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Stephen Metcalf
Head, Sustainable Investing

As pressure grows for the private sector to play an active role in mitigating their harmful impact on the environment, some of the most scrutinised industries have begun to make bolder commitments. Proxy voting and shareholder preferences are some of the contributing factors to this increased pressure.

Court cases were lost in Europe and proxy votes went against managements of carbon-intensive industries in the United States, mostly for not specifying how the companies were going to accomplish their carbon emission reduction plans. Because of that, one of the largest Canadian oil producers committed to becoming net-zero by 2050.

Asset managers are quickly taking the lead to invoke change at companies around the world. For example, Vanguard, BlackRock and StateStreet - which combined vote approximately 25 percent of all proxies - all committed to net-zero portfolios by 2050, as well as a 50 percent reduction in emissions by 2030.

Historically, both Vanguard and BlackRock tended to vote against proposals for companies to make changes to reduce emissions, but since 2021, they have switched to supporting them. In early 2021, we saw oil companies targeted first - they are the low-hanging fruit - but as the movement grows to reduce emissions, other sectors like transportation, agriculture and industrials are expected to face additional scrutiny.

Growing interest

Later in 2021, the Net Zero Asset Managers initiative