The failure of a shareholder resolution on climate strategy at the ExxonMobil AGM illustrates the need for institutional investors, especially large US asset managers, to become willing to challenge company management, the head of responsible investment at the £6.7bn (€8.4bn) Church Commissioners has said.
Speaking at the IPE 360 risk and asset allocation conference at the London Stock Exchange on Friday, Edward Mason said that the outcome of the shareholder resolution, in comparison with successful resolutions lodged with BP and Shell by the ‘Aiming for A’ coalition last year, illustrates the ”need for a cultural shift”.
“Why vote in one way on the same issue when management recommends it, and vote in a different way just because management opposes it?” he asked.
“If you need better disclosure on climate risk and opportunity you need it from all oil & gas majors, not just from those who see the risk and the opportunity and agree to make the disclosure.”
The result of the vote on the Exxon shareholder resolution suggests that asset owners such as pension funds are not engaging sufficiently with their investments managers on the topic, he said, with the voting by large US asset managers probably also going some way towards explaining the failure of the proposal.
“We’ll see when the big US managers put out their disclosures of their voting in the summer how they voted, but I think you’ll probably find it’s the largest US asset managers that didn’t back this,” said Mason. ”And it’s because of a cultural position that you don’t challenge management.”
He called on investors to be more assertive and to accept that in some cases the interest of diversified investors are going to diverge from those of some underlying portfolio companies.
On 24 May some 62% of shareholders voted against a shareholder resolution at the ExxonMobil annual general meeting (AGM) that was filed by the Church Commissioners for England and the New York State Common Retirement Fund.
It asked Exxon to report on how its business would be affected by efforts to mitigate climate change, specifically to limit the average temperature increase to below 2 degrees Celsius.
The company “resisted it furiously”, said Mason.
Exxon had attempted to block the resolution from making it onto the ballot papers.
The fate of the resolution at the Exxon AGM contrasts with that of climate change resolutions that were filed with BP and Shell in the UK by the ’Aiming for A’ investor coalition last year, of which the Church Commissioners is a leading member.
Endorsed by the boards of BP and Shell, the proposals were overwhelmingly passed by shareholders.
The 38% vote in favour of the Exxon resolution, however, is “not nearly enough”, Mason told delegates.
“It is not acceptable that investors are not in greater numbers backing this kind of resolution after the Paris [climate change] agreement,” he said.
A coalition of more than 60 institutional investors with over $10trn (€8.7trn) of assets under management said they would support the motion at the Exxon AGM, including Norway’s Government Pension Fund Global, CalPERS and fund managers Amundi, AXA Investment Management, BNP Paribas, Legal & General Investment Management, Natixis Asset Management, and Schroders.