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A watershed for climate change stewardship?

2021 may come to be viewed as a watershed year for climate change and investor stewardship, with votes on companies’ transition plans and COP 26 on the horizon.

If we needed more evidence that the pandemic has served as a wake-up call on climate for businesses, investors, policymakers and individuals, this year’s voting season emphatically provided that. Mainstream sentiment has shifted, and the momentum is with investors calling for faster action on climate change.

With climate transition votes on the agenda for the first time at some 18 annual shareholder meetings, the stage was set for a busy season of scrutinising the fine detail of companies’ transition strategies. Although there is regulatory and societal pressure on companies to align more quickly with the goals of the Paris Agreement, there is no established consensus or unified framework to guide an assessment of how aligned companies are. This presented investors with an analytical challenge and allowed some companies to win votes for transition plans that in our view had significant gaps or were misaligned.

Whilst we were supportive of the idea of such a vote in principle, we had some initial concerns about the concept. The high level of support for transition plans suggests these concerns were justified. There is a tendency for investors to vote in line with management, which may suggest they do not have the technical skills or the time to evaluate plans properly. We decided to apply a rigorous approach in our assessment of transition plans, setting a robust standard of alignment to the Paris Agreement goals for companies to pass. This meant that we recommended voting against some high-profile names, including Total, Glencore, Royal Dutch Shell and Aena.

This article appears in our Q2 2021 Public Engagement Report.

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EOS Client Service and Business Development

Amy D’Eugenio,
Head of Client Service and Business Development, EOS