.
- Approval of remuneration: The variable remuneration of executive management includes criteria that reflect the company’s strategic priorities. At a time of climate crisis, it is essential that this remuneration gives a major place to climate criteria to encourage executives to take climate action. These criteria should be clearly defined, measurable, and linked to key targets in the climate strategy, such as greenhouse gas emission reduction targets. Investors should vote against remuneration of executives and board members than do not respect the above-mentioned conditions.
- Approval of financial statements and auditor renewal: To date, many companies, and their auditors, do not adequately communicate how climate-related risks are taken into account in the preparation of financial statements. This lack of disclosure penalizes investors since the published financial statements may provide an incorrect representation of the company’s financial situation regarding the impacts of climate change and the global transition of the economy. Shareholders should therefore use the vote on financial statements and auditor renewal to express their opposition to the failure to integrate these risks.
At a time of climate emergency and record profits in the fossil fuel industry, Reclaim Finance urges investors to take action and responsibility at 2023 Annual General Meetings. Investors’ votes should demonstrate clear opposition to climate strategies that cannot be assessed against a 1.5°C trajectory or that are inconsistent with such a scenario, in addition to supporting climate-relation resolutions and making climate the backbone of routine votes.
