Ethos Foundation has included a mandatory clause for carbon intensive companies to report on their climate strategy for a shareholders’ vote at annual general meetings in its new guidelines for 2021.
With the new guidelines on environment, Ethos joined the “Say on Climate” campaign supported by the Children’s Investment Fund Foundation.
The initiative called for shareholders to vote on companies’ strategies to mitigate the effects of carbon emissions on climate change at AGMs. Ethos would adopt international standards in the event of a vote at AGMs.
It would also check whether a company has set out reduction targets, including intermediate targets, compatible with the goal to keep global warming at 1.5°C.
In its proxy voting guidelines for 2021, Ethos recommened voting against a proposal of the board of directors if a company did not publish its CO2 emissions in line with the Greenhouse Gas Protocol, and if the company’s report did not cover at least 90% of its indirect emissions to the life-cycle of a product.
It also recommended voting against if a company did not disclose its progress towards the target to reduce emissions or refrained from taking adequate measures to reduce CO2 emissions.
Shareholders’ resolutions on environment should push a company to prepare sustainability reports, adopt and publish quantitative targets on greenhouse gas emissions, develop policies regarding waste management, water usage, or limit production that releases pollutants in the atmosphere, according to the guidelines.
Shareholders would also ask companies to clarify the fate of so-called “carbon risks”, which relates to unusable, carbon-intensive assets.
The Local Authority Pension Fund Forum (LAPFF) also announced its support to the ‘Say on Climate’ campaign, in time for the five-year anniversary of the adoption of the Paris Agreement last week.
LAPFF motivated its decision to support the campaign by adding that the ability of the shareholders to use voting rights to address climate change remained limited.
“‘Say on Climate’ presents an opportunity for shareholders to effectively hold companies to account on climate, and to affect real change,” said Doug McMurdo, chair of the LPFF, adding that the Forum was ready to rise to the challenge to increase efforts in reducing carbon emissions.
The LPFF said it was time to step-up efforts beyond filing resolutions at a limited number of companies with high carbon impact. It advocated a mandatory use of the ‘Say on Climate’ option through appropriate regulations for every listed company.
Asset owners and managers should incorporate ‘Say on Climate’ into their investment and voting policies, it said, adding that if investee companies do not voluntarily put an action plan to shareholders for approval, they should consider filing or co-filing ‘Say on Climate’ resolutions.