Are “say on climate” shareholder votes just more corporate greenwashing?

Shareholders of Glencore approved the company’s climate plan even though it aims to mine coal for decades.
Shareholders of Glencore approved the company’s climate plan even though it aims to mine coal for decades.
Image: REUTERS/Siphiwe Sibeko/File Photo
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Glencore, the Swiss mining and commodities giant, isn’t exactly at the vanguard of corporate climate action. One of the world’s top coal miners, the company is committed (pdf) to bringing its net greenhouse gas emissions to zero by 2050. But in the meantime, it plans to expand coal mining (pdf), and not phase it out until after 2040. According to the investment research firm MSCI, the company’s overall climate plan doesn’t meet the goals of the Paris Agreement.

Yet, on April 28, Glencore’s shareholders voted overwhelmingly in favor of the plan, as they did the year before.

Since the beginning of 2021, at least 33 companies in the US and Europe—predominantly in high-emissions sectors like oil and gas, as well as infrastructure companies and household product manufacturers like Unilever—have held so-called “say on climate” votes, in which the companies asked investors to give a non-binding thumbs-up to its climate plan. All passed, according to MSCI.

But critics say the votes can be used as a tool for greenwashing.

“Companies are eager to show climate action without doing the real work behind it,” said Guillaume Pottier, a corporate engagement strategist at the French research nonprofit Reclaim Finance. “It’s easy to have big investors who aren’t experts give you a 95% rubber-stamp approval for a fake climate plan.”

More votes are coming up soon, including at most of the European oil and gas majors and several banks that are leading fossil fuel financiers. And like the vote at Glencore, most of these votes are the company’s idea, not that of activist shareholders.

The problem with “say on climate” votes

Why would companies with questionable climate plans want investors weighing in, especially when most companies are averse to shareholder dictation on any issue?

Experts at MSCI, Harvard, and the proxy voting advisory firm Glass Lewis (which typically sides with management) agree with Pottier that since the first votes took place in 2021, “say on climate” has mostly served to validate low-quality plans and preempt more proactive investor involvement.

“It complicates meaningful engagement with management,” Pottier said, “and you’re in a more difficult position to ask anything else of the company.”

Can “say on climate” work better than “say on pay”?

“Say on climate” has ideological roots in “say on pay,” in which shareholders vote on executive compensation. “Say on pay” became mandatory for US public companies in the 2010 Dodd-Frank financial reform law, with the idea that investors could tamp down sky-high CEO pay. But since then, at 3,000 of the largest companies, “say on pay” has proven to be a rubber-stamping exercise: on average, fewer than 4% of votes fail. And executive pay is still climbing.

But activist investor groups led by the Children’s Investment Fund Foundation, run by British hedge fund billionaire Christopher Hohn, have pushed for more “say on climate” votes. Their rationale is that ”say on climate” at least requires companies to disclose a climate plan, which many still have not done. Investors, meanwhile, have access to increasingly sophisticated tools to assess and compare those plans. And they seem to be making use of them. Support for Glencore’s plan fell this year to 76%, from 94% in 2021.

Votes over the next few weeks at Shell, Total, and BP will reveal more about the standard investors want to see from oil and gas companies. Most will likely pass as long as major asset managers like BlackRock continue to vote with management on climate issues.

How to improve “say on climate” voting

There’s little evidence that merely disclosing greenhouse gas emissions or a climate plan leads directly to better company behavior on climate. That’s especially true if the plan in front of voters lacks crucial information—a “say on climate” vote at the French utility Engie passed (pdf) with 97% approval on April 21 despite the fact that the company’s plan sets no restrictions or goals for capital spending.

The solution, Pottier said, is two-fold. First, regulators should set more specific criteria for what kind of data companies need to include in climate disclosures, so that “say on climate” voters have what they need to make an informed judgment. Second, in addition to “say on climate” votes, shareholders should vote out board directors who don’t get serious about climate.

“Say on climate” votes will only become more commonplace; already this year, companies ranging from Boeing to The Cheesecake Factory have agreed to begin issuing climate reports to shareholders. To prevent that from becoming an exercise in greenwashing, it’s up to investors to weigh them critically.

“To have one rejected would be a great victory for the climate,” Pottier said.