Investors Are Calling on Climate Action

Institutional investors are continuing to flag votes during this proxy season at Climate Action 100+ focus companies to bring attention to key shareholder resolutions that encourage more robust climate action. This includes management proposals, where, just this week, Climate Action 100+ flagged votes for directors at four focus companies. Informed by five years of investor engagement supported by Climate Action 100+ including high shareholder votes in recent years, these director votes seek to improve corporate governance on climate issues to mitigate exposure to climate risk.

Climate Action 100+, of which Ceres is one of five investor network partners, flags key shareholder proposals and other votes for investors to consider when they vote their proxies. This season, the initiative has (to date) flagged 17 shareholder proposals and signatory-declared votes on management proposals at six companies related to company progress against the expectations of Climate Action 100+. In addition to more robust corporate governance on climate, investors are calling for disclosure on key issues including greenhouse gas emissions targets, transition plans including policies to ensure a just transition for workers and communities, and reporting on methane measurements.

Mercy Investment Services is urging shareholders to vote against the reelection of three directors at Valero for failure to adequately manage the risks that climate change and the energy transition pose to its core business of refining and selling fossil fuels. After nearly a decade of dialogue, and more than four years of engagement with Valero's senior management, there has been limited progress on aligning with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). Forecasts from the International Energy Agency indicate that the global demand for petroleum liquids, including refined products such as Valero's core transportation fuels, is expected to shrink in the coming decades, and Valero lags its peers in setting out a transition plan that includes lower carbon energy sources. Valero's annual general meeting is on May 9.

At Chevron, Wespath Benefits and Investments is urging shareholders to vote against the election of two directors. This is due to the company's failure to provide a meaningful response to a shareholder resolution approved by a majority of the company's shareholders concerning climate-related lobbying and a failure to establish sufficient governance to address risks from misalignment between the company's lobbying practices and its stated support of the Paris Agreement. Chevron's annual general meeting is on May 31.

"One of the main roles of corporate boards is to ensure that companies take the long view on matters of strategy. For oil and gas companies, while current product demand may be robust, the long-term holds significant risks to that demand as the world decarbonizes," said Andrew Logan, senior director of oil and gas at Ceres. "Boards that do not take these risks into account are simply not doing their jobs. Boards that ignore significant shareholder votes on climate issues or refuse to engage seriously with the investors who filed them, are placing investors and their own companies at real financial risk."

The Church of England Pensions Board is calling for votes against the reelection of members of the supervisory board at Volkswagen AG due to failure to produce requested disclosure on lobbying as well as an update to their targets during fiscal year 2022. The Church of England Pensions Board has been engaging with Volkswagen AG (VW) for over four years on its approach to climate change, urging the company to set stronger emissions reduction targets and to provide public disclosure on its lobbying activities regarding climate change policy. VW's GHG targets and transparency regarding climate lobbying lags its German peers-including Mercedes Benz and BMW, which both have produced lobbying disclosures and have been independently assessed as having stronger short- and medium-term emissions reduction targets by the Transition Pathway Initiative. Volkswagen's annual general meeting is on May 10.