On June 14, 88% of the voting shareholders of Builders FirstSource, the largest supplier of materials and services for US residential construction, called for the company to adopt science-based greenhouse gas emissions reduction targets.
This victory was just the latest in a string of remarkable shareholder successes on environmental issues this spring.
While the general public and media may have been surprised, we were not. Investment firms including Green Century that advocate for shareholder proposals to improve or protect our environment had high expectations entering this proxy season.
That optimism was understandable given that 2021 was one for the record books. Shareholders of a wide variety of companies approved nearly 20 environmentally focused proposals last year – including Green Century proposals on deforestation and climate change that chalked up unprecedented majority votes at the annual meetings of Procter & Gamble, Bunge and Bloomin’ Brands.
Despite that recent success, when climate activist shareholders lost some votes earlier in spring 2022, some media outlets were quick to declare that the party was over – assuming that with soaring oil prices, inflation and Russia’s invasion of Ukraine, shareholders would fixate solely on the bottom line and asset managers would retreat from their climate commitments.
After proposals calling on ExxonMobil and Chevron to strengthen their emissions reductions targets did not earn majority votes, the Washington Post wrote it was “yet another sign that climate activist investors are having a less successful proxy season this year.”
Similar sentiments appeared when BlackRock, the world’s largest asset manager, announced it would vote for fewer climate shareholder proposals than it had in 2021, explaining that it saw this year’s proposals as more demanding.
Putting aside BlackRock’s hypocrisy in opposing strong emissions targets while espousing its net zero goals, BlackRock is right about one thing: This year’s proposals were more demanding – and rightly so, given escalating climate change.
Sometimes less is more. Because many of this year’s winning proposals called for much more aggressive action on climate and biodiversity than those of 2021 or any year before, the Washington Post and others got it wrong by framing fewer majority votes as a less successful season.
Progress continues apace, but shareholder advocacy on climate is entering its mature phase. Environmentally-minded shareholders no longer just request that companies produce basic reports on their climate impacts. Now, we ask for tangible action, such as setting science-based targets to reduce the carbon emissions from entire value chains, or Scope 1, 2 and 3 emissions.
Three such new proposals from Green Century went to a vote in 2022, earning majorities of 89%, 88% and 70% from the shareholders of US Foods, Builders FirstSource, and Costco, respectively.
Not only that, we withdrew similar proposals in exchange for science-based targets commitments from five other companies, including Kroger, America’s largest grocery chain.
We’ve also garnered overwhelming vote tallies on proposals on other environmental issues, including a 95% vote supporting our sustainable packaging proposition at Jack in the Box’s annual meeting, as well as a 65% vote in favor of a deforestation proposal we filed with Home Depot.
Landmark votes on other climate resolutions included near unanimous approval for a methane emissions disclosure proposal at Chevron, and 96% and 91% votes on emissions reduction proposals filed with Caterpillar and Boeing.
Many environmental proposals were more robust this year because the Securities and Exchange Commission allowed greater flexibility in the requests proponents could make of companies.
Clearly, many of those new proposals fared well. Others, such as our proposals calling on insurers to stop underwriting new fossil fuel supplies, and similar proposals filed at banks, didn’t receive majorities this first year. But a significant minority of shareholders voted for these resolutions, and history indicates that support will grow.
These votes and commitments mean that the 2022 annual general meeting (AGM) season will likely result in more concrete changes – most notably, more tons of carbon dioxide kept out of the atmosphere – than the 2021 AGM season did, as more companies set emissions reduction targets in response to shareholder advocacy. By that measure – really, the only one that matters – this has been the best AGM season for the environment on record. We don’t think it’s close.
Paradoxically, each victory we have accumulated is in part a reason we have fewer majority votes now. Companies see the trend, so they often are willing to agree to our requests to avoid a shareholder vote.
With all this in mind, we will keep asking companies to reduce the emissions from their full value chains and to end support for new fossil fuel projects.
In taking these actions, we can mitigate the portfolio-wide risks that climate change poses to us as diversified investors, and support our clients’ desire to invest in alignment with their values.
Leslie Samuelrich is president of Green Century Capital Management and member of the ESG Clarity US Committee.
