UK-based investment pool Border to Coast Pensions partnership has voted against the re-election of board chairs at 95% of oil and gas companies due to inadequate transition plans in 2023.
This is up from 31% in 2022 after the pool, which is responsible for £38.2bn on behalf of 11 local government pension schemes (LGPS), updated its voting policy for the oil and gas sector, warning that oil majors must make greater progress on climate pledges or risk losing its support on key votes in this annual general meeting (AGM) season.
As part of the updated policy, the partnership said it will vote against board chairs of oil companies that fail to meet one of the first four indicators of the Climate Action 100+ benchmark, which include short, medium and long-term emission-reduction targets.
It also said it would vote against oil companies that are scored 3 or lower by the Transition Pathway Initiative (TPI), meaning they had not yet developed a strategic understanding of climate risks and opportunities or integrated this into their business strategy and capital expenditure decisions.
Border to Coast said that during this AGM season, it voted against the chair of 50 companies that failed its climate requirements, 20 of which were oil and gas companies.
It said that the scale of shareholder opposition to the oil and gas chairs it opposed varied widely, from close to 0% at some companies to 35% at Woodside Energy. The average level of opposition was 7%.
Border to Coast detailed that it voted against the re-election of the chair of BP and in support of an independent climate resolution. It added that it publicly pre-declared its votes ahead of the AGM.
This is because, in Border to Coast’s view, BP only partially meets medium-term and short-term targets of the CA100+ benchmark. In addition, since its targets were assessed in 2022, it said that BP has weakened its commitments and would therefore likely perform worse against the CA100+ criteria.
The shareholder resolution called for the company to align its 2030 Scope 3 emission reduction targets with the Paris Agreement. Border to Coast said this goal is necessary for all oil and gas companies and has therefore also supported resolutions calling for this where they have been filed on the ballots of its other oil and gas holdings.
As a result of its action, almost 10% of shareholders voted against the re-election of Helge Lund as the chair of the board, an increase from 3.5% in 2022 and 2.3% in 2021, while the shareholder resolution received 17% support.
Border to Coast said that both results indicate significant shareholder disapproval of the company’s current climate risk management and a willingness to employ voting as a tool for improving it.
Colin Baines, stewardship manager for Border to Coast, said that investors need to be authentic in how they put commitments to net zero and company engagement into practice, resisting attempts to politicise ESG and climate risk management.
“Voting across all our funds in alignment with our RI [responsible investment] policies and voting guidelines ensures a clarity of approach for our partner funds. However, many asset owners do not have this assurance and misalignment between asset owners and some asset managers is becoming evident,” he said.
Baines added that not only are some investors exposing themselves to accusations of greenwashing by voting counter to their climate commitments, they are also hindering the potential of ESG stewardship to secure quality company transition plans, reduce climate risk, and add long-term value.