ShareAction is one of the most active players in Europe when it comes to engagement. In other words, #Sriactivism. Mondosri already talked about it. No doubt it will happen again.
ShareAction promotes the presence of active investors at company AGMs, it calls them effectively ‘#AGMarmy‘, in order to call on listed companies and their top managers to better business conducts with regard to ESG issues. It also organizes training courses for people who wish to become socially motivated shareholder activists.
ShareAction has worked hard in view of the 2015 AGMs of BP (it took place yesterday) and Shell (on May 19). Questioned by mondosri, Catherine Howarth, Chief executive at ShareAction (she recently came to Italy to give a speech at the 2nd Positive Economy Forum in San Patrignano), kindly agreed to explain why those AGMs are so important for the whole Sri community.
(Catherine gave me the interview some days ago, I mean before Bp’s AGM).
mondosri: The two resolutions you worked at have gained fame much before the two AGMs. What’s their main theme? Why a lot of Sri investors are so interested in?
C.H.: One of the reasons these resolutions have attracted so much attention is that the two companies have both taken the unprecedented step of recommending the resolutions to shareholders. The bottom line is that climate change is a major business risk. Companies know this; investors know this. Companies’ physical assets are already being hit by more frequent extreme weather, and this is set to worsen. At the same time, stronger emissions regulation coming in at local and regional level across the world will compromise outdated business models. And that’s before the possibility of an international agreement in Paris this December.
Over 130 investors have joined with us to file shareholder resolutions requiring BP and Shell to report publicly to investors on their assessment and management of the risks of climate change. Until now, BP and Shell have refused to disclose the stress testing they do of their business models against a scenario in which global warming is limited to two degrees, despite broad global agreement that this is essential to avoid dangerous climate change. The shareholder resolutions would require both companies to be open about this analysis from 2016. That will allow shareholders to understand the real value of these companies and to make better investment decisions.
Shareholders are also seeking better disclosure on how managers are incentivised in relation to climate change risks. We want the companies to shift from bonuses and personal incentives based on finding new fossil fuel reserves to incentives based on strong return on capital investment. The resolutions also cover: operational emission reduction targets (these companies are big energy users in their own operations as well as supplying the rest of us with fossil fuels); plans for engagement in public policy debate; investments in renewable energy sources.
To pass, the resolutions need 75% of voting shareholders to support. We think we’re going to achieve that. (She was so right, Resolution25 got 98.28%!)
mondosri: Talking about climate change and the role that (Sri) finance could/should play to tackle it, you know a growing number of Sri investors support the fossil fuel divestment campaign. Others think that working on engagement with companies could be more effective. What’s your opinion? Are there ways to work, how to say, on the divest-side and the engage-side at the same time?
C.H.: Engagement and divestment are both valid approaches to tackling climate change. Some investors might want to divest, particularly from coal, whereas others might want to engage meaningfully, and if engagement proves fruitless, ultimately divest. Some investors do both – retaining some shares to facilitate engagement. Both approaches send a strong message to companies that business as usual is not an option. Disagreement about which is the ‘right’ approach only serves the status quo. The ultimate goal of both approaches are the same – to get the companies and a wide range of investors to recognise and realise their responsibility and role in the transition to a low-carbon future.
This is a crucial period in the history of humanity, with significant and long-lasting decisions being taken collectively by Governments in Paris later this year. Every step that can be taken to help influence industry and Governments to commit to meaningful change should be taken.
mondosri: You just came to Italy. First of all, you were so welcome! Secondly, which are your expectations regarding Italian Sri investors? Is my country part of ShareAction’s expansion into Europe this year, as you announced months ago?
C.H.: I’ve had a fascinating time in Italy at the Positive Economy Conference in San Patrignano. It has made me very excited about the possibilities of connecting to SRI investors in Italy. Everyone seems to be aware of the problems in Italian politics. That makes people want to solve problems in a different way – in an SRI way! Of course we need effective governments but when politics is letting us down, today people have other ways of tackling the problems that confront our societies. Responsible investment is a powerful tool for addressing social and environmental problems. It’s crucial that we get more people involved in that.
Many tkanks, Catherine.