With publication of the votes from the 2017 proxy voting season, large US investors are being given much credit for their votes in support of shareholder resolutions seeking disclosure of climate risk. The Financial Times lead on 1 October was as follows:
“Large investment groups including BlackRock and Vanguard have stepped up pressure on US energy companies to address the risks associated with climate change, despite the Trump administration’s lack of action to address the threat. An analysis of shareholder votes at this year’s annual meetings showed investors have taken a more active role in pushing for information on climate risks, often voting for improved disclosure against company board recommendations.”
If only the “often” were accurate. The two giant investment firms supported climate resolutions only at Exxon and Occidental; they voted against similar resolutions at nine U.S. utility companies. Reducing emissions at utilities is critical to moving toward the 2°C-aligned planet envisioned in the Paris Agreement. The EPA recently reported that U.S. utilities were responsible for emitting 1.9 billion metric tons of greenhouse gases in 2016, out of 2.99 billion metric tons CO2e reported by direct emitters. The Petroleum and Natural Gas Systems Sector was the second largest, with 283 million metric tons CO2e.
Hence the focus on utilities, nine of which faced shareholder resolutions asking for increased disclosure of climate risk. Of the nine, one resolution was approved with a 56.8% vote in favour; one received 49.9% in favour; the rest averaged 45% in favour. While many large asset managers–State Street Global Advisors, Goldman Sachs, FranklinTempleton, Legal & General–are on top of their brief in the sector, the two largest utility investors remain aligned with management. Preventable Surprises Chair Carolyn Hayman responded to the Financial Times article with the following letter, published 8 October:
Sir, Your report “Investors press energy groups for action on climate risk” (October 2) missed a conundrum in proxy voting policies. While BlackRock and Vanguard are waking up to risk on the supply side (ExxonMobil and Occidental), they have ignored the demand side, the utilities that remain wedded to fossil fuels when clean alternatives exist. Nine US energy utilities faced shareholder resolutions on 2C scenario planning in 2017. BlackRock and Vanguard voted against all nine resolutions, most of which would have passed if the two investors changed their votes.
The narrative about engagement rather than voting is wearing thin. The companies targeted by these resolutions continue to lobby to protect the carbon-intensive status quo, at a high cost to customers, shareholders, and the planet, and few are on track even to meet the Paris goals. If investors are seeking to limit the systemic risks of climate change, they need to be publicly supporting resolutions at both supply-side and demand-side companies.
Carolyn Hayman
Co-Chair, Preventable Surprises, London NW5, UK