How investors are helping fight climate change

The investor community is pushing for faster action from the corporate sector, and getting results, says Matt Crossman

“We have not come here to beg world leaders to care...We have come here to let you know that change is coming, whether you like it or not.”
Greta Thunberg

Schools Strike for Climate activist Greta Thunberg is making waves with her message for political and corporate leaders.

Since the Intergovernmental Panel on Climate Change’s (IPCC) most recent assessment report, it has been clear that work to address climate change at all levels of society requires even greater urgency.

The investor community is doing its part, working with a degree of global coordination never before seen to push for faster action from the corporate sector.

At Rathbone Greenbank, a specialist ethical and sustainable investment arm, as members of the Institutional Investors Group on Climate Change, we are playing our part in Climate Action 100+ (CA100+).

Launched in 2017, the CA100+ is an investor initiative to ensure that the largest corporate greenhouse gas emitters are taking necessary action on climate change.

As members, we are helping to lead on several companies and helping coordinate the most recent round of shareholder resolutions on climate change.

At BP’s AGM tomorrow, several institutional investors and clients of Rathbone Greenbank have co-filed a climate change-related resolution to be debated.

Resolution 22 aims to push BP further and faster in its efforts to align its business model with the goals of the landmark 2015 Paris Agreement. The resolution specifically asks for the company to make clear that the need to limit warming to “well below” 2C aligns with its capital expenditure plans and carbon emissions targets.

In essence, it asks the company if its sound policies on climate are translating into real action. The resolution has been developed in dialogue with company management and is an ambitious and challenging requirement that has the board’s backing and, hence, a good chance of delivering results.

Investor engagement on the environmental impact of carbon-intensive companies, such as BP, is no longer unusual. Indeed, 2019 has already experienced several notable interventions with target companies under the CA100+, which comprise the most carbon-intensive companies in the world, and results are being achieved.

Shell’s pledge

Royal Dutch Shell has now pledged to halve its carbon footprint, including that from the use of its own products, by 2035.

BP, too, must act firmly and decisively over the coming year with regard to setting wide-ranging, long-term targets if it is to enjoy continued support from investors.

Targets have also been a matter of debate at Norwegian energy giant Equinor (formerly Statoil). Here, CA100+ leads were in negotiation to file a resolution on climate risk, but reached a compromise with the board that will see it take significant additional action on climate change.

In a joint statement agreed through engagement with the investors, Equinor is committed to pursuing a business strategy “consistent with the goals of the Paris Agreement”. The company will set out new climate-related ambitions beyond 2030 for its business activities. It will publish its updated targets and ambitions in 2020, and thereafter report annually on progress. Equinor will also regularly review its climate-related ambitions, targets and key performance indicators.

Further afield, engagement on climate change at US oil major Exxon has suffered a setback, as the US Securities and Exchange Commission (SEC) decided to support the management’s decision to block a resolution from the CA100+ group at the company’s AGM.

The SEC retains a role in “policing” such resolutions at US companies, whose use by non-governmental organisations and investors has grown year on year. A freshly politicised SEC has been cracking down on such resolutions in 2019.

The co-filing group has therefore recommended that investors vote in favour of the election of a new chairman and oppose the re-election of the entire board at the AGM on 29 May.

Investors’ efforts are moving companies further and faster than they would otherwise go, but progress remains patchy.

Combined, the total number of companies on the CA100+ list account for more than half of global greenhouse gas emissions. The CA100+ has a major role to play in ensuring that the world meet the Paris Agreement’s goals, and Rathbone Greenbank will continue to play a part in this major global initiative.

For any carbon-intensive industry, change is coming, whether they like it or not. Those at the forefront of efforts to respond to the climate crisis will be best placed for continued success.

Matt Crossman is stewardship director, Rathbone Investment Management.

Subscribe to Money Observer Magazine

Be the first to receive expert investment news and analysis of shares, funds, regions and strategies we expect to deliver top returns, plus free access to the digital issues on your desktop or via the Money Observer App.

Subscribe now

Add new comment