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Apr 06, 2021

Say on climate builds momentum

A campaign started by a British hedge fund plans to target hundreds of companies in the next two years

Inspired by say-on-pay voting, a British activist hedge fund is calling on companies to publish a climate transition plan and give shareholders a vote on the contents. The Children’s Investment Fund (TCI), headed by billionaire investor Sir Christopher Hohn, wants hundreds of companies to hold say-on-climate votes within the next two years.

So far, only a handful of companies have embraced the idea, but they include major names such as Unilever, Rio Tinto and Royal Dutch Shell. The project is encouraging companies to sign up voluntarily, but will use shareholder resolutions where necessary to try to force change.

Indeed, a growing number of resolutions have already been submitted. The action is being co-ordinated by the Children’s Investment Fund Foundation (CIFF), an organization co-founded by Hohn, with support from a range of partners.

‘CIFF is working with a group of NGOs, asset owners and asset managers to file hundreds of say-on-climate resolutions, starting in 2021, across the US, Canada, Japan, Europe, the UK and Australia,’ says Tom Lorber, CIFF’s senior manager for climate.

Further, faster

In recent years, companies have come under increasing pressure to align their business models with the Paris Agreement climate goals, which call for global warming to be capped at 1.5°C compared with pre-industrial levels.

This has led to a growing number of firms announcing net-zero emissions pledges, where they aim to become carbon-neutral in their operations and across their value chain by 2050. 

For Hohn, however, the pace of change is too slow. He has frequently spoken about the need for companies to go further, faster in cutting emissions. He has also criticized the investment community for not pushing issuers hard enough to change their ways.

To push this agenda, TCI created the say-on-climate campaign, which calls on companies to disclose carbon emissions each year, publish a ‘credible’ climate transition plan and give shareholders an annual advisory vote on the plan.

‘It’s clear... shareholders should have a vote,’ Jonathan Amouyal, partner at TCI, told IR Magazine last year. ‘[It’s the] same concept as having a say on senior executives’ compensation. Shareholders are relevant stakeholders. They should be consulted.’

The movement scored its first victory last year when Aena, the Spanish airports operator, agreed to produce a new climate strategy and hold an annual vote. TCI, Aena’s largest shareholder after the Spanish government, spent almost a year pressuring the company before it agreed to the demands. 

Aena’s updated plan raises from 70 percent to 100 percent the goal for self-generated energy use by 2026. It also brings forward from 2050 to 2040 the target date for net-zero emissions at all airports. The plan will be presented for shareholder approval at the 2021 AGM and progress reports will be voted on at each subsequent meeting.

‘I would say we are… one of the first major listed companies – if not the first – in the world to decide to adopt these commitments,’ said Maurici Lucena, Aena’s chief executive and chairman, during his AGM address last October. In the speech, he also thanked Hohn for the ‘encouragement he has given us [over] these months to be even more ambitious than we were initially thinking’.

This is an extract of an article that was published in the Spring 2020 issue of IR Magazine. Click here to read the full article.