COP26: investors no longer want to endorse greening plans that lack ambition

Posted on Nov 2, 2021, 7:14 AMUpdated Nov 2, 2021, 10:07 AM

More and more, shareholders want to know the climate plans of listed companies and also be able to give their opinion, even if this is not obvious. Proof of this is: the “Say On Climate” landed massively at the general meetings of 2021. Modeled on the “Say On Pay”, which submits the remuneration of the directors to the votes of the shareholders, it consists in having the general assemblies approve the plans of the companies to fight climate change.

In France, Atos, Vinci and Total have voluntarily participated in this exercise. In Europe, these are Unilever, Ferrovial, Shell. In total, this year, 25 companies around the world have consulted their shareholders on their environmental policy. In general, these resolutions are popular with shareholders. They are often voted over 90%, even in the case of Glencore, one of the world’s largest coal operators. There were two exceptions.

In May 2021, Shell shareholders only approved the oil company’s climate plan at 89%. But it was the mining giant BHP which won the palm for the worst score (87%). While it is difficult to speak of a rebellion against the general management of the Anglo-Australian group, this low score illustrates the willingness of shareholders to pay particular attention to the group’s impact on the environment.

Shareholder pressure

The first “Say On Climate” dates back to just over a year ago. The shareholders of Spain’s Aena, which manages the airports of Madrid and Palma de Mallorca, have spoken out on its action plan to reduce greenhouse gas emissions. The group gave in to pressure from one of its shareholders, the British hedge fund TCI, founded by billionaire Christopher Hohn. This activist has forged a solid reputation for nearly twenty years by shaking the bosses of large listed groups so that they generate more profitability. In France, he is known to have tried to torpedo, in 2017, the takeover of the Zodiac equipment supplier by the engine manufacturer Safran, an operation deemed “overpaid” and “irrational”.

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Crusade in the United States

Since then, Christopher Hohn has continued his crusade, also in the United States, with the rating agencies S & P Global, Moody’s, or Union Pacific Corporation. But, the very high approval scores make investors think about the meaning of the votes. Some people wonder. Calpers, who manages the pensions of California officials, consistently abstains to be sure not to approve plans that are too unambitious. Glass Lewis, the proxy advisory agency, is openly opposed to “Say on Climate”.

Even Christopher Hohn has moved on from his positions. He has stopped systematically asking companies in which he is a shareholder to submit a climate resolution. In the United States, where the weight of passive management is greater than in Europe, index funds systematically vote on the resolutions of the board of directors. Result: they almost always pass as they are. What to call into question the interest of these votes.

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