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Commentary

Take Five: For or Against  

A selection of this week’s major stories impacting ESG investors, in five easy pieces.  

The voting choices of asset owners and managers on key climate-related resolutions are being closely watched.  

Opening exchanges – After the 2022 proxy season featured some notable victories for shareholders, but decidedly mixed support for ESG resolutions overall, climate-related vote outcomes were always going to be closely watched at this early stage in the AGM calendar. Many US investors had major banks and insurers in their sights, seeking to hold them to stated climate commitments. Investor calls for an “actionable” climate transition plan from Bank of America and other leading banks achieved a respectable level of support this week, if not achieving majorities. UK and European investors lined up against oil and gas majors with similar demands for credible net zero policies.  Despite backing from five UK pension schemes, efforts to unseat BP’s chair yesterday – for failing to consult investors before watering down emissions targets – gained less than 10% of shareholder votes. Meanwhile a resolution seeking alignment of the firm’s Scope 3 decarbonisation targets with the Paris Agreement – backed by PGGM – garnered around 17% of votes. Were the BP votes “a failure of shareholder engagement” as claimed by Make My Money Matter’s Tony Burdon or a“pretty significant” signal from investors, as commented by Lindsey Stewart of Morningstar? Time will tell, but pressure is mounting, with asset owners and retail investors increasingly noting the “disconnects” between asset managers’ policies and votes.  

Year on year campaign – Effective engagement can be achieved without winning votes at AGMs of course. Food and beverage company Kraft Heinz announced new goals to cut the use of virgin plastic packaging, making good on a commitment made to As You Sow after the shareholder advocacy group agreed to withdraw a shareholder proposal on plastic pollution last year. This follows similar action by Keurig Dr Pepper, Mondelez, PepsiCo, Target and Walmart. Change may also be on the way at Dow – the world’s third largest producer of single-use bound plastic resins – after 30% of shareholders backed a first-time resolution asking the firm to report on the impact of reduced global demand for virgin plastic on its business. Elsewhere, steps being taken to increase plastics-related disclosures should lead to further action by firms and investors to reduce risks.  

The North (Sea) wind blows – BP was among the many firms backing the Ostend Declaration on Monday, a nine-country pact committing to expansion of North Sea offshore wind generating capacity to 120 GW by 2030 and 300 GW by 2050 (the EU-27 installed just 16 GW of new wind capacity in 2022). As a side deal, two of the signatories – the UK and Netherlands – unveiled LionLink, an undersea cable that can carry 1.8 GW between offshore windfarms and Dutch and British homes. EU Energy Commissioner Kadri Simson put the declaration in context of the recent G7 renewable energy commitment as well as the revised EU Renewable Energy Directive, which also reforms electricity market design, and the Net Zero Industry Act, aimed at scaling green technologies. While many will have welcomed the UK’s participation in a pan-European green power initiative, the sense of rapprochement was slightly undermined by the decision to only send Energy Security Minster Grant Schapps to rub shoulders with the assembled heads of government.  

Compare and contrast – The contrast in UK and EU approaches to securing a sustainable future were apparent beyond Ostend this week. In Brussels, the Europe Commission rubber stamped major planks of its Fit for 55 plan, aimed at rapid reductions in GHG emissions by 2030, covering the revised EU Emissions Trading System, the Carbon Border Adjustment Mechanism, and plans to reduce emissions from maritime, air and road transport and buildings. There was also progress on the Corporate Sustainability Due Diligence Directive, albeit with criticism that its power to hold firms account on human rights and environmental harms was being diluted. This was as nothing compared to the brickbats of barbs facing UK policymakers, ranging from parliamentarians demanding greater urgency and coordination to its sustainable investment policies, to key bodies calling for five steps to improve infrastructure resilience against climate change, to judges greenlighting legal action for over proposed new oil and gas licences.  

Physical risks – US President Joe Biden’s long-awaited confirmation of his intention to run for a second term has raised concerns among many who fear he may not be up to the physical strains of the job for much longer, having recently entered his eighties. Is this fair or are they guilty of one of the last acceptable forms of workplace discrimination: ageism? Having done so much so far in putting the US back onto a Paris-aligned pathway – further demonstrated at last week’s Major Economies Forum – it’s tempting to cheer him on to “finish the job”. After all, it might take another four years to finalise the SEC’s long awaited climate disclosure rule.   

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