What does 2016 proxy season tell us about responsible investment?
Spring 2016 saw company AGMs take place worldwide, which led to investor activity across the globe, as shareholders sought to influence change across a wide range of issues by drafting and voting on resolutions.
2016 Proxy Season tells of key trends in responsible investment, as well as some geographical splits.
- PRI signatories shared information on 85 resolutions through the PRI’s Collaboration Platform (a 17 resolution increase from 2015)
- Topics ranged from lobbying disclosure to pesticide pollution, and from climate change to drug health responsibility
- The majority of lobbying resolutions reached over 25% in favour, with the highest vote in favour reaching 40% (Suncor)
- Shareholders were more receptive to resolutions on climate change. The Aiming for A coalition, led by CCLA, sent proposals to Anglo American, Glencore, and Rio Tinto. These resolutions received on average 97.8% of votes in favour.
- In Canada, a resolution with Suncor Energy by NEI Investments asking the company to regularly report on how it is assessing its strategic resilience in a low-carbon world received 98.2% of votes in favour
- According to proxy advisory service ISS resolutions on the topic in Anadarko Petroleum, Chevron, ExxonMobil and Occidental Petroleum in the US received an average of 36.9% of votes in favour
- Exxon and Chevron in particular received an unprecedented amount of investor pressure with 71 investors representing upwards of $10 trillion in AUM declaring their intention to vote in favour of a resolution ahead of the AGM at Exxon, and a further 62 declaring for Chevron. Both ISS and Glass Lewis recommended shareholders vote in favour of these resolutions. Following this pressure, the resolution at Exxon received 38.1% of votes in favour, and Chevron received 40.8%.
- The large difference on votes in favour in Europe compared to the results of resolutions with US companies on similar requests shows that there is need for further investor pressure in the US market.
Detailed account of Proxy Season 2016
Lobbying has become an increasingly popular topic for shareholder dialogue as the lack of transparency in this area becomes increasingly clear. Exxon for example has been well-documented in the media for supposedly spending $30 million to discredit climate change, in addition to giving millions to climate-sceptic legislators. This led to an inquiry which found company funds going towards external groups working to dispute climate change, while in-house scientists were finding many of the potential consequences of climate change.
Given this growing concern, PRI signatories filed resolutions with over 20 companies including Google, Pfizer and AT&T, focusing specifically on the issue of lobbying disclosure this season. Of the resolutions that went to vote, the majority received over 25% of votes in favour, with some such as Suncor reaching 40%. Of the resolutions that did not go to vote, several had promising outcomes, including TransCanada and Enbridge in Canada. Both companies agreed with shareholders to disclose new information on how and where they spend on political activity, as well as agreeing to establish more robust board-level oversight on such spending.
In November 2014, the New York City Comptroller and the New York City pension funds launched their “Boardroom Accountability Project.” This campaign aimed to give shareholders the right to nominate directors for the board using the corporate ballot, known as “proxy access” (listen to our dedicated podcast to learn more). 75 companies were targeted in 2014 through collaboration with other institutional investors including CalPERS. In 2016, this campaign targeted 72 companies – 36 of the original 75 who had yet to enact viable proxy access bylaws and 36 new companies including Intel, Wells Fargo and Bank of New York Mellon.
The average votes in favour of those that were posted to the PRI’s Collaboration Platform was 57.6%. Some companies had upwards of 70% votes in favour including Netflix Inc. and Old Republic. According to the New York City Comptroller, 115 companies have adopted meaningful proxy access bylaws as of 8 January 2016, up from just six as of November 2014 when the campaign was launched.
While many of the lobbying resolutions had elements looking at climate change, others focused on portfolio resilience to a 2-degree scenario, renewable energy sourcing or public policy positions. In total, there were nearly 30 resolutions posted to the PRI’s Collaboration Platform focusing specifically on climate at several US, Canadian and European companies.
On the European side, the Aiming for A coalition, led by CCLA, sent proposals to Anglo American, Glencore, and Rio Tinto requesting the companies include in their reporting information on ongoing operational emissions management, asset portfolio resilience to the International Energy Agency (IEA)’s scenarios, and low-carbon energy R&D, in addition to requests such as disclosing public policy positions relating to climate change. These resolutions received on average 97.8% of votes in favour.
In Canada, a resolution was filed with Suncor Energy by NEI Investments asking the company to regularly report on how it is assessing its strategic resilience in a low-carbon world. Suncor is the largest company in Alberta’s oil sands and faces significant climate change risks. The resolution offered a good opportunity for Suncor to engage shareholders on why it believes these risks are material, and how it plans to mitigate them. This proposal was supported by Suncor’s Board and received 98.2% of votes in favour.
Finally, a total of 89 resolutions focusing on climate change were filed in the US this year according to proxy advisory service ISS. The most common proposals focused on carbon asset risk asking companies to conduct an annual assessment of long-term portfolio impacts of public climate change policies, evaluate the resilience of the companies’ reserves and resources through 2040 and beyond, and address the financial risks associated with such a scenario. Companies who received resolutions on the topic included Anadarko Petroleum, Chevron, ExxonMobil and Occidental Petroleum. On average, these resolutions received 36.9% of votes in favour, with several receiving upwards of 40% of the vote.
Exxon and Chevron in particular received an unprecedented amount of investor pressure with 71 investors representing upwards of $10 trillion in AUM declaring their intention to vote in favour of this resolution ahead of the AGM at Exxon, and a further 62 declaring for Chevron. In addition, both ISS and Glass Lewis recommended shareholders vote in favour of these resolutions. Following this pressure, the resolution at Exxon received 38.1% of votes in favour, and Chevron received 40.8%. Several investors and investor networks commented following the results, including Andrew Logan, Oil and Gas Program Director at Ceres who said: “Investors have sent a clear message that meaningful 2 degree stress testing is the new norm for risk reporting” and Julian Poulter, CEO at the Asset Owner Disclosure Project said: “Many of the world’s biggest investors have sent a clear message to Big Oil that they want a 2-degree business plan that shows how companies will deliver shareholder value in the transition to a low-carbon economy.” That said, the large difference on votes in favour in Europe compared to the results of resolutions with US companies on similar requests shows that there is need for further investor pressure in the US market.
The PRI’s Managing Director Fiona Reynolds concludes: “As we can see through this piece, investors are increasingly using their voting rights to make their voices heard on a range of ESG factors.
“In a post-Paris world there has been a particular appetite for climate resolutions, as investors feel increasingly confident that the world is beginning to transition to a low-carbon future and weigh up both the risks that will impact their investments, as well as the opportunities that will arise.
“Great progress has been made through the success of many investors, particularly the Aiming for A coalition, however, we still see a trans-Atlantic divide when it comes to outcomes with sensible resolutions filed by investors being unsuccessful at Exxon and Chevron, and in some cases being voted against by investors.
“More focus on voting transparency by asset owners is required and this is increasingly an issue being raised by signatories for the PRI to focus on. We will do this as part of our plan to take responsible investment forward in the next decade, with a key focus on Principle 2 on Active Ownership.”
Signatories wishing to promote resolutions and invite co-filers, either for upcoming resolutions or during next year's proxy season, can do so through the PRI's Collaboration Platform, which has recently been upgraded to assist signatories in holding companies to account, with further upgrades planned for later this year.