Shareholder pressure forcing businesses to work for climate change progress will increase next year, according to panelists at a Climate Week 2020 event sponsored by Ceres, a sustainability nonprofit organization that works with influential investors and companies.
Investor interest is being heightened because climate change is recognized as a risk to businesses and their investors, said Catherine Moyer, head of North American stewardship and asset management at Northern Trust, a financial services company based in Chicago.
One of the things we are working for is “better disclosure around climate change, so that we can see the direction companies are moving in,” Moyer said Wednesday during the panel discussion, ”Investor Expectations in 2021: Setting a Course for Effective Climate Lobbying,” that was moderated by Anne Kelly, vice president of government relations at Ceres.
A company’s actions on climate risks can be complicated. For example, “a company could be doing research and development on alternative fuels, while at the same time working through its lobbying against regulations that would help combat climate change. This is why we need disclosure,” Moyer added.
Adam M. Kanzer, head of stewardship - Americas, BNP Paribas Asset Management, said companies’ lobbying efforts and business policies are important because “we are talking about systemic risk” to the planet. “We do not have the government regulations we need to fight climate risk because businesses have been telling Congress it is too expensive to change. But investors are becoming aware” of the need for change.
For investors, “this is not about putting politics in the portfolio. It is about considering climate risk in the portfolio,” he said. “If an investor does not understand business policies, he does not understand the business’s climate policies. We are asking firms to make their lobbying efforts align with the Paris Climate Agreement. It is critical to inform investors of this.”
One issue that investors need to know more about is that some companies that are taking positive action on climate risk, also belong to trade associations that conduct lobbying against needed government regulations, Kanzer added.
The next year will see more shareholder resolutions that promote positions supported by the Paris Climate Agreement, said Morgan LaManna, senior manager of investor engagement at Ceres. “Investors want to hold companies accountable.” Anytime a shareholder resolution receives approval from at least 20% of shareholders, businesses need to pay attention, she added. “Shareholders now are determining what kinds of resolutions and actions are effective.”
Companies are beginning to consider the risk to their reputations if they are not pro-active enough on climate actions, the panelists said.
With the information available and additional benchmarks that will come out in 2021, “investors will be able to create a profile of a company about how the company is engaging with trade associations to work for progressive climate policies,” Moyer said. “Companies need to think more broadly about these issues [because] the public wants action on climate change.”
In addition to voting to instill new company policies, “shareholders can vote against particular members of the board of directors who are working against policies that would help combat climate change,” she said.
Kanzer added that shareholders need to realize “reputational risk is more important to some companies than others and that there is a difference among industries.” However, companies need to realize that if they are seen as “opposing regulations that are going to keep us alive, it is going to hurt their reputations.”
“There is a sense of urgency on climate change,” Kanzer said. European countries are ahead of those in the United States in addressing the risks of climate change in part because “the European consumer is more enlightened” about the issue. “But we are making progress. The American investor is waking up to the policy implications.”