Net Zero Company Benchmark Update

Assessments for 14 Australian focus companies have been released early ahead of AGMs —click here for more information.

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Proxy season activity: Frequently Asked Questions

The investor networks that coordinate Climate Action 100+ provide investor signatories with additional information during proxy seasons to help them evaluate companies’ climate ambition and progress. This includes individual company assessments using the Net Zero Company Benchmark, which measures business strategy alignment with the Paris Agreement, and the Climate Action 100+ flagging process, through which the initiative raises awareness of shareholder resolutions and other votes for signatories to take into consideration during proxy season.

These FAQs have been updated as of May 2022.  

RULES OF ENGAGEMENT

All engagements conducted in relation to the initiative are informed by a common agenda to achieve clear commitments to cut emissions, improve climate governance and strengthen climate-related financial disclosures. Company alignment with these goals, and more widely with the Paris Agreement, is measured by the Net Zero Company Benchmark.

‘Engagement’ refers to activity undertaken between an investor and the management and/or Board of a company that they are invested in, to exchange perspectives and push for certain outcomes. In the context of Climate Action 100+, this would be between investor signatories and one (or more) of the initiative’s 166 focus companies that they hold shares in. See here for more about the engagement process.

 

Examples of engagement activity include private dialogue, as well as strategies to hold the board and management accountable, such as filing of shareholder resolutions, pre-declaring voting intentions and AGM statements. It also includes shareholder proposals or other votes flagged by Climate Action 100+.

Each engagement is headed by a lead investor/s, often with the support of other collaborating investors. The lead investor/s is the main point of contact between the focus company, any collaborating investors and the coordinating investor network (i.e. AIGCC, Ceres, IGCC, IIGCC or PRI) responsible for monitoring the status of engagement with that company. They are the primary signatory accountable for driving the Climate Action 100+ engagement with their focus company forward.

 

However, while underpinned by a common agenda, the objectives and outcomes of individual investor engagements do not represent the initiative as a whole or its signatories. Signatories are responsible for driving each engagement independently and represent only the assets over which they have a fiduciary duty. Any engagement undertaken does not represent any other investor signatories or the initiative, unless this has been explicitly stated.

Engagements between investors and focus companies often take place privately and there are various reasons why details may not be made public. The initiative includes signatories from across the globe, many of whom operate in different regulatory environments and have their own policies on disclosure of engagements, so their appetite for engaging publicly varies. To allow investors to engage as effectively as possible and deliver the best possible outcomes, Climate Action 100+ has agreed not to publish details of which signatories engage with which focus companies, and to leave the choice to do so to individual investors.

No. The use of engagement tools and tactics is at the discretion of individual signatories. Climate Action 100+ will only facilitate the sharing of information relating to these tools and tactics and will take no formal position on them. In certain situations, the coordinating investor networks (i.e. AIGCC, Ceres, IGCC, IIGCC and PRI) may express a view or take a position where a matter of regional significance arises.

FLAGGING PROCESS

The objective of the flagging process is to enable lead investors to bring shareholder and management proposals that are aligned with the initiative’s goals to the attention of the initiative’s wider signatory base. Lead investors can do this by either publicly sharing a vote decision and accompanying rationale ahead of an AGM or making a public statement in line with their own regulatory standards, such as filing an exempt solicitation in the US.

For a resolution or other vote to be receive a ‘flag’ to alert the wider signatory base to an issue, a lead investor must publish their vote decision by either publicly sharing a vote decision and accompanying rationale ahead of an AGM or making a public statement in line with their own regulatory standards. If the initiative proceeds with flagging a filed resolution or other vote, it is listed on the Climate Action 100+ website, with links to the relevant public information from the lead investor. All investors vote for shareholder proposals in their individual capacity and not on behalf of the initiative.

To ‘flag’ resolutions at shareholder meetings of companies is an effective escalation tool for investor signatories, to increase pressure on the initiative’s focus companies that are lagging on taking the urgent action required to limit temperature rise to 1.5°C.

 

While it is for individual investors to make the own voting decisions, flagging resolutions or other votes sends a clear signal that a company is not making sufficient progress toward the goals of the Climate Action 100+ initiative and shines a spotlight on resolutions that investors might find of interest.

