While some investors have recently decided to give up engagement with the oil and gas industry and divest from the sector, others have decided to remain shareholders but refuse to make new investments in the sector [3]. For the latter, and for any climate-conscious investor, it is necessary to rethink the way in which the climate is addressed in votes at AGMs.<\/span>\u00a0<\/span><\/p>\n<\/div>Until now, climate issues have <\/span>mainly been<\/span> dealt with in specific resolutions: either <\/span>in climate-related shareholder proposals<\/span>, or in so-called <\/span><\/span>Say on Climate <\/span><\/span>resolutions proposed by the management <\/span>that ask<\/span> for approval of the climate strategy or its implementation. This approach has limitations, as it has<\/span> put<\/span> climate <\/span>in the background <\/span>among strategic <\/span>concerns, and<\/span> has not prevented oil and gas developers from pursuing their <\/span>fossil fuel expansion<\/span>, even though investors have expressed significant opposition <\/span>to them <\/span>in their votes.<\/span><\/span>\u00a0<\/span><\/p>\n<\/div>Reclaim Finance is therefore calling for climate <\/span>issues <\/span>to be systematically included in strategic <\/span>routine <\/span>votes, <\/span>with the aim of b<\/span>lock<\/span>ing<\/span> and oppos<\/span>ing<\/span> fossil fuel expansion<\/span> plans on the one hand, and to present climate as a strategic priority on the other.<\/span><\/span>\u00a0<\/span><\/p>\n<\/div>In addition, it is essential to focus climate-related voting criteria on the most impactful criterion: an immediate end to oil and gas expansion, which, according to climate science, is a prerequisite for limiting global warming to 1.5\u00b0C.<\/span>\u00a0<\/span><\/p>\n<\/div>These imperatives also apply to proxy advisors such as ISS and Glass Lewis, which have so far failed to take responsibility for climate action. In 2023, ISS and Glass Lewis both recommended to vote against climate-related shareholder resolutions filed at Shell and BP, and ISS has recently expanded its offering to include dedicated recommendations for \u00ab\u00a0ESG-sceptic\u00a0\u00bb investors [4].\u00a0<\/span>\u00a0<\/span><\/p>\n<\/div>Integrating climate issues into strategic votes<\/span><\/b>\u00a0<\/span><\/h2><\/span><\/div><\/div><\/div>
\u00a0<\/span>Climate issues are intrinsically linked to several strategic votes at oil and gas companies\u2019 AGMs:<\/span>\u00a0<\/span><\/p>\n<\/div>\u2192 Re-election of directors and <\/span>remuneration<\/span><\/span>: <\/span><\/span><\/span><\/span><\/strong>A company’s board of directors and executive <\/span><\/span><\/span><\/span>management <\/span>are responsible for<\/span> defining and implementing its strategy. As such, they must be held accountable <\/span>in the event of<\/span> incomplete or inadequate climate <\/span>strategy, and<\/span> must be <\/span>sanctioned<\/span> for it. In the case of oil and gas companies, fossil fuel expansion is a red line to a 1.5\u00b0C trajectory. Investors must therefore vote against the re-election of directors and<\/span> directors\u2019 and executives\u2019<\/span> remuneration<\/span> of the <\/span>oil and gas developers.<\/span><\/span><\/span><\/span><\/p>\n<\/div>\u2192 Financial accounts and auditors<\/span><\/span><\/strong>:<\/strong> To <\/span>properly reflect<\/span> a company’s financial <\/span>situation<\/span>, financial statements must <\/span>take into account<\/span> all the risks to which the company is exposed, including the potential material impacts of climate change (physical risks) and the risks associated with global decarbonisation efforts (transition risks) [5]. Any new financial asset linked to fossil fuels is likely to suffer a loss of value due to regulatory or market changes <\/span>related <\/span>to the transition, and therefore to become a \u00ab\u00a0stranded asset\u00a0\u00bb [6]. Yet oil and gas companies are <\/span>failing to incorporate<\/span> these considerations into their accounts [7]. Investors should therefore oppose resolutions calling for the approval of financial accounts and the reappointment of auditors for <\/span>all <\/span>oil and gas <\/span>developers<\/span> [8].<\/span><\/span><\/span><\/p>\n<\/div>\u2192 <\/span><\/span>Dividends and share buybacks<\/span><\/span><\/span><\/span><\/strong>: The oil and gas sector <\/span>dedicate<\/span>s<\/span> only 2.5% of its total capital expenditure to \u00ab\u00a0clean\u00a0\u00bb energy [9]. This <\/span>very low<\/span> level of spending compared with that de<\/span>dicated<\/span> to fossil fuels, in a context where the industry has made record profits that have <\/span>largely been<\/span> redistributed to shareholders in recent years [10], illustrates the lack of transformation to be expected from these companies and their determination to perpetuate the fossil-fuel era. Investors must sanction this <\/span>prioritisation<\/span> by voting against dividend payments and share buybacks if oil and gas companies <\/span>fail to<\/span> invest 50% of their capital expenditure in sustainable energy [11].<\/span><\/span><\/span><\/span>\u00a0<\/span><\/p>\n<\/div>Our voting recommendations for 2024 AGMs<\/span><\/span>\u00a0<\/span><\/h2><\/span><\/div><\/div><\/div>
At a time of climate <\/span>emergency<\/span>, investors must put climate at the heart of their strategic vot<\/span>es<\/span>, at the risk of becoming complicit in <\/span>corporate <\/span>strategies that contribute to climate chaos<\/span>.<\/span><\/span>\u00a0<\/span><\/p>\n\u00a0<\/span><\/p>\n<\/div><\/div><\/div><\/div><\/div><\/div>