Energy Giants May Be Bowing to Investor Sway on Climate Stance

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By Andrea Vittorio

Energy companies may be more willing to give in to investor demand for disclosure on climate change after a record show of support for environmental issues this proxy season.

Average backing for environment-related proposals from shareholders at Fortune 250 companies rose from 21 percent of voting investors in 2016 to 27 percent so far in 2017, its highest point in 12 years tracked by the Manhattan Institute’s Proxy Monitor database.

Growth in support was driven by unprecedented majority votes for shareholder proposals asking Exxon Mobil Corp., Occidental Petroleum Corp. and electric utility PPL Corp. to report on the long-term business impacts of climate change. This proxy season marked the first time that kind of proposal has passed over board opposition. It also marked the first time BlackRock Inc. and likely more of the companies’ largest shareholders voted in its favor.

“When a company as prominent as Exxon Mobil loses a vote,” the board or corporate governance team may change its negotiating stance in the future so that it doesn’t happen again, James Copland, a senior fellow and director of legal policy at the Manhattan Institute, told Bloomberg BNA.

Copland said companies could follow Chevron Corp.’s approach to a similar climate proposal, which shareholders withdrew after the oil explorer published a report earlier this year saying its efforts to manage climate risks are “sufficient.” The investors who requested the report, Wespath Investment Management and Hermes EOS, consider it a first step toward a more robust and comprehensive analysis.

Demand for Disclosure

When Exxon Mobil issued a similar report for investors in 2014, it said it was “confident” in the resiliency of its resource portfolio. A company spokesman didn’t comment on whether it planned to provide the annual disclosures investors are seeking on how its portfolio fares in a range of climate scenarios, including one consistent with the goal of an international climate accord.

“We do intend to respond in a meaningful fashion to the feedback we received from shareowners,” PPL spokesman Ryan Hill said. “We haven’t determined exactly how that response may be structured at this point. That is something we continue to explore.”

A spokesman for Occidental didn’t return a request for comment on how it planned to respond to its majority vote. A dozen other proposals making the same climate risk report request didn’t pass this year, though most did get support of at least 40 percent, according to a tally by the sustainability advocacy group Ceres.

“The time period between now and the filing deadlines in the fall is going to be a very busy one,” Ceres’ oil and gas program director Andrew Logan told Bloomberg BNA. “I think investors see an opportunity to really push companies forward on disclosure and companies now have even more reason than they usually do to want to keep these things off the ballot.”

Even though the proposals aren’t binding, boards that fail to respond to climate concerns could be held accountable come director election time. That’s already happened at Exxon Mobil, where BlackRock voted against the re-election of two directors after repeated requests to meet with the board to better understand its oversight of climate risk and other issues were rebuffed.

Another expectation for next season: a campaign by investors to push climate proposals that came close to passing. “This is the start of a broader trend,” said Edward Kamonjoh, who leads a group called the 50/50 Climate Project that is working with 50 large pension funds, sovereign wealth funds, and endowments on dialogues at 50 carbon-intensive companies.

To contact the reporter on this story: Andrea Vittorio in Washington at avittorio@bna.com

To contact the editor responsible for this story: Yin Wilczek at ywilczek@bna.com

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