UK bank faces investor scrutiny after shareholder rebellion over Credit Suisse climate plans.
Barclays is the latest major bank to come under pressure from shareholders in relation to its financing of the fossil fuel sector.
At its annual shareholder meeting today (4 May), Barclays is to put its proposed climate strategy to shareholders. In it, the bank pledges to become net zero by 2050 and to align its financing activities “with the goals and timelines of the Paris Agreement” – including supporting companies “committed to the transition”, regardless of industry.
However, responsible investment NGO ShareAction has called on investors to reject the strategy, with Lydia Marsden, Senior Research Officer, arguing that the plan “lacks the ambition needed to address the climate crisis”.
Last month, ShareAction warned that voting in favour “would be equivalent to giving the bank a mandate to adopt and pursue an inadequate plan, making any follow-up engagement on climate much harder for investors”.
The NGO has criticised Barclays’ proposed strategy, asserting that its coal finance withdrawal plans lag best practice, while also noting loopholes in its policies around oil and gas expansion and its targets for reducing portfolio emissions from other carbon-intensive sectors.
It is the latest instance of pressure from shareholders and campaign groups on banks to address the amount of financing they provide to the fossil fuels sector. Standard Chartered also faces a climate vote at its AGM today, following the filing of a resolution calling for the bank to adopt policies aligned with the International Energy Agency’s Net Zero by 2050 pathway, which specifies no expansion of oil or gas exploration beyond 2022.
US banks have also been targeted by investors filing shareholder resolutions in recent weeks, while Natwest shareholders backed the UK bank’s climate strategy at its AGM last week.
NGOs including Reclaim Finance and ShareAction have highlighted that banks and other financial institutions are supplying significant levels of financing to carbon-intensive firms without adequate plans to reduce this or scrutinise clients’ emission reduction plans.
“Walking the walk”
The success of climate votes at the AGMs of banks and other large firms will depend largely on the willingness of asset managers to vote against company management. Jeanne Martin, Senior Campaign Manager at ShareAction, says managers’ voting records are improving from a low base.
“We have certainly seen some asset managers step up their engagement with banks on climate change this AGM season. LGIM pre-declared its intention to vote for the climate resolution at Credit Suisse and outlined its reasons, while Aviva Investors and Sparinvest did the same,” said Martin. “However, it is too early to know these are isolated pockets of leadership or an overall trend.”
But resolutions do not necessarily need to gain a majority to have an impact. Blackrock found that ESG resolutions that received between 30 or 50% at US companies in 2021 resulted in 67% of the companies fully or partially meeting the ask of the proposal.
In some jurisdictions, response to resolutions may also be a legal requirement. The UK Corporate Governance Code asks companies that face a 20+% vote against management to “explain, when announcing voting results, what actions it intends to take to consult shareholders in order to understand the reasons behind the result”, with follow-up actions expected before the next AGM.
“The next step for banks is to consult their shareholders and understand why some opposed their management proposal or voted for a climate proposal brought forward by investors, and then lay out a plan of action to act on their shareholders’ concerns,” said Martin.
“Investors should also pro-actively reach out to the bank and explain why they have voted against management, and that they expect their concerns to be acted on within a specific timeframe.”
Credit Suisse criticised for net zero plan
Swiss bank Credit Suisse suffered a setback last week as almost a quarter of its shareholders opted against a management recommendation to reject a climate-related proposal.
The proposal was put forward by Ethos Foundation, which represents more than 200 Swiss pension funds on ESG issues, and was co-ordinated by ShareAction, calling for action to address its financing of fossil fuel companies. Credit Suisse is the fourth largest financier for this sector in Europe, according to the campaign group.
At the bank’s AGM on 29 April, 18.52% of shareholders supported the shareholder resolution, while 4.27% abstained.
ShareAction’s Martin said the result was a clear signal for Credit Suisse “to strengthen its climate plan and accelerate its transition away from fossil fuels”.
Earlier this month, fellow Swiss bank UBS saw its climate strategy supported by just over a quarter of shareholders at its AGM, despite the opposition of several large investors.
HSBC seeks to calm campaigners’ anger
Meanwhile, at HSBC’s annual meeting – also on 29 April – Group CEO Noel Quinn told shareholders that the bank had received support for its climate plans from investors and ShareAction.
While there was no specific resolution on the agenda related to climate change, after a shareholder resolution was withdrawn, Quinn highlighted HSBC’s provision of US$83 billion of sustainable finance and investment in 2021. Since 2019, it has provided US$126.7 billion in sustainable financing and plans to hit between US$750 billion and US$1 trillion by 2030.
The bank has also published “interim targets” for its financed emissions related to oil and gas, power, and utilities companies.
“We are committed to working with our clients globally to develop valid, science-based transition plans to understand – sector-by-sector, client-by-client – how we move to net zero by 2050,” Quinn said, at a meeting interrupted by Extinction Rebellion campaigners.
A busy AGM season
Listed companies from a variety of sectors are coming under unprecedented pressure from investors to address climate-related concerns.
According to Proxy Preview, an annual report published by a trio of organisations focusing on the US AGM season, investors have filed 529 shareholder resolutions on ESG-related issues at US listed companies – a record total.
“A striking change is the near-total focus on greenhouse gas emissions targets, with most proposals asking for a transition to net-zero status by 2050,” the Proxy Preview report stated.
Of these, 110 or 21% related to climate change, with 6% concerned with other environmental issues. Two in five (19%) were related to corporate political influence.
Andrew Behar, CEO of As You Sow – one of the three groups behind the Proxy Preview report – said companies were “at a major inflection point” and must choose between “thriving in an emerging regenerative economy based on justice and sustainability, or preparing to wind down the extractive economy”.