Stewardship News

Dialogue between companies and investors shows results in the energy industry

The Climate Action 100+ is an initiative that gathers 323 investors with $33 trillion in assets under management engaged in ensuring that 161 companies take necessary action to reduce their environmental impact. The group develops its activities through the so-called ‘tea and biscuits’ activism, which consists in a continuous dialogue between investors and companies to persuade them to adopt the best practices. Raj Thamotheram, founder and chair of the think tank Preventable Surprises wrote an article highlighting the successes achieved by the initiative (available here).

In its second year, CA100+ delivered, among other results, a management-backed resolution at the oil company BP to align business strategy with Paris goals, a promise by Glencore to cap coal production and an unusually assertive letter from EU investors to EU energy utility companies requesting transitions plans to renewable sources. But Thamotheram points that these developments are worthless if companies do not deliver what they promise, reason why investors should be attentive.

Most of the 161 companies are in the infrastructure and energy sectors, usual targets of those concerned with carbon emissions. The researcher also stressed that companies in the finance sector – such as banks and insurance companies – should take attitude as many times they finance polluting organizations.

ADR agreements demand attention, warns report by the Investor Forum

Eleven UK companies with American Depositary Receipts (ADRs) traded on US stock exchanges had auto-proxy clauses, according to a report prepared by the Investor Forum, UK group established in 2011 to facilitate the dialogue between institutional investors and promote good management practices. The instrument expects that the votes of the uninstructed shares of ADR holders would be automatically in favor of management recommendations (the report is available here).

The Investor Forum approached 11 companies to request a commitment not to use auto-proxy rights, 9 agreed, 1 did not respond, and 1 did not agree. 7 agreed to amend their ADRs at the time of the next review. The airline company Ryan Air was the only one that intends to continue to use auto-proxy rights, but have agreed to disclose the percentage of votes cast in this manner.

The Investor Forum is preparing recommendations on good practices regarding ADRs agreements. Its main objective is to add more transparency to the use of votes of uninstructed shares of ADR holders and ensure that companies do not use them on a discretionary basis.