Guest essay by Eric Worrall

Big fund managers like Blackrock and BNP Paribas are supporting shareholder climate resolutions, demanding big companies demonstrate their commitment to Paris Climate Agreement goals. But President Trump is supporting a pushback against corporate virtue signalling.

Climate change: asset managers join forces with the eco-warriors

The pandemic has persuaded some investors of the potential financial damage from global warming

Attracta Mooney in London and Patrick Temple-West in Tampa

As 2020 kicked off, Dan Gocher at the Australasian Centre for Corporate Responsibility, a shareholder advocacy organisation, was feeling “pretty optimistic” about its plans to force big Australian energy companies to tackle climate change.

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Then came the coronavirus pandemic. “Once the virus hit, we said ‘God, we won’t get anything done [on climate change] for 18 months’,” says Mr Gocher.

Like many others, Mr Gocher feared investors would swiftly retreat from recently made climate pledges as markets plummeted. Critics had long argued that the fund industry’s nascent love affair with environmental, social and governance investing was in reality a marketing ploy that would be dumped at the first sign of trouble. 

Instead, in spite of the pandemic, 2020 has proved to be a landmark year for investor action on climate change, with significant resolutions being passed and investment pouring into sustainable funds. With both regulators and clients increasingly calling for change, asset managers are now broadening their remit beyond energy-intensive industries such as oil.

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The path to greener investment is not assured, with other companies still shrugging off asset managers’ new threat. “Our companies are not worried,” says Charles Crain at the National Association of Manufacturers, whose members include ExxonMobil.

In the US there is a growing pushback against investors acting as climate warriors. Asset managers are gearing up for a row with the Trump administration over a new proposal that threatens investors’ ability to incorporate ESG principles into pension portfolios. At the same time, many well-known asset managers are still reluctant to vote against management, meaning the vast majority of climate resolutions do not pass.

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Read more: https://www.ft.com/content/78167e0b-fdc5-461b-9d95-d8e068971364

The US SEC has been very active blocking climate activist shareholder resolutions.

Investors Worried About Climate Change Run Into New SEC Roadblocks 

The Securities & Exchange Commission has more Trump appointees now, and energy and utility companies see an ally as they argue shareholder resolutions ‘micromanage’. 

BY DAVID HASEMYER
MAY 3, 2019

Nearly two-thirds of the climate-related shareholder resolutions filed with publicly held energy and utility companies this year have been contested before the U.S. Securities and Exchange Commission, an agency now dominated by appointees of President Donald Trump who appear more sympathetic to the fossil fuel industry.

So far this year, the SEC has sustained 45 percent of the challenges, the highest percentage in the last five years.

Exxon, Chevron and Devon Energy have all succeeded with arguments that some shareholder proposals infringe on the companies’ oversight of everyday business operations. The SEC concluded that forcing the companies to comply with the demands would be micromanaging.

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Read more: https://insideclimatenews.org/news/01052019/shareholder-resolution-climate-change-sec-challenge-micromanage-trump

If you are concerned about the infringement of shareholder rights, remember if climate action was really the overriding priority, asset managers and shareholders could install the head of Greenpeace as the new company CEO.

In my opinion the activist asset managers voting these green resolutions want to have their cake and eat it as well. They want to keep the successful management team in place, doing their magic, but they also want to force management’s hand on daily operations.

The SEC rules being used to block these virtue signalling resolutions are not designed to prevent shareholders getting what they want, they are designed to avoid dysfunctional delegation, responsibility without authority. They stop shareholders from placing impossible micromanaging demands on managers, then holding the managers accountable for a situation they are powerless to correct.

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