Last month’s approvals of climate-change risk disclosure resolutions at Kinder Morgan and Anardarko Petroleum are the latest visible signals that shareholder interest in environmental issues remains high. Yet, beyond steadily increasing support for environmental resolutions, an even broader shift may be underway as companies pro-actively engage with shareholders on their climate change strategy.
The increased attention continues a trend observed last year when climate-risk disclosure resolutions were passed by shareholders of Exxon Mobil, Occidental Petroleum Corp. and PPL. Each required the companies to assess the impact from long-term climate change and movement toward a lower carbon economy on the companies’ asset portfolio and strategies. The resolutions have been supported major institutional investors like BlackRock, Vanguard and State Street Global Advisors as well as employee retirement funds from California and New York.
The successful votes reflect a long-term rise in support for environmental proposals. A Semler Brossy analysis shows median support for environmental resolutions has increased from 19% in 2012 to 30% thus far in 2018. An EY survey of 320 institutional investors last year also found increasing concern about ESG (environmental, social and governance) issues.
Getting out front
There are signs that companies aren’t waiting for shareholders to vote before taking action on environmental issues. A Cooley PubCo article last year noted that one of the arguments made by proponents of climate-risk proposals was “that a number of peer companies were already providing the requested analysis.” Likewise, Reuters reported that other proposals have been withdrawn “when the companies agreed to take steps the proponents viewed as acceptable.”
The Wall Street Journal reported recently that 11 of 19 proposals seeking specific climate-change disclosures were withdrawn after companies committed to producing a report on strategy. Andrew Logan, director of oil and gas at Ceres, an investor group that focuses on sustainability issues told WSJ, “There are fewer of these resolutions going to a vote…a lot of the action is happening away from the [annual general meetings].”
The broad trend to shareholder activism on environmental and social issues is stirring concern in conservative political circles. A group called Main Street Investors Coalition is warning that index fund managers may be using proxy voting to advance their own agenda on issues unrelated to improving financial performance.
With investors like BlackRock letting companies know they are expected to pay attention to their long-term “societal impact,” it’s evident that climate change and other environmental and social issues need to be front and center for companies in their communications strategies.