An interview with Kirsten Snow Spalding, vice-president of the Ceres Investor Network, founding member of Climate Action 100+ (CA100+)

 

Could you give a brief overview of CA100+, its goals and how it operates?

With more than 700 investors responsible for $68 trillion in assets under management, CA100+ is the world’s largest investor-led initiative working to ensure that companies take the necessary steps to address climate change. Seeking to address the material financial risks and opportunities of climate change, consistent with their fiduciary duty to their beneficiaries, investor-signatories engage with the companies in which they invest on issues of climate risk and opportunities.

Launched in 2017, the work of the initiative is coordinated by five investor networks: the Asia Investor Group on Climate Change (AIGCC), Ceres, Investor Group on Climate Change (IGCC), Institutional Investors Group on Climate Change (IIGCC) and Principles for Responsible Investment (PRI). Supported by the initiative, investors engage independently with more than 170 focus companies.

 

When it comes to engagement and shareholder proposals, what are you most commonly asking companies to do?

Investors want companies to move from words to actions. Investors are now looking for companies to publish comprehensive climate transition action plans that provide more information about the company’s climate lobbying practices, capital expenditure alignment, climate accounting and their efforts that support a just transition that protects workers and communities as we move towards a more sustainable economy.

Engagements are spearheaded by a lead investor or co-lead investors, who work with a number of contributing investors. Lead investors can focus on a specific company, sector or theme. Each engagement is unique, depending on the challenges facing the specific company or sector, and investors may have asks about a variety of priority topics, as reflected in the multiple indicators of the Net-zero Company Benchmark.

 

How do you decide which votes to flag, and what does this mean for the targeted companies?

CA100+ flags key shareholder proposals at the recommendation of signatories who are leading engagements. Flagged votes may be shareholder proposals or other management proposals, including votes on climate transition plans, directors, auditors and reporting. Flagged votes are aligned with both the goals of the initiative and informed by five years of collaborative engagement. It is important to note the flagged votes process is designed purely for information-sharing purposes and to highlight upcoming key votes at the initiative’s focus companies. It is at the discretion of each signatory investor to determine how they vote.

In North America, director votes, whereby investors withhold support of leadership, were flagged at Berkshire Hathaway, Chevron and Valero Energy, demonstrating a continued focus on board-level engagement and accountability. Shareholder proposals are increasingly leading to negotiated withdrawals, including seven commitments from North American CA100+ focus companies, three related to greenhouse gas (GHG) emissions targets and four on climate-related lobbying disclosure.

In Europe, several resolutions made it onto companies’ ballot papers, including multiple that have been blocked in the past, such as at TotalEnergies, demonstrating the increasing pressure investors are placing on companies to address climate-related financial risk. Europe also saw its first withdrawal of a flagged vote at National Grid after a commitment had been made on the topic of climate lobbying.

This year, CA100+ flagged the first vote in Asia at Toyota Motor on the topic of climate lobbying. To date, there have been four alerts on shareholder proposals in Australia, and this number is likely to increase as the Australasia proxy season continues into the summer.

 

What commitments do you require from investors that are part of your initiative?

There are four things we ask for investors interested in joining CA100+. The first is that you must be an asset owner, an asset manager or a service provider that is formally representing assets and that typically conducts engagements with companies. The second is that you must be a member of one of the five coordinating investor networks: AIGCC, Ceres, IGCC, IIGCC, or PRI. The third is that you must be able to participate in engagements with the initiative’s focus companies, unless you are an asset owner, then you may join as a supporter. Finally, we expect investors to be members of the network through which they primarily undertake engagement with CA100+ companies.

CA100+ is open for new signatories and interested investors can join via a form on the climateaction100.org website.

 

Support for environmental shareholder proposals has trended down for a couple of years now but you noted that withdrawals for agreement have been on the rise. What does this say about the impact investor engagement is having on the climate transition?

The evolving engagement landscape and more nuanced shareholder proposal language can help explain why overall votes were lower this season. In recent years, investors won majority votes on the building blocks of addressing the financial impacts of climate change. But we have entered a whole new world of corporate climate action. This year, we have seen an unprecedented amount of public dialogue between investors and companies regarding all the climate-related requests from shareholders.

It’s clear that corporate executives and board members are talking to investors about climate action. 79 climate-related proposals were withdrawn in return for a commitment by the company this year. CA100+ investors will continue to engage with companies on these topics year-round.

 

You recently announced Phase 2 of your investor engagement initiative: why now?

If we are to decarbonize our economies and limit warming to 1.5 Celsius by 2050, the next decade will be critical. Phase 2 builds on the success of the initiative’s first five years where we have seen the number of focus companies that set net-zero commitments increase from just five at the outset to 75% percent currently. This next phase will shift focus from climate-related disclosure to implementation of corporate climate transition plans. This is designed to create long-term shareholder value as investors work with companies to move to net-zero in the next seven years.

 

What are the main changes in Phase 2?

The initiative has renewed its three goals through to 2030, evolved the Net-zero Company Benchmark, enhanced the ways in which investors can participate and made marginal updates to the focus list.

The changes include asking companies to provide enhanced corporate disclosure on and implement transition plans to achieve robust targets, expanding the initiative’s focus to support signatories to identify and implement engagements with stakeholders to help create the ecosystem conditions needed for sectors to transition and introducing a new ‘thematic engager’ role for investors, allowing them to engage on specific cross-sector themes in any given year.

Going forward, leading investors will also be able to opt-in to disclose their organization’s identity on the initiative’s website, providing greater transparency and more ways for investors to be agents of change. In addition, leading investors will be asked to submit an annual schedule of engagement, specifying actions and escalations strategies they intend to deploy and be expected to disclose votes and rationales on all of the votes flagged by CA100+ (where allowable by jurisdiction and internal policies.)

 

There has been some consolidation in sustainability reporting standards, but with new EU and U.S. reporting requirements on the horizon, do you recommend companies follow a global standard?

As independent firms making their own decisions, it’s for each company to assess what regulations and reporting standards they need to adhere to. CA100+ has developed the Net-zero Company Benchmark to support investor engagement and outline steps focus companies can take to address systemic climate risks by working towards the global goal of zero emissions by 2050. This includes providing enhanced corporate disclosure and implementing transition plans to deliver robust targets. This should be in line with the final recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) and other relevant sector and regional guidance, to enable investors to assess the robustness of companies’ business plans and improve investment decision-making.

The CA100+ Steering Committee submitted a comment to the Securities and Exchange Commission (SEC) in support of mandatory climate risk reporting in the U.S. last year. It was recognized that consistent and comparable corporate disclosure is an important input to company assessments.

 

Can companies negotiate their way off the CA100+ list?

Marginal updates to the focus list were made for Phase 2 in order to continue the focus on the largest carbon emitting companies, globally. Companies that have been removed from the list have not “graduated” from CA100+ engagement. Their removal should not be viewed as endorsement or recognition of progress, rather they were removed from the focus list so that resources and capacity could be re-prioritized. Engagement with these companies is still required to deliver on the global goals set out in the Paris Agreement. All other companies will remain on the focus list for Phase 2 of the initiative, unless there is a material corporate action, including a merger or acquisition, spinoff, delisting or bankruptcy.