July 16, 2017
Shareholder Advocacy: Climate Change Resolutions Lead to Industry First
If you’ve ever wondered whether groups of shareholders can really change the behavior of large corporations, this story is for you. Even industry giants, it turns out, can be influenced by collaboration and persistence.
Through a series of steps taken in late 2016 and early 2017, Portico Benefit Services, the ELCA’s Corporate Social Responsibility consultant, and fellow investor organizations successfully influenced the behavior of three large corporations in which ELCA retirement funds are invested: BlackRock, Occidental Petroleum, and Exxon Mobil (Exxon’s not included in ELCA social purpose funds).
While always guided by ELCA social teachings and policies, Portico’s motivation to influence corporate behavior is driven by our desire to enhance the value of our investment holdings. Companies that aren’t anticipating the possible effects of climate change are not addressing the related risks, such as sustainability of their business and the impact those risks have on shareholder value.
It Started with Occidental and Exxon
This story starts Nov. 16, 2016 when Portico and other like-minded investors filed a shareholder resolution with multinational oil and gas company, Occidental Petroleum, calling on company leaders to publish an annual assessment of the long-term impact of climate change scenarios on its business.
In November 2016, a similar resolution was filed by another coalition of faith-based shareholders with gas and oil giant, Exxon Mobil, calling on its leaders to publish a similar assessment.
“As long-time shareholders, we want companies to demonstrate that they’re taking into account global concerns about climate change and carbon reduction efforts as they shape their future,” explains Kurt Kreienbrink, Portico’s manager of socially responsible investing. “Because it’s fairly time-intensive to hold dialogues with companies and file these resolutions, we work with other investor groups to impact as many companies as possible. It’s a team effort among investors.”
With the Occidental and Exxon Mobil resolutions coming up for a vote in the spring of 2017, Portico, along with other investors, shifted attention to BlackRock, a respected global investment corporation and the world’s largest asset manager. Investors turned to BlackRock to help send a consistent message on climate change. While BlackRock leaders were publicly calling on companies in which BlackRock owned shares to address the risk of climate change, BlackRock was consistently using its proxy votes to oppose climate risk-related resolutions.
“BlackRock is a company we know well,” says Jeff Thiemann, Portico’s president and CEO. “We invest in BlackRock through stock holdings in the ELCA retirement plan, and we have hired them to manage portfolios. From our perspective as shareholders, BlackRock could have significant impact on corporate behavior if it used its proxy votes to address climate change risks on behalf of our members and other investors.”
Following efforts to discuss the issue with BlackRock’s leaders, Portico and other shareholder organizations opted to co-file a resolution on Dec. 1, 2016 calling on BlackRock to review and issue a public report detailing its proxy voting policies and practices related to climate change. This resolution successfully prompted BlackRock to issue a report explaining how the company analyzes and engages companies on climate risk. Satisfied with this response, Portico and co-filers withdrew their resolution on Feb. 22, 2017, and BlackRock published the promised report in March 2017, called How BlackRock Investment Stewardship engages on climate risk.
Then, History-Making Votes
Two months later, leaders from energy giants Occidental and Exxon Mobil chose not to respond to the shareholder resolutions filed late in late 2016. When each resolution came to a vote in May, shareholders delivered an unprecedented message. A majority of investors called on each company to annually assess the impact of climate change on their long-term sustainability — 67.3% of Occidental proxy votes and 62.3% of Exxon proxy votes.
Importantly, BlackRock, which owns 8% of Occidental’s shares and 13% of Exxon Mobil’s, voted in favor of both the Occidental and Exxon Mobil resolutions, having just issued its promised report on climate change in March.
“This was a historic moment for shareholder advocacy,” says Kreienbrink, “the first time in U.S. history that a climate change-related shareholder resolution was supported by a majority of voting shareholders. To put this in perspective, a vote of 25% or more is often considered ‘successful’ because it gets a company’s attention. A majority vote, however, is much more likely to get a company to take positive action. In fact, Occidental recently expressed a desire to continue shareholder engagement on this topic and expand its disclosures related to assessing and managing climate-related risks and opportunities.”
According to Kreienbrink, shareholder advocacy continues to be an area of focus at Portico. “We join shareholder coalitions and leverage dialog, resolutions, and proxy voting to convince companies we’re invested in to better secure their long-term stability — on behalf of all our funds, not just our social purpose funds. Portico’s proxy votes are always cast with the goal of enhancing the company’s value for its shareholders.”