Are shareholder resolutions the solution to driving progress towards a climate friendly economy? They certainly make a contribution, but they are too few and too unsuccessful to rest investor’s climate responsibility on them. In 2020, only nine markets (Australia, Canada, France, Japan, Norway, South Africa, Spain, the United Kingdom and the U.S.) saw climate-related shareholder resolutions – mostly targeting Banking, Oil & Gas as well as the mining sector. In total, there were less than 50 such resolutions and only 11 received majority support.
Most of an equity and fixed income investor’s climate action is still defaulting to a form of divestment, which as we have noted previously can be a blunt instrument. It arguably makes a portfolio more resilient without impacting the real economy.
A publicly announced divestment by a prominent investor might send a signal to the divested company to change course, but it is a one-time shot from a gun with only one bullet in the chamber. Once this bang has faded, the impact has as well.
The ballot, on the other hand, is a constant opportunity for driving change if and when investors apply it consistently. Whether by supporting AGM resolutions, joining industry-wide initiatives like “Say on Climate”, or using the power of a shareholding to express a lack of confidence in climate-laggard directors and company management.
Good investors own bad companies. This can be a good thing, so long as the investors act on their knowledge. After all, bad boards are elected by good investors who don’t vote.