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Creating Positive Change Through Your Investments

June 20, 2017

As an investor, you own a share in a company. A certain number of shares gives you a right to vote. This is a powerful way to create positive change in the world.

 

A recent report revealed that last year, almost 40% of all shareholder resolutions were related to sustainable governance and environmental issues. This year, so far, the number of shareholders’ resolutions addressing climate change, in particular, have increased to 430 compared to prior year’s 370. A significant number of these resolutions requested fossil fuel extraction companies and suppliers to disclose details regarding the effect of climate change on their operations and their response if governments followed their commitments made in Paris to ensure fossil fuels remain in the ground.

 

Shareholders of ExxonMobil, the world’s biggest gas and oil company, voted in favor of a requirement that the company disclose the impacts of climate change on its business. This action defied management and marked a milestone in a 28-year period effort made by its activist investors. 62% of the shareholders voted that Exxon should initiate the process of drafting an annual report explaining how the company will be impacted by global initiatives to lower greenhouse gas emissions.

 

This detailed analysis should clearly address the financial risks Exxon faces as many countries slash fossil fuel use to prevent global temperatures from rising in excess of two degrees Celsius. The shareholders’ resolution at Exxon reveals the rapid erosion of support for its defiant and unpopular stance on climate-related disclosures, and highlights a shareholder’s meeting season that has witnessed unprecedented support for more and better business disclosure regarding climate change. In the recent past, shareholders at 2 other big energy companies passed resolutions in favor of climate risk disclosures.

 

The 2 corporations are PPL and Occidental Petroleum, Pennsylvania's largest utility company. Shareholder resolutions relating to climate changes also garnered great support at other US based utility companies that depend heavily on fossil fuels: Duke Energy (46.4%), Dominion Resources (47.8%), and DTE Energy (45%).

 

Fund managers, like BlackRock, which manage over $5.1 t

 

rillion in assets, and other big global investors, like Aviva, State Street, and Legal & General, have indicated that they require greater transparency with respect to climate change risk.

 

Some Australian super funds, too, have indicated their open support for climate related resolutions in both Exxon Mobil and Chevron. Although their shareholdings are relatively small, each shareholder counts when it comes to shareholder resolutions. Recently, a two-degree stress testing shareholder resolution held at Occidental Petroleum failed because it garnered only 48.99% of the vote. With just a few more institutional investors, the resolution would have passed.

 

When Australian funds publicly declare their support for resolutions at oil and gas companies in the US, it also sends a signal to Australian oil companies, such as Woodside and Santos to respond appropriately to climate change. These funds are under obligation to their members to manage climate risk effectively. They can achieve this by making sure every company in which they have made investments is managing climate risk as well.

 

So the question is, just how engaged is your super fund with shareholder resolutions and stranded asset risks?

 

To find out how you can get more involved with creating change through your investments, get in touch with me adrian@argonautfinancial.com.au

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