Active owners have described how they are tackling companies working contrary to shareholders’ long-term interest by lobbying against effective climate regulation.
Sarah Couturier-Tanoh, manager, corporate engagement and advocacy at Shareholder Association for Research and Education (SHARE), told the PRI Digital conference last week: “Companies’ lobbying should be aligned with investors’ interests.
“We have evidence that many companies have spent a lot of resources to undermine effective climate regulation.”
She referred to a report published recently showing oil and gas company Total had known about the impact of its activities on climate change since 1971, and has been lobbying to weaken climate regulation since the 1990s.
Systemic risk
Couturier-Tanoh said SHARE has been engaging companies on climate lobbying.
“We co-filed a proposal last year at ExxonMobil and another one at Phillips 66 asking these companies to demonstrate alignment of their lobbying activities – including memberships of trade associations – with the Paris Agreement.
“Both proposals were supported by a majority of shareholders. This clearly demonstrates that investors increasingly understand the systemic risk associated with irresponsible lobbying practices. And considering the urgency of global warming we are not only asking for transparency but for positive actions,” she said.
Positive changes
Emine Isciel, head of climate and environment at Storebrand Asset Management, said the climate policy Storebrand announced last year included new lobbying criteria.
“We will no longer invest in companies that systematically work against the Paris Agreement and we divested from five companies. And, of course, divestment has to be on the table, but this is the last option for us.
“We are asking companies to review their membership in industry associations, and one company we have been working together with, Equinor, that did this exercise… left Australian Petroleum Production & Exploration Association (APPEA),” said Isciel.
Brynn O’Brien, executive director at Australasian Centre for Corporate Responsibility (ACCR), said the Australian state has been “captured” by the fossil fuel industry. ACCR’s engagement with fossil fuel companies has, for the best part of five years, focused on relationships with industry associations.
“We have seen some changes to how some of those industry associations operate. The Business Council of Australia (BCA) is a case in point. The BCA went from saying Paris-aligned targets were ‘economy wrecking’ two or three years ago to saying they are now necessary, which is great.
“But the oil and gas industry’s lobbyists at APPEA continue to take a view that is totally out of step with safe climate,” said O’Brien.
Exhausting the options
The executive director illustrated the scale of the threat the fossil fuel industry poses using research by ACCR’s global climate insights team which shows Shell’s proposed emissions to 2050 will consume 8.6% of our global remaining carbon budget.
“That’s one single company. And this is a company Climate Action 100+ investors forcefully endorsed the transition plan it put to a vote at its last AGM. That’s getting up to that 10% mark. So we have 10 Shells and that’s it.”
O’Brien said ACCR is resorting to litigation where engagement with oil and gas companies is unsuccessful.
See also: – Litigation risk
“Investors in Australian law and in many jurisdictions around the world are owed accurate and reliable information that is not misleading or deceptive.
“We have started to get to a point where we simply can’t have a conversation with companies any more and resolve it either through voting or conversation. So we need an independent arbiter of some of the claims the companies are making. We have asked the courts, for example, to evaluate the statements Australian listed oil and gas company Santos made to the market.”
She stressed the important role investors have in urgently impacting companies’ behaviour.
“I want to emphasise this, we need to see [all engagement strategies] exhausted in the next two years.
“We need to see them pushed to their fullest potential. And if we can’t achieve what we want to achieve through exhausting those strategies in the next two years then we need to look at new strategies.
“And perhaps we have to say, ‘here are the limits of what shareholders are capable of’.”
