Shareholders of the Canadian grocery retailer also called for “time-bound commitments” on establishing climate targets validated by the Science Based Targets Initiative.
Concessions made by a Canadian food retailer have demonstrated the risks of falling behind both investors’ expectations and peers’ climate policies, according to co-filers of a shareholder resolution at its AGM last week.
Shareholders in Metro, which operates in Ontario and Quebec, called for the company to adopt near- and long-term science-based greenhouse gas (GHG) emissions targets, including Scope 3 (value chain) emissions, due to it lacking a clear reduction plan aligned with the Paris Agreement’s 1.5°C goal.
“Investors saw the need for this proposal due to the company’s peers’ performance eclipsing their own,” said Jennifer Story, Acting Director of Shareholder Advocacy at SHARE, a Canadian provider of responsible investment services for institutional investors.
In January 2022, the retailer announced Scope 1 and 2 GHG emissions reduction targets that neither put the company on track to achieve net zero emissions by 2050 nor aligned it with limiting warming to 1.5°C, according to the shareholder proposal.
As a result of its unclear reduction plan, the retailer stands out as a “laggard” in comparison to its peers, the proposal said, with supermarket rivals Loblaw and Empire announcing their commitments to achieve net zero Scope 1 and 2 emissions by 2040 and Scope 3 emissions by 2050 – both in line with the guidelines of the Science-Based Targets Initiative (SBTi).
“Investors see climate action as both a necessary risk mitigation tool, and competitive imperative,” said Story.
“In this case one third of Metro’s voting investors sent a strong and unified signal to the company.”
While the vote did not pass, almost a third (29%) of shareholders voted in favour of the climate proposal at Metro’s AGM on 24 January, with the company’s CEO verbally sharing his intentions to address the feasibility of working on new 1.5°C targets.
“We expect the number of climate-focused proposals at Canadian companies to increase in coming years, as investor expectation, and the urgency of the climate crisis, continues to grow in significance,” said Story.
“This proposal received an affirmative recommendation from proxy advisor Glass Lewis, which signals that future similar proposals on the ballot will experience an increase in support.”
Glass Lewis’ support appears to have been significant as the proxy advisor controls approximately 28 percent of the proxy advisory market. SHARE co-filed the proposal with University of Montreal, a client.
While SHARE welcomed Metro CEO’s intentions to review its GHG emissions reduction plan, it is seeking “time-bound commitments” that reflect the ambition necessary to meet the urgency of the climate crisis, said Story.
“In order to establish investor confidence in Metro’s climate approach, the company would need to measure and disclose its emissions, inclusive of its entire value chain, and set targets aligned with international standards, and have those targets externally validated, by the SBTi.”
The resolution called for Metro to establish and disclose targets that will follow established guidance at least 180 days prior to the next AGM. The targets should also be supported by an “enterprise-wide climate action plan”.
SHARE plans to follow up with the grocery retailer over the proposal and the next steps, with it “keen to support the company’s exploration of SBTi targets”.
SHARE has also seen such climate concerns grow to become an issue of governance, with investors beginning to assess the suitability of sitting board members, given the company’s lack of action on an issue, she said.
“Any signal of a large group of investors that they are concerned with company performance and risk management is serious,” she added.
“That means we have more work to do, together, to get the company’s climate planning right, so investors have more confidence in their plan.”
Last week, New York City pension funds and the NYC Comptroller Brad Lander announced shareholder resolutions at Royal Bank of Canada (RBC), Bank of America, Goldman Sachs and JPMorgan Chase in a bid to force them to disclose their GHG emissions targets for 2030.
All four banks continue to finance fossil fuel expansion despite making net zero pledges, with the shareholder proposals calling for their reduction plans to be aligned with climate science.
“Shareholders applauded these banks when they set net-zero goals – but it can’t be all talk,” Lander said in a statement. “We expect them to take the steps needed now to reduce emissions on the timeline to which they have committed.
“Absent a concrete plan to reduce absolute emissions in the real world in the near term, any net-zero plan rings hollow.”