Investing in Climate Change

Engaged Investors Come in from the Cold as Climate Action 100+ Wins Votes


Climate Action 100+ (CA100+), an umbrella group of engaged investors, is using shareholder engagement to win impressive victories.

“Companies and investors should work together to shape the policy framework in a way that isn’t reactive, and that would guide this transition to a low-carbon economy,” says Morgan LaManna, Senior Manager of Investor Engagements at Ceres, one of CA100+’s five founding partner organizations.

According to LaManna, the changing climate landscape is putting pressure on major polluters—and threatening bottom lines in the process. Here’s what CA100+ is doing to redirect companies toward sustainability.

Tracing the Coalition’s Path

Climate Action 100+ is a confederation of more than 320 investor members from around the world. They’ve banded together to pressure “systematically important” greenhouse gas emitters to fall in line with the Paris Agreement. Managing a combined $33 trillion in assets, the group has become what Bloomberg calls “the biggest, richest, and possibly the most benevolent bully the corporate world has ever seen.” The initiative’s tool of choice has been the shareholder resolution: CA100+ members have put forth resolutions to oil and auto giants like BP, Ford, Shell, General Motors, ExxonMobil, Chevron, and Equinor.

Altogether, CA100+ has targeted 100 companies that account for two-thirds of global industrial emissions, plus 61 others that can drive the clean energy transition. While Climate Action 100+’s emphasis is on environmental sustainability, the organization is also concerned about financial sustainability.

The coalition predicts that a combination of policy, price and demand trends, and new technologies will spell trouble for the focus companies. For example, electric car battery prices fell 65% between 2010 and 2015, while the percentage of global greenhouse gas emissions covered by carbon pricing schemes rose to 58%. South Africa became the latest to add to that figure after adopting a carbon tax in late May 2019.

The serious ones have made that commitment and have expertise on the board to manage the transition.

Posting Results

The coalition earned its most recent win on May 21, when 99.14% of BP shareholders approved a binding resolution to set out a business strategy consistent with the goals of the Paris Agreement. A similar push at Shell was withdrawn in March after the company agreed to most of it, setting a three-year carbon reduction goal and linking executive pay to its achievement.

The pressure helped push the two oil giants to join more than 70 Fortune 500 companies in advocating for a federal carbon tax and dividend in the US. Each donated $1 million to Americans for Carbon Dividends, an arm of the Climate Leadership Council.

Investors had less success this spring at ExxonMobil and Chevron, when Exxon successfully convinced federal regulators to block consideration of one measure, claiming it had “sought to micromanage the company.” Frustrated at the gambit, shareholder groups worked to separate the roles of CEO and hair of the board at the company, positions both currently held by Darren Woods. That motion won 41% of the vote—not enough to win, but enough to get the attention of the world’s largest privately owned oil company. According to LaManna, these kinds of failures show that “until you get the biggest asset managers in the world—like BlackRock, Fidelity, and Vanguard—it’s hard to get a majority of shares.”

The asset managers at the top of the heap are themselves a target of activists and critics who claim that their proxy voting records do not live up to their claims of sustainability. That said, there are wins: BlackRock, whose investment stewardship statement cites its emphasis on “direct dialogue” with companies, went against Exxon’s wishes and supported a successful vote in 2017 that required the company to report how its revenues would be affected by action on climate change.

However in general, according to LaManna, these investors do not vote sustainably. “They say they do care about climate change,” she says. “But their votes don’t support it.”

Managing Risk

Climate Action 100+’s goal is not necessarily to put targeted companies out of business. The group has to operate within the constraints of what investors—not to mention society—will tolerate. Instead, they focus on managing risk.

“Investors are putting together a business case about policy,” LaManna says. “It is not only a reputational risk to be lobbying against climate policies they say they support, but it also creates the risk of a sudden policy change that a company is not ready for.”

Steering such large pools of money involves significant social responsibility, both for companies and for the clients of investment firms.

“Pension funds are the biggest pools of capital,” she says, pointing to members like the Government Pension Investment Fund, a Japanese pension fund with over a trillion dollars under management. “Their first duty is to make money to pay pensioners. Their concern is that some companies they invest in could lose value quickly.”

The biggest emitters are also often at the heart of local and national economies. Their sudden demise would lead to significant social disruption and political blowback. “Investors’ aim is to work with companies to chart out a business strategy consistent with the Paris Agreement,” LaManna explains. “We need to manage a just and sustainable transition.”

And since their goal is to change behavior, divestment is not always a luxury the coalition can afford. “One of our members, CalPERS, sold out their holdings in gun companies,” LaManna recalls. “One gun company sent them a letter saying ‘thank you’ since they were tired of being scrutinized.”

Leading the Way

At the other end of the spectrum—climate leaders—LaManna looks for companies that set themselves up for success in a low-carbon future.

“We look to see if they are setting targets within the board’s governance. Does the board membership have the skills to manage climate? Are they incentivizing leadership to meet the targets through executive compensation packages?”

She cites US utility Xcel Energy and global shipping giant Maersk as good models. They have set carbon-neutral goals by 2050 and are studying how a transition would affect workers so that they can proactively prepare and work with governments. Shell and BHP Billiton reviewed their trade associations to see if they were aligned, and both left over climate policies. That drastic step can be influential in shaping a policy environment.

“Only net zero by 2050 is Paris-aligned,” LaManna insists. “The serious ones have made that commitment and have expertise on the board to manage the transition.”

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