Welcome to Most Significant Votes! A weekly update from Paul Lee, Redington’s Head of Stewardship & Sustainable Investment Strategy, highlighting the key AGM decisions that matter to asset owners and on which they might wish to hold their fund managers accountable.
It’s been a week of muted investor voices on climate, and one which has also seen some of the pharma businesses only gently held accountable by their shareholders. In spite of all their vaunted net-zero ambitions, and predictions that this would be the year when investors would finally make their voices heard in pressing for climate delivery, it doesn’t seem to have happened at the season’s first batch of AGMs.
There were plenty of opportunities collectively not taken by the investor community. At the 26th April AGMs of three US banks (Bank of America, Citigroup and Wells Fargo), investors were invited to support calls for an end to lending that supports new oil and gas drilling and development. When the IIPCC makes clear that we must reach peak CO2 emissions within three years, and even oil industry defender the International Energy Agency (IEA) makes clear that there should be no new fossil fuel developments if we are to achieve net zero, this should hardly be controversial call. Yet the banks opposed the resolutions, in effect arguing that they need to continue to service their clients no matter what they intend to do with the financing and that the IEA analysis is wrong. In each case, only a little over 10% of shareholders supported the resolutions.
At Goldman Sachs (AGM 28th April), shareholders provided a similar result on its equivalent resolution. Perhaps the most striking thing about its meeting was this sentence from the bank’s proxy statement (printed in bold so no shareholder could miss it): “We do not believe that placing limits on financing to producers will result in either reduction in emissions or demand for fossil fuels.” Maybe it’s possible to agree that the impact on demand will be limited, but is this the first time that Goldman Sachs has argued that its financial role has very limited influence on the real world? Goldman is surely not often so shy – and surely, on this occasion, their modesty is misplaced?
It’s worth remembering that US shareholder resolutions are generally non-binding, so even if they had passed, these resolutions would not have obliged the banks to act. They’re a signalling tool, but it seems that few shareholders are willing to signal in this way. The war in Ukraine has complicated the oil markets, but the weakness of these voting signals has to be disappointing. It’s probably further evidence that investors are relatively less pressuring of US companies – the pressure on European banks in this area is much more substantial – or that the big US investment institutions are less pressuring than the large European firms. But it’s also evidence that investors are less firm in relation to the financial services industry – there’s a tendency to be weaker on one’s own world.
In Europe, and in the real operating world, there were stronger messages sent, though they were still fairly muted. Two of the biggest European emitters (Switzerland’s Glencore, the one major miner to retain significant thermal coal activity, and Ireland’s CRH, one of the world’s three main cement businesses which are all heavy emitters because of the chemical reactions inherent in the creation of cement) both held their AGMs yesterday (28th April). At Glencore, a resolution to approve the company’s Climate Progress Report was opposed by nearly 24% of shareholders (with what looks like around a further 1% abstaining).
While Glencore has carefully changed the language in its Reserves and Resources Report, emphasising that the extensions it’s seeking to coal mine lives are just in the normal course of business, this simply reconfirms that Glencore is indeed seeking to extend the lives of a number of its coal mines. Given its argument that it’s a better long-term owner of those mines because it’s well-placed to wind them down, this may have been surprising to a number of investors. The company also faced an unusually large vote against the auditors (Deloitte in this case), though the word ‘relative’ matters here as it was only a 3.4% vote against. Again this seems to reflect a concern about the climate reporting in the accounts, as the analysis now incorporated in the Climate Action 100+ benchmark raises concerns.
There was no climate-specific resolution at CRH, but some investors had pressed for votes against the auditor (again, Deloitte) and audit committee chair Shaun Kelly. Again, this remains very much a minority pursuit: with just over 2% of shareholders voting against the auditors, and a little more against Kelly. The contrast with the nearly 14% voting against the remuneration report and almost 10% against the new pay policy is striking. While these votes aren’t surprising given that pay has long been a running sore at the company, the greater comfort that investors feel in taking voting action on pay in comparison with other issues remains stark.
Stepping beyond climate to another global crisis, yesterday was also a big day for resolutions at the major pharmaceutical companies. In particular, Pfizer and Moderna both faced resolutions calling for them to make their Covid-19 vaccines more readily available to the developing world. Despite these resolutions having had the unprecedented public support of the World Health Organisation and even though the companies have achieved spectacular profits from sales to developed economies, neither was passed. However, they did receive relatively high levels of support – 27% and 24% respectively in preliminary results disclosures. All the shareholder proposals at Johnson & Johnson (which included similar resolutions on Covid-19 treatment fairness) also failed to get majority support. In all three cases, the full voting results are not available at the time of writing – the convoluted voting system in the US often makes vote collation a complex process.
The AGM of Irish insulation manufacturer Kingspan – whose actions have repeatedly been flagged as concerning in the Grenfell Inquiry – occurs on 29th April as this blog is written. We’ll discuss that next week.