27th March 2015 by Catherine Howarth
The Beatles sang: “We all want to change the world.” But it’s not often that finance types get the chance to feel like they’re really doing it, and for the better. Not really.
As Annual General Meeting season approaches, investors in oil giants BP and Shell face a historic opportunity this year to vote in favour of two shareholder resolutions on climate change risk. Not to toot our horn at ShareAction too much, but these resolutions could actually play a role in saving the planet for future generations to enjoy. Who knows? The Beatles might even have been proud…
Working with the Aiming for A coalition we pulled together a coalition of institutional, faith based and individual investors, some buying just a single certificated share each, to file the resolutions. We managed to get investors with around one percent of each company’s value to file. The resolutions call for a series of disclosures from each company demonstrating how their business models stand up in a ‘2 degrees world’.
In an unprecedented move both companies have decided to recommend a vote in support to shareholders. Making sure we nevertheless secure the necessary 75% of votes cast in support is a challenge. In addition to reaching out to institutional shareholders across the world, another part of winning the vote is a public-facing website offering people the chance to voice their support for a “yes” vote in the spring. You can check it out here. And as the AGMs approach, we’ll be contacting people who’ve signed the petition, offering them the chance to email their pension funds direct, urging votes in support.
We’ll also be at the AGMs of the companies showing vocal public support for the resolutions, and seeking to get across the need for both companies to engage with the spirit as well as the letter of these resolutions if passed.
Shareholder resolutions in the UK are emerging as a way of bringing key sustainability issues to the fore. Back in 2010, we coordinated resolutions at Shell and BP which resulted in key disclosures around the companies’ controversial tar sands projects in Canada. This Spring, Shell announced it had shelved plans for a tar sands mine in Canada, against a backdrop of falling oil prices. The risks, which had been highlighted in our 2010 resolutions, of shareholders’ capital being wasted in the tar sands were proved all too obviously real. And that’s before you factor in the compelling evidence that tar sands exploitation is incompatible with governments’ stated commitments to limit global warming to 2C.
With some level of agreement on climate change increasingly likely to be reached by governments in Paris at the end of this year, these 2015 resolutions would appear well designed to provide investors with the information they need to evaluate their exposure to the risks of stranded assets and capital loss. Until now, both companies have refused to stress test their business models against a scenario in which global warming in limited to 2 degrees, despite broad global acknowledgement that this is essential to avoid dangerous climate change.
In the meantime, the world’s demand for energy is not going away, and the transition to a low-carbon economy creates huge opportunities for the energy giants. Shareholder activism, both engagement and divestment, can pressure these companies to do more, much more quickly, to respond to that opportunity. Are they moving to seize it, and be part of a sustainable future, or are they putting their companies and the planet in danger by clinging to a glorious past that must inevitably pass away?