Sustainable investment

Shareholder votes will accelerate path to net zero - Luxembourg investor

Camdrian analysts were speaking ahead of the upcoming COP27 conference. Pictured: The previous COP26 2021 in Glasgow.   Photo: Shutterstock.

Camdrian analysts were speaking ahead of the upcoming COP27 conference. Pictured: The previous COP26 2021 in Glasgow.   Photo: Shutterstock.

Using voting rights as shareholders will help the battle against climate change, according to Luxembourg-headquartered investment manager and investor group Climate Action 100+ signatory, Candriam.

Voting rights are an increasingly effective way to ensure issuers set and keep to their net zero targets and a necessary part of investor engagement, environmental and social governance analysts at Candriam said in its webinar ‘The Road to Net Zero’ on Thursday.

“Around votes there are a lot of tools available. Votes for climate, but also votes on executive remunerations, and, of course, votes against policies,” said lead ESG analyst at Candriam, Sophie Deleuze-Duvielguerbigny.

Candriam claims to attend 1,200 general meetings and vote on nearly 16,000 resolutions every year as part of its ESG engagement with issuers.

In concrete terms, votes can influence a number of things, said Deleuze-Duvielguerbigny.

“We [Candriam] have started to sanction more directors if we feel they are not behind crucial climate change policies.We have also voted against financial statements if we feel auditors have not sufficiently challenged the board on their climate objectives. Voting action also means engaging with companies so that they include ESG targets in their director remuneration score packages.”

Candriam, which has €143bn in assets under management globally, cites its increased investor engagement as the biggest difference between its current climate policy and its former ones.

“It’s engagement with investors--not only decarbonise but commit to something--that will result in real world reduction,” said Deleuze-Duvielguerbigny. “We set objectives and if the company doesn’t achieve then we divest. In this way it’s a real strategy in fostering change.”

The global investor also cited its use of forward-looking data in helping managers make investment decisions and its risk management tools as crucial to investing responsibly.

Flagging shareholder annual general meetings

The power of shareholder votes is acknowledged by investor-led initiative Climate Action 100+, which flags shareholder proposals and other votes for investors to take into consideration during publicly-listed companies’ AGMs.

According to Climate Action 100+, six out of 14 flagged shareholder proposals received majority votes at some of the world’s largest greenhouse gas emitters during the 2021 AGM season.

Global consultancy Ernst & Young has found that the number of ESG shareholder proposals based on the 2022 Fortune 100 list that filed as of 8 June 2022 increased from 147 proposals in 2021 to 249 in 2022.

However, the number of proposals that found a majority amongst shareholders stayed the same year on year (29 in 2021 versus 31 in 2022).

The failure to gain traction with investors broadly is a sign that company management needs to continue to engage better with shareholders, Ernst & Young noted.

“Engage with key investors outside proxy season to understand their views on the company’s ESG strategy, performance and reporting, and the rationales behind their votes,” it said.

Candriam’s Deleuze-Duvielguerbigny said that issuer engagement was central. But, that investment firm aims to go beyond pure investor engagement, however. “We need to exchange with regulators, civil society and sovereigns,” she said.