Investment firms that voted their clients’ proxies to increase transparency around climate risk–then reversed course last year when management at Exxon and Chevron opposed such measures–found themselves in an awkward position. Do they agree that climate risk is material and must be disclosed, or not? Is it material at some companies but not at competitors? Investment firms managing trillions of dollars in assets will face similar shareholder resolutions in the next month. Many of their end clients are demanding a consistent vote on climate resolutions–recognising both the scientific consensus around climate change and the heightened concern around related portfolio risk.
In December, the FSB’s Task Force on Climate-related Financial Disclosure recommended that carbon-intensive companies disclose how climate-related risks and opportunities could impact their businesses. This year investment firms will find it even more awkward to ignore the recommendations of the TCFD–especially for those managers that worked on the TCFD report, such as BlackRock, UBS, and JP Morgan.
Preventable Surprises–along with allies at Boston Common Asset Management, Ceres, ShareAction and others–is calling for large investors to vote in favour of resolutions that push companies to plan for a 2°C-aligned economy. We are also asking investors to declare their voting intention to encourage others to follow. Our briefing note makes the case for action by both investment firms and asset owners, particularly members of Principles for Responsible Investment. It is all well and good to issue statements on responsible investing, taking a long-term view, and promoting sustainable finance. But if the vision and the votes don’t align, the largest emitters of greenhouse gas can pursue business as usual, with dire consequences for the planet and investors’ portfolios.