Energy Giants Come Under Shareholder Pressure on Emissions

Investors on both sides of the Atlantic use AGM votes to demand GHG disclosures, reductions.

A group of 11 investors, including Dutch asset manager MN, Aegon Asset Management, Greater Manchester Pension Fund and Van Lanschot Kempen, have filed a shareholder resolution urging TotalEnergies to set emissions reduction targets consistent with the Paris Climate Agreement. The company’s AGM will be held on 25 May.

It is the latest in a series of moves in Europe and North America by investors to hold energy giants and other companies to greater account over their emissions targets.

Bas Bijleveld, Senior Advisor Responsible Investment & Governance at MN, acknowledged open dialogue with and progress by the French energy firm, but said current efforts “are not enough to stop global warming”.

The shareholder resolution encourages TotalEnergies to become “the first oil and gas giant that has its targets for 2030 completely 1.5°C aligned and be an example for others in the sector”, he added.

Most of the co-filers of the TotalEnergies proposal are members of investor coalition Climate Action 100+, which has been engaging with the firm since early 2017 to ensure alignment of emission reduction targets with a 1.5⁰C pathway. The company has previously come under pressure from shareholders to improve its performance on Paris Agreement alignment.

US shareholder action

Shareholder activist group Follow This has filed a resolution calling on US-based oil and gas firm ExxonMobil to set and publish medium- and long-term targets to reduce greenhouse gas (GHG) emissions from its operations and energy products across Scopes 1, 2 and 3 consistent with the goals of the Paris Agreement.

Reducing Scope 3 emissions, which account for the vast majority of those produced by energy firms, is essential to limiting global heating, the resolution states. Scope 3 emissions are indirect emissions that occur in a company’s value chain.

ExxonMobil’s board recommended shareholders vote against the resolution, saying the multiple approaches for estimating Scope 3 emissions were “questionable”.

Other companies have been more forthcoming in their response to Scope 3-related proposals. CME Energy, a US-based utility company, has agreed to expand the scope of its net zero GHG emissions commitment to include its natural gas production and delivery system by 2050, in response to a shareholder proposal filed by the Sisters of the Presentation of the Blessed Virgin Mary of Aberdeen, South Dakota.

The Sinsinawa Dominicans Sisters filed a similar proposal with another utility company, MGE Energy, which has committed to analysing its Scope 3 emissions to inform future goal-setting related to its natural gas distribution. A third proposal from the School Sisters of Notre Dame was discussed with WEC Energy, leading to its commitment to set a Scope 3 target to address up and downstream GHG emissions and alignment with the goals of the Paris Agreement goals.

All of the engagements were coordinated by Seventh Generation Interfaith (SGI) a member of the Interfaith Center on Corporate Responsibility (ICCR).

ICCR describes the momentum on the Scope 3 issue as “striking”, citing similar proposals filed by ICCR member and shareholder advocacy group As You Sow with Duke Energy and Dominion Energy, which were withdrawn after the companies committed to expand their net zero 2050 targets to include all material Scope 3 emissions.

“Investors applaud this leadership in expanding net zero targets to fully account for material Scope 3 emissions,” said Daniel Stewart, Energy Program Manager of As You Sow.

“Not doing so will lead to ill-informed strategic investment decisions and risk mismanagement that can result in stranded assets or lock-in large sources of emissions for decades to come – we expect peers to follow Duke and Dominion’s ambition.”

Pressure on Amazon

As You Sow has filed a shareholder resolution requesting Amazon prepare a report explaining divergence between the retail and technology firm’s climate policies for its operations and employee retirement investments.

The US Securities and Exchange Commission (SEC) recently ruled against Amazon’s no action motion to exclude the resolution. As You Sow CEO Andrew Behar said: “We believe most employees have no idea that their hard-earned savings are being invested in companies, essentially destroying their ability to retire on a liveable planet.”

The SEC also ruled that an As You Show shareholder proposal asking insurance company Travelers to address its Scope 3 financed emissions could move forward to a vote at the company’s AGM in May, following a similar decision to allow a climate proposal at fellow insurer Chubb.

View from the SEC

Addressing investors at a briefing organised by non-profit Ceres this week, SEC Chair Gary Gensler said investors representing “tens of trillions of dollars” support climate-related disclosures, “because they recognise that climate risks can pose significant financial risks to companies”. Investors need reliable information about climate risks to make informed investment decisions, he added.

In March, the SEC released its draft on climate-related financial disclosure which will ask companies to disclose the material impacts of climate-related risks on their business operations in their registration statements and periodic reports. Companies will be expected to disclose Scope 3 emissions only for those which are considered material.

Gensler told investors that “climate disclosures are already happening”, while investors are “already making investment and voting decisions using information about climate risk”. Many of the existing disclosures by US companies build on the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) and the Greenhouse Gas Protocol, both referenced by the proposed SEC rule.

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