 

Six out of 14 flagged shareholder proposals received a majority of the votes cast at some of the world’s largest greenhouse gas (GHG) emitters during the 2021 proxy season, demonstrating the value of this tool for Climate Action 100+ signatories.

A flagged shareholder proposal relates to a resolution that has been successfully filed at a Climate Action 100+ focus company by an individual or group of investor signatory/ies. However, these do not necessarily need to be affiliated to or signatories of Climate Action 100+. For example, the resolution may be put forward by a non-governmental organisation (NGO).

 

A flagged ‘other’ vote refers to existing votes on a focus company’s ballot/AGM agenda, for which a lead investor has pre-declared their voting intention and is sharing information regarding their statement of support with the wider Climate Action 100+ signatory base. This is a pilot process which is still under development.

The first ‘other’ vote to be piloted and flagged by the initiative was a director vote at ExxonMobil in May 2021. The board refreshment at Exxon, proposed by Engine No.1, was supported by lead investors CalPERS and CalSTRS, which both filed letters with the SEC to allow them to share views with other shareholders. This resulted in the replacement of three board directors (see Climate Action 100+ press statement here).

 

The initiative will continue to pilot the flagging of management proposals and other votes, which may include votes on board directors, auditors, an/or climate transition plans, that are aligned with the goals of the initiative. Because of the inherent complexities in assessing multiple types of votes and developing a standardised process for flagging them, this process is still under development and will remain a pilot process in 2022. However Climate Action 100+ may trial flagging a small number of votes (on a case-by-case) basis in the interest of more formally establishing the mechanism in the future.

No. The flagging process does not state an initiative position on particular resolutions. It is designed purely for information-sharing purposes and to highlight upcoming key votes at the initiative’s focus companies. It is at the discretion of each investor to determine how they vote.

 

Climate Action 100+ does request signatories to disclose their votes and rationales on flagged votes, as well as some other votes that are sent around as alerts by the coordinating investor networks.

The lead investor involved in either flagging the resolution or making a public statement is strictly acting on its own behalf. While coordinated via Climate Action 100+, it does not represent the views or action of any other signatories, unless explicitly stated otherwise.

 

The flagging process aims to provide useful information to signatories which they may want to take into consideration during the proxy season, but there is no recommendation or obligation to act in a particular way.

It is not possible as Climate Action 100+ is neither a legal entity, nor a shareholder.

VOTING

While signatories are encouraged to pre-declare their voting intentions to provide transparency and accountability on how they vote, the initiative does not take a position on any resolutions or votes. Climate Action 100+ does not require that investors support specific shareholder resolutions or other votes. Investor signatories vote for shareholder proposals in their individual capacity and not on behalf of the initiative.

 

The flagging process enables investors leading on engagements with focus companies to raise awareness of certain shareholder resolutions or other votes aligned with the initiative’s engagement agenda with the wider signatory base, given the shared interest in achieving the three high level objectives of the initiative and driving increased company alignment with the Net Zero Company Benchmark.

Climate Action 100+ is an initiative not a formal entity, so does not hold shares and therefore cannot vote itself.

 

All signatories to Climate Action 100+ invest independently and have fiduciary responsibilities to their clients. Signatories vote in accordance with their own principles and independent internal investment analysis. Therefore, the publication of one investor’s voting intention does not represent the views of any other investor signatories, or indeed the initiative itself, unless explicitly stated. The public pre-declaration of voting intentions by Climate Action 100+ signatories can raise awareness of key votes that may be of interest to the initiative’s wider signatory base.

The Benchmark is explicitly aligned with the high-level goals of the initiative and adds granular detail on type of actions focus companies can take to align with those goals. It sets a baseline for company performance and identifies key priority areas for investor engagement, that companies can be held accountable to.

 

Whilst investor signatories take the Benchmark company assessments into account in their engagement and voting decisions, it is one tool among many that signatories might reference in their engagements and/or use to advance the goals of the initiative.

 

As per the governance of the initiative, Climate Action 100+ does not provide recommendations to investors to divest, vote in a particular way or make any other investment decision.