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Forward thinking | Article - 3 Min

Say-on-climate votes must move beyond box ticking

Say-on-climate votes are becoming more popular, and a common framework is needed, Paula Meissirel, stewardship analyst at BNP Paribas Asset Management, says

Now more than ever, climate action is at the top of the corporate agenda, and rightly so. The climate crisis is putting global businesses at risk and is demanding rapid adaptation. In the wake of the recent COP27 conference, the question now is about the pace of climate action.

Why not add climate strategy to the agendas of annual general meetings? The novelty value of ‘say-on-climate’ resolutions has left asset managers contemplating a strategic approach. Therefore, we believe they should strongly consider developing a common framework.

Say-on-climate resolutions, which are ballot measures voluntarily added to AGM agendas by companies, have grown in popularity over the 2021 and 2022 voting seasons. However, the practice is still in its infancy, with say-on-climate resolutions appearing at around 2% of global AGMs in 2022.

Shareholders have certainly noticed this trend, and reactions have varied.

For some, these resolutions create suspicion, seen as merely ‘ticking a box’. Investors worry such resolutions could create a distraction and climate inaction. These investors are proposing different forms of shareholder intervention, such as opposing the re-election of board members. An example was the first climate-focused boardroom contest at Exxon’s 2021 AGM.

For others, it holds the possibility that ESG [1] practices – in particular with a view to climate risks – will be managed better by allowing shareholders to have a greater influence.

Despite these differing viewpoints, the fact that this practice is up and coming underscores the need for say-on-climate proposals to be a truly ambitious and engaging mechanism of shareholder consultation on climate change.

More climate resolutions

Non-governmental organisations and investor groups have played a key role in forming coalitions that have been critical to the success of the first climate shareholder resolutions. More companies are now proposing their own climate resolutions and must demonstrate the credibility of their climate action plans to win shareholder support.

That trend is unlikely to render shareholder climate resolutions obsolete.

Say-on-climate proposals from companies can be wide-ranging, making it a challenge to navigate companies’ climate action plans and to come to voting decisions. Given the role of shareholders, it is becoming crucial that they understand the climate issues – for each company and sector. That also goes for asset managers.

At this stage, it is hard to say whether say-on-climate will become common practice. Not only are there differences among sectors from one year to the next (see Exhibit 1), but developments differ across countries. Overall, we are seeing a rapid increase in say-on-climate votes.

Geographically, 2022 saw say-on-climate in more countries, most notably in Europe (see Exhibit 2). France and the UK stood, with more than 50% of all say-on-climate votes in the past two years.

In the absence of a common framework, specifying, for example, performance indicators, baseline climate scenarios and voting frequency, these resolutions reflect a multitude of approaches.

Yet, climate risks and opportunities vary according to the company and their sector of activity, among other factors. This requires a qualitative analysis of say-on-climate votes.

However, some elements are inherent to a credible climate strategy. This is why a common framework can facilitate a global alignment of say-on-climate proposals.

Translated into voting guidelines, a common vision can allow for more clarity and help shareholders define key decision-making factors when assessing a climate action plan.

Some asset managers have already changed their voting policies to tackle this challenge. This may lead to higher asset owner expectations and consequently, higher opposition rates. BNP Paribas Asset Management, for example, recorded a 76% opposition rate [2] to say-on-climate proposals in 2022 (see Exhibit 3) after we updated our voting policy.

Voluntary for now

During this year’s voting season, we observed an increase of say-on-climate proposals, but the ambition levels were relatively constant. A few companies stood out with more comprehensive climate plans, underpinned by credible decarbonisation strategies and intermediate targets.

As for companies whose climate action plans are still lacking key steps such as the disclosure of absolute GHG emissions, a 2050 net-zero target or GHG emissions reduction targets for the short and medium terms, we would question their say-on-climate proposals.

For now, say-on-climate is voluntary. This leaves companies free to decide on the best strategy. Eventually, it may become a regulatory requirement, much like climate-related disclosures.

Looking ahead to the 2023 proxy season, we expect the conversation to shift, focusing on a global perspective and the importance of standardisation to ensure best practice.

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[1] Involving environmental, social and governance criteria.  

[2] Including abstained votes and votes against. 


Please note that articles may contain technical language. For this reason, they may not be suitable for readers without professional investment experience. Any views expressed here are those of the author as of the date of publication, are based on available information, and are subject to change without notice. Individual portfolio management teams may hold different views and may take different investment decisions for different clients. This document does not constitute investment advice. The value of investments and the income they generate may go down as well as up and it is possible that investors will not recover their initial outlay. Past performance is no guarantee for future returns. Investing in emerging markets, or specialised or restricted sectors is likely to be subject to a higher-than-average volatility due to a high degree of concentration, greater uncertainty because less information is available, there is less liquidity or due to greater sensitivity to changes in market conditions (social, political and economic conditions). Some emerging markets offer less security than the majority of international developed markets. For this reason, services for portfolio transactions, liquidation and conservation on behalf of funds invested in emerging markets may carry greater risk.

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