The guidelines have been described by John Rogers, the former CEO and President of the CFA Institute, as “an emerging best practice framework to guide investor action”. There are 7 guidelines:
- Declare your intention to vote in favour of prudently formulated shareholder resolutions that will help reduce systemic climate risk while protecting shareholder value in the long-term.
- Instruct your voting advisors to vote automatically in favour of such resolutions. If current voting agents are unable to support this obligation, find agents who will.
- Vote in favour of resolutions that call for listed companies to publish robust analyses of their assessments of the physical, policy and economic impacts to their businesses of global warming of 2° and 4°
- Declare your intention to vote in favour of resolutions that call for listed companies to publish business plans (2° transition plans) that describe how, without damaging shareholder value:
- They can reduce their emissions each year by an appropriate amount for their industry; and/or
- How their business could adapt to a carbon price that rises to $100 per tonne of carbon dioxide by 2030; and/or
- How their business could adapt to regulations aimed at meeting a 2° warming target and/or restricting atmospheric carbon dioxide to 450 parts per million (ppm).
- Actively consider, on a case-by-case basis, voting against the re-election of the chairman of the board, or against the report and accounts (or in the USA, initiating a ‘book and records’ request), where there have been persistent and unacceptable practices related to climate risk (such as repeated non-disclosure of greenhouse gas emissions or funding of climate denial organisations).
- For asset owners: require consultants actively to support the above process by including these principles in manager research, screening, selection, and the review process. If current investment consultants are unable to support this approach, find consultants who can. For investment managers: instruct analysts and credit rating research partners to assess “2°C transition plans” and adapt recommendations in accordance with these principles.
- Redouble efforts to engage with credible and well-informed scientists, economists and civil society experts and wherever possible, in alliance with these and corporate business leaders[1], engage with legislators and regulators. Investors need to support those governments that have made ‘good’ Intended National Determined Contributions (INDCs) so that these commitments are implemented and to encourage governments that are lagging to catch up. One area where diversified and long-horizon investors have a strong business case for acting is reform of fossil fuel subsidies. There is already a government-business-civil society initiative – the Friends of Fossil Fuel Subsidy Reform[2] – which climate-aware investors could and should be supporting.
[1] One corporate leadership group that is committed to action is We Mean Business: http://www.wemeanbusinesscoalition.org/
[2] http://fffsr.org/