United States: Shareholder Resolutions Pressure Corporations To Disclose Plans For Climate Change

Last Updated: February 17 2015
Article by Jones Day

A large coalition of shareholders in several energy companies has recently published resolutions focused on provoking corporate responses to climate change. In early 2015, 150 investors in BP Plc ("BP") and Royal Dutch Shell Plc ("Shell") published resolutions with the two companies demanding several responses. Specifically, the resolutions call for the companies to: (i) test whether their business models are compatible with the "2C target," the international community's pledge to limit global warming to two degrees on the centigrade scale (3.6 degrees Fahrenheit); (ii) restructure the corporate bonus systems to no longer reward climate-harming activities; (iii) commit to reducing emissions and investing in renewable energy; and (iv) disclose how their public policy plans align with climate change mitigation and risk. These measures will be put to a vote at BP and Shell's annual general meetings ("AGM"), in April and May 2015, respectively. In a January 29, 2015, letter to the shareholder coalition regarding the resolution, Shell stated its intention to recommend that shareholders support the resolution at its AGM.

The BP and Shell resolutions are notable for the size of the investors involved in the coalition. One of the driving forces behind the resolutions was the "Aiming for A" investor coalition, organized by CCLA Investment Management, a charity fund manager. The "Aiming for A" coalition was established with the goal of engaging with the 10 major UK-listed utilities and extractives companies to earn an "A" in the Carbon Disclosure Project's Carbon Performance Leadership Index. The BP and Shell resolutions are the first shareholder resolutions published by the coalition.

CCLA manages, among other things, more than US$2.35 billion of Church of England money. The full co-filing group in the BP and Shell resolutions comprises more than 50 institutional investors, including UK churches, charities, and local authority pension funds, as well as clients of Rathbone Greenbank Investments and individual supporters. Eight of the co-filing pension funds have assets higher than US$15 billion. The co-filing group is being assisted by ClientEarth, an environmental law firm, and ShareAction, a shareholder action group

The kind of shareholder resolutions filed with BP and Shell are becoming increasingly common. According to Ceres, more than 100 similar resolutions related to climate change, carbon asset risk, and greenhouse gas emissions have already been published for 2015. The actions requested by these types of resolutions take many forms. Proposed resolutions were filed with several large banks, urging the banks to disclose information about the loans they make to "oil, gas, coal and other companies whose practices create carbon emissions."

As previously reported in the Fall 2014 Climate Report, multiple shareholder proposals by state pension funds in New York and Connecticut were filed in 2014 with five energy companies, requesting that they (i) report on their progress in achieving the Obama administration's goal of an 80 percent reduction in greenhouse gas emissions by 2050, (ii) consider innovative energy generation technologies and strategies, and (iii) evaluate best practices among domestic and international peers. More recently, the Vermont Pension Investment Committee approved the co-filing of a resolution asking ExxonMobil to report to shareholders by the end of November 2015 about its plans for reducing total greenhouse gas emissions from its products and operations. And a resolution filed in November 2014 with ExxonMobil called for the company to return capital to shareholders rather than invest in high-cost, high-carbon oil projects.

As coalitions such as "Aiming for A" become increasingly active, the number of resolutions, and the amount of assets implicated, can be expected only to grow.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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