This AGM season, investors have filed numerous shareholder resolutions to accelerate finance sector action to address climate risks and meet net zero commitments.
The next four weeks will see asset owners and investor networks challenge major US financial institutions on their willingness to make good on their stated climate commitments.
Investors have filed 21 climate-related shareholder resolutions with major US banks and insurers calling for measures including the adoption of science-based targets, a phase-out of lending and underwriting to companies involved in new fossil fuel expansion, aligning climate-lobbying with the goals of the Paris Agreement, and the strengthening of due diligence policies on indigenous rights.
During a media briefing hosted by the Interfaith Center on Corporate Responsibility (ICCR), lead investors, including the New York City (NYC) Comptroller’s Office, As You Sow and Sierra Club Foundation, outlined their proposals for the upcoming 2023 proxy season.
AGMs to be held by Citi, Wells Fargo, and Bank of America on 25 April, and by Goldman Sachs on 26 April, are seen as key indicators of investment sentiment. Other major dates include the mid-May AGMs of JPMorgan Chase, Chubb and Morgan Stanley.
“These investors have filed their shareholder resolutions with the finance sector in response to the growing climate crisis and the failure to limit global warming to 1.5°C and achieve net zero greenhouse gas (GHG) emissions by 2050,” said Christina Herman, Senior Programme Director for Climate Change and Environment at ICCR.
“The devastation we are already seeing across the planet, such as flooding, fires, declining fish stocks and coral reef destruction from ocean warming and acidification, and dangerous amounts of methane being released by melting tundra, all demonstrate the need for immediate action.”
Non-profit shareholder advocacy group As You Sow has filed transition planning proposals at Bank of America, Goldman Sachs, JPMorgan Chase, Morgan Stanley and Wells Fargo, as well as insured emissions reduction proposals at Travelers, Berkshire Hathaway and Chubb.
Danielle Fugere, President of As You Sow, told onlookers how climate change poses growing risks to banks, such as stranded assets on balance sheets, client destabilisation, and potentially higher capital requirements from regulatory bodies, as well as new opportunities.
“The proposals ask banks to set 2030 targets and describe their transition plan for achieving those targets,” she said.
Fugere noted that key elements of a credible transition plan include forward-looking indicators rather than an annual summary of emissions, providing a pathway for how the bank intends to achieve its goals, and establishing milestones and metrics that provide accountability to investors and stakeholders.
Morgan Stanley has withdrawn its own proposal and will present more information on its transition plan this summer, but the other four proposals will proceed to a vote, she said.
The NYC Comptroller has filed absolute emissions proposals at Bank of America, JP Morgan, and Goldman Sachs on behalf of three of the city’s pension funds: New York City Employees Retirement System, the New York City Teachers Retirement System, and the New York City Board of Education Retirement Systems.
The proposals ask each bank to disclose interim 2030 absolute GHG reduction targets for their lending and underwriting into high emitting sectors, such as oil and gas, and power generation.
“These targets should be aligned with a science-based net zero pathway and should be in addition to the emissions intensity targets that each bank has already set for these sectors,” said Michael Garland, Assistant Comptroller for Corporate Governance and Responsible Investment at NYC Office of the Comptroller.
He noted that all three banks are signatories to the Net Zero Banking Alliance and, therefore, have agreed to report progress towards net zero emissions by 2050 against absolute emissions intensity targets. However, all three banks have set “only intensity targets”, he said.
“Absolute and intensity targets are complementary, but intensity targets alone paint an incomplete picture of a bank’s progress towards meeting its climate commitments,” he added.
Sierra Club Foundation has filed fossil fuel expansion proposals at Goldman Sachs, JPMorgan Chase , Morgan Stanley and Wells Fargo. Further, the Seventh Generation Interfaith Coalition for Responsible Investment has filed a climate lobbying proposal at Wells Fargo.
Underwriting fossil fuel phase-out
Last year, shareholder proposals were filed with insurers Chubb, Travelers, and The Hartford, calling for them to cease underwriting new fossil fuel projects. Feedback from large asset managers indicated that the proposals were not flexible enough, according to Andrea Ranger, Shareholder Advocate at Green Century Capital Management.
As a result, this year’s proposals ask the insurers to commit to a time-bound phase-out of underwriting new fossil fuel exploration and development projects aligned with limiting temperature rise to 1.5°C.
“The relationship between insurance companies and fossil fuel companies getting capital in order to expand is clear, and it may lead to decades of emissions that we cannot afford to have in our atmosphere,” said Ranger.
“Although insurance companies have expressed the need for a flexible approach to underwriting, it is unclear how they plan to accommodate reducing emissions if they continue to underwrite new projects.”
Additionally, insurance losses have continued to increase over recent decades, and there may be a loss of insurable areas and big increases in premiums over time, reducing potential profits for insurance companies, said Ranger.
In 2021, insured natural catastrophe losses reached around US$110 billion, according to Swiss Re, making it the third-costliest catastrophe year since 2011.
Climate risks and human rights
Chubb has also had a proposal on free prior and informed consent filed by Domini Impact Investments this proxy season, requesting that the company report on how it incorporates its human rights-related risks into its underwriting.
“There is a real intersection between human rights risks and climate risks, and we want to understand how, if at all, Chubb is looking at that,” said Mary Beth Gallagher, Director of Engagement at Domini Impact Investments.
Specifically, the proposal focuses on the impacts and risks to indigenous peoples and the obligation that companies should consult with indigenous communities when a project might impact their rights and lands, known as free prior informed consent. The proposal also requests information from Chubb on how it is undertaking it stakeholder engagement process.
“This engagement started by recognising the risks of underwriting oil and gas exploration in the Arctic National Wildlife Refuge,” said Gallagher. “For decades, the Gwich’in community, a group of indigenous peoples who live in the coastal plain of the Arctic, has been advocating and organising to ensure that there is no oil and gas exploration there.”
The unique and sensitive ecosystem in this region is essential to the health and well-being of the Porcupine Caribou, Gallagher said.
“As leases might be opened up for oil and gas exploration in this territory in the next year, we want Chubb to consult with indigenous peoples, fully looking at all potential risks, not only related to climate change, but also those related to indigenous peoples and biodiversity,” she said.