Climate Action 100+, the world’s largest investor engagement initiative on climate change, is flagging key shareholder proposals in North America ahead of the 2022 Proxy Season to drive greater shareholder action on the climate crisis.
The initiative flags proposals at focus companies to help build the vote for climate-related resolutions that align with its goals to reduce greenhouse gas emissions and improve climate governance and disclosures and support global efforts to achieve a net zero emissions economy.
So far this season, the initiative has flagged three proposals at North American focus companies including one at Berkshire Hathaway, Inc. that seeks Task Force on Climate-related Financial Disclosures (TCFD)-aligned reports on physical and transitional climate-related risks and opportunities. The proposal was filed by Brunel Pension Partnership Limited represented by EOS at Federated Hermes, Caisse de Dépôt et Placement du Québec, California Public Employees’ Retirement System, and State of New Jersey Common Pension Fund. Proposals at Imperial Oil and Valero Energy are also part of the initial round of flagged proposals, with more to be announced in the coming weeks.
Already this year, we saw the release of the Intergovernmental Panel on Climate Change’s starkest warning yet on the state of the climate crisis. The report represents the most recent comprehensive review of the world’s climate science, and unequivocally lays out the catastrophic damage that will hit our ecosystems, communities, and economies as global temperature rise approaches 1.5 degrees Celsius.
“Flagging shareholder resolutions as well as routine votes, including those on directors and audit committees, is an impactful and increasingly critical tool for investors aiming to accelerate action on the escalating risks of the climate crisis,” said Mindy Lubber, Ceres CEO and President and a member of the global steering committee for Climate Action 100+. “The latest science from the Intergovernmental Panel on Climate Change leaves no doubt that the climate crisis will bring even more devastation to our hardest hit communities and global economy. Accordingly, the proposals filed so far this year carry a clear message from investors: companies must act immediately and take ambitious, necessary climate action, and they must be transparent and accountable to their investors as they work toward our collective goal of limiting global temperature rise to 1.5 degrees Celsius.”
These regional flagged proposals represent only a subset of climate-related shareholder proposals filed by Climate Action 100+ investor signatories. So far, signatories and other shareholders have filed 39 proposals at North American Climate Action 100+ focus companies, according to initiative tracking. Climate Action 100+ is coordinated by five investor networks: Asia Investor Group on Climate Change (AIGCC); Ceres (Ceres); Investor Group on Climate Change (IGCC); Institutional Investors Group on Climate Change (IIGCC) and Principles for Responsible Investment (PRI).
The proposals zero in on greenhouse gas reduction targets, Paris-aligned lobbying practices, capital expenditures, transition plans, climate accounting, and more. Twenty proposals have already been withdrawn for commitment after signatories reached agreements with companies, a positive step showing that the companies have accepted the importance of the proposal and are willing to act even without a formal vote.
Companies take shareholder votes seriously — resolutions garnering more than 30% approval have been found to prompt change by the company. In last year’s historic proxy season, the number of majority votes on climate-related proposals in the US and Canada reached a record high of 14. The average approval vote among all climate-related shareholder proposals at North American companies leapt to a record 44%, compared to 34% in 2020. A Ceres analysis shows that Climate Action 100+ flagged resolutions have received higher votes over the years, both among its investor signatories and across the broader investment community.
2022 Climate Action 100+ Flagged Proposals at North American companies
Notably, the updated proposal at Berkshire Hathaway, Inc. has been refiled from the 2021 season in which it, despite a strong company recommendation for shareholders to vote against it, ultimately received a significant majority of non-insider votes cast. That represented a large shift in shareholder sentiment, as the votes in favor showed a dramatic increase from an environmental proposal in 2018. Berkshire Hathaway, Inc. was the only North American focus company to achieve none of the criteria on its Climate Action 100+ Net Zero Company Benchmark assessment in 2021.
A flagged proposal at Valero Energy, filed by Mercy Investment Services, Inc., calls on the company to both adopt near- and long-term greenhouse gas reduction targets aligned with the Paris Agreement goal of limiting global temperature rise to 1.5 degrees Celsius and present a plan of how it will achieve those goals. It calls for the targets that include the company’s full range of operational and supply chain emissions, aligning with peer refiners both in the U.S. Europe that have already adopted their own targets covering emissions caused by the use of company products.
“Extreme weather events, forest fires and other environmental changes have devastating effects on people and communities around the world – not to mention the increased physical and systemic risks for companies and investors,” said Mary Minette, director of shareholder advocacy at Mercy Investment Services, Inc. “We need companies to develop ambitious, transparent plans to address the clear and growing risk of climate changes. Independent petroleum refiners like Valero are highly exposed to physical and financial risks of climate change, and companies that fail to address scope 3 emissions in their targets are now lagging their industry peers.”
A new flagged proposal this year at Imperial Oil, filed by Aequo, calls on the company to cease capital expenditures in exploration and developments of new oil and gas fields to align its business strategy with the pathway described in the International Energy Agency (IEA) Net Zero Emissions by 2050 scenario. IEA reports have been historically used by oil and gas companies as a justification for further development, but last year’s World Energy Outlook 2021 included the bombshell Net Zero Emissions by 2050 scenario, in which “the rapid drop in oil and natural gas demand means that no fossil fuel exploration is required, and no new oil and natural gas fields are required beyond those that have already been approved for development.”
Climate Action 100+ signatories will continue to flag proposals at both North American and European companies in the weeks ahead.