Top investment groups push for action on climate risks

Large investment groups including BlackRock and Vanguard have stepped up pressure on US energy companies to address the risks associated with climate change, despite the Trump administration’s lack of action to address the threat.

An analysis of shareholder votes at this year’s annual meetings showed investors have taken a more active role in pushing for information on climate risks, often voting for improved disclosure against company board recommendations. 

In votes at seven of the largest US energy companies this year, the 30 largest investors switched their votes to support disclosure on climate risk a total of 38 times, having opposed similar resolutions in 2016, according to ShareAction, a campaign group. 

The data come from regulatory filings compiled by Proxy Insight, an information service. 

The increasingly assertive position taken by large investors had its most significant impacts at ExxonMobil and Occidental Petroleum, two of the largest US oil groups. There was majority support for proposals calling on the companies to publish regular reports on the possible impact on their businesses of policies to address the threat of climate change. In both cases, BlackRock and Vanguard, the world’s two largest fund managers, voted to support the proposals. 

Paul Lee, head of corporate governance at Aberdeen Standard Investments, the largest active manager in the UK, said the group backed motions calling for climate-related disclosure because it wanted to “encourage greater ownership of the risks of climate change at board level”. 

State Street Global Advisors has been one of the most active large fund managers in pushing boards to take account of climate change. Rakhi Kumar, its head of environmental, social and governance investments, said that with holdings in about 10,000 companies worldwide, the group could have a very broad influence. 

“As an index investor, you can hold all the companies in your portfolio to the same standard. You don’t need regulation,” she said. 

Many investors have been stepping up their engagement with companies over climate change, generally seeking more transparency on the potential risks to earnings. BlackRock, for example, identified climate risk disclosure as one of its five investment stewardship priorities for 2017-18. 

However, there have been some wide variations in fund managers’ votes on climate-related issues. In “key climate votes” this year as assessed by the 50/50 Climate Project, another group that works with investors on the issue, BlackRock voted for relevant proposals 9 per cent of the time and Vanguard 15 per cent, compared to 61 per cent for State Street. 

BlackRock said its approach was to “engage primarily through direct dialogue but [we] will exercise our right to vote against management recommendations where we do not see sufficient progress.” 

Ms Kumar at State Street said the group used both “vote and voice” to persuade boards to assess climate risk. 

Edward Kamonjoh, executive director of the 50/50 Climate Project, said he expected investors to seek better explanations from fund managers when they decide not to support climate-related resolutions. 

“Large fund managers with poor voting records on climate risk can expect public challenges on the dichotomy between their engagement priorities and voting practices,” he said.

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