Asset managers are failing to translate words into action when they vote at annual general meetings, according to an analysis of votes at 75 fossil fuel companies conducted by Reclaim Finance.
Despite communicating a desire to act positively on climate engagement, asset managers are failing to do so in key strategy votes, with Reclaim Finance saying that engagement on climate is “cosmetic at best”. The NGO is urging asset managers to up their game ahead of the 2024 AGMs, basing their voting decisions on whether companies have comprehensive climate plans aligned with a 1.5°C scenario.
The assessment, which took into account the policies and practices of 30 asset managers at the 2023 AGMs of 75 fossil fuel companies within their portfolios, found that although almost all asset managers had committed to engage on climate issues by joining the Climate Action 100+ investor coalition, they also supported companies’ fossil fuel expansion plans.
“Asset managers talk a good game when it comes to climate engagement, but when it comes to walking the talk, they seem to have forgotten the aim of the game,” said Agathe Masson, stewardship campaigner at Reclaim Finance.
“By voting to support the fossil fuel expansion strategies of these developers, they are committing to climate devastation. The decisions made by fossil fuel developers in the coming year are critical for the future of our climate.”
Findings
The analysis found that asset managers made very limited efforts to engage fossil fuel companies on climate issues at the 2023 AGMs, prioritising disclosure indicators over concrete climate action in their proxy voting policies.
Reclaim Finance also noted that asset managers are failing to look beyond specific climate votes, which were held at just 15% of the companies analysed. Very few of them used routine management-proposed votes to engage fossil fuel companies, even though they are a crucial lever for shaping companies’ strategy and governance.
Meanwhile, only 9% of climate-related shareholder proposals filed at fossil fuel developers’ AGMs were approved in 2023, and the only two fossil fuel companies that organised a vote on their climate strategy (TotalEnergies and Shell) received support from more than 80% of their shareholders. Several asset managers, including Amundi, BNP Paribas Asset Management and UBS Asset Management, were cited as showing inconsistent approaches on climate votes.
Moreover, 11 of the asset managers assessed have no climate-related expectations when voting on the re-election of directors. As a result, on average, the asset managers assessed voted in favour of 78% of director re-elections at the companies analysed, rather than holding them accountable for their climate-hostile strategies.
Asset managers’ approach regarding votes on financial statements is even worse. Only three asset managers expect companies to integrate climate-related risks into financial statements, even though fossil fuel companies present a high risk of stranded assets.
Reclaim Finance, therefore, is calling on asset managers to use management-proposed votes to oppose inadequate, unclear or incomplete climate strategies, while basing voting decisions on whether companies’ climate strategies are comprehensive and aligned with a 1.5°C scenario. Asset owners should actively engage with asset managers to encourage them to adopt robust climate-related voting policies and practices.