To avoid some of the worst impacts of climate change, greenhouse gas emissions need to be eliminated or offset by mid-century, according to the United Nations. To get there, activist investors say banks and insurance companies should account for the emissions they contribute to by underwriting and investing in fossil fuel infrastructure like this natural gas plant in ‘California.
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To avoid some of the worst impacts of climate change, greenhouse gas emissions need to be eliminated or offset by mid-century, according to the United Nations. To get there, activist investors say banks and insurance companies should account for the emissions they contribute to by underwriting and investing in fossil fuel infrastructure like this natural gas plant in ‘California.
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Every spring, shareholders in publicly traded companies have to weigh in on how they are being run. It’s a chance for investors to vote on proposals to shape corporate policies for things like executive pay and political spending. But as the Earth warms, annual shareholder meetings have become a battleground for activist investors who are pressuring companies for more aggressive action on climate change.
This year, shareholders have submitted around 540 proposals since mid-February asking companies to address environmental, social and corporate governance issues, according to Proxy Preview. Resolutions focused on climate change accounted for about a quarter of this year’s total, with the number increasing by about 12% from the same point in 2022.
Investors want to know how companies are contributing to rising temperatures, and what they are doing about the problem. They are asking executives and corporate boards to set targets for reducing greenhouse gas emissions, and then to report on their progress. And they want to know how businesses plan to keep making money as industries are reshaped in the drive to cut emissions.
The message to companies is, “set goals, come up with plans, give us clear disclosures,” says Kirsten Snow Spalding, who leads investor initiatives at Ceres, a nonprofit organization focused on sustainability. “And it’s all about, how are you addressing the risks and moving towards the opportunities?”
Are the shareholder proposals working?
Most resolutions are non-binding, but their introduction alone has proven to be an effective tool for activist investors. Last year, shareholders withdrew a record 110 proposals that were focused on climate change after reaching agreements with companies, according to Ceres. Another 15 climate resolutions that went to the vote in various corporations gained majority support from shareholders.
“The trend towards climate action is really picking up,” says Spalding.
But the pace of corporate change is slower than activists would like – and what climate science shows is necessary. Scientists working for the United Nations say the planet is on track for catastrophic warming that will cause more extreme weather. Heat waves, droughts and floods fueled by climate change are already causing severe economic damage and are killing and displacing people around the world.
Some of the worst impacts can be avoided by quickly reducing emissions. Currently, however, emissions are not decreasing. Activists say many companies are not doing enough to address the threat, despite pressure from investors.
People walk past stranded trucks on a flooded road in Bangladesh. Experts say climate change is increasing the frequency, ferocity and unpredictability of floods.
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People walk past stranded trucks on a flooded road in Bangladesh. Experts say climate change is increasing the frequency, ferocity and unpredictability of floods.
MAMUN HOSSAIN/AFP via Getty Images
Activist shareholders focus on emissions that are difficult to measure
Chubb Ltd., a large insurance company, is one of the businesses that activist investors are targeting this year.
Chubb already reduce its own greenhouse gas emissions. But, like other insurers, the company does not directly produce many emissions. However, some of her customers do. Therefore, Chubb says it has limited its underwriting and investment in coal and oil sands. And the company he said in March which will require customers in the oil and gas industry to reduce emissions of methane, a potent greenhouse gas.
But the company’s recent methane initiative was met with a shrug by a major shareholder advocacy group called As You Sow. Note that many oil and gas companies already have their own plans to reduce methane emissions.
“I never like to say this, but it feels a little like window dressing – trying to convince investors that they are taking action,” says Danielle Fugere, president of As You Sow. “But because they are not measuring, they are not disclosing, we have no way to measure the effectiveness of those actions.”
How to Sow submitted a proposal to shareholders last year asks Chubb to publish a report on whether and how it plans to measure and reduce greenhouse gas emissions connected to its underwriting, insurance and investment activities. The group wants Chubb to make commitments that align with the Paris Agreement’s goal of limiting global warming to 1.5 degrees Celsius by the end of the century. To do this, all greenhouse gas emissions need to be eliminated or offset until 2050.
Majority of Chubb shareholders supported the proposal. But the company he said he did not know how to “reasonably measure” emissions from the insuring entities. As You Sow and other activists brought forward a similar proposal this year which is set for a vote at Chubb’s annual meeting in May.
“Insurers’ activities may contribute to systemic climate risk to the global economy, investors’ portfolios, and insurers’ profitability,” activist investors say in the proposal.
Flared natural gas is burned in Texas. Chubb recently said it will require oil and gas customers to reduce emissions of methane, a greenhouse gas and the main component of natural gas. However, shareholder activists say many oil and gas companies already have plans to reduce methane emissions, and it is unclear what impact Chubb’s policy will have.
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Flared natural gas is burned in Texas. Chubb recently said it will require oil and gas customers to reduce emissions of methane, a greenhouse gas and the main component of natural gas. However, shareholder activists say many oil and gas companies already have plans to reduce methane emissions, and it is unclear what impact Chubb’s policy will have.
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How one company is responding to a shareholder resolution
Chubb is urging investors to vote against the resolution. The company did not make anyone available to NPR for an interview. It is he said in a recent filing to the Securities and Exchange Commission (SEC) that there is not yet a “well-established and widely accepted” way to measure emissions from all of its customers.
The methods for measuring these so-called Scope 3 emissions are not perfect, however more than 3,300 companies reported theirs anyway in 2021.
“Chubb shares the proponent’s goal of achieving a net zero economy by 2050,” the company he said in a recent filing with the SEC, referring to As You Sow. “We disagree that forcing Chubb to set goals related to emissions produced by its insureds, rather than Chubb’s own emissions, would advance that goal.”
Chubb is planning further investments in “alternative energy and clean technology,” the company said he said in a climate report last yearand says its underwriting practices are encouraging companies to move away from using the dirtiest fossil fuels.
It is unclear whether most Chubb shareholders will vote again this year for the company to make a plan to reduce emissions from its various business activities.
Mainstream investors want climate proposals tailored to individual companies
While the number of shareholder resolutions focused on climate change is increasing, last year support, on average, decreased for those who went to vote at annual meetings. Ceres says average support has fallen to around 32% from 42% in 2021 amid a global energy crisis and rising inflation.
Paul Washington, who runs The Conference Board ESG Center, a think tank on sustainability, says the decline was also driven by concerns that the proposals were too prescriptive and could interfere with the way companies are run. Investors were also less willing to consider shareholder resolutions when companies had their own climate strategies. He says those same factors are at play this year.
“I think there is still strong interest [in] climate than mainstream investors,” Washington says. “But they’re taking a more case-by-case approach to what climate strategy makes sense for a particular industry and a particular company.”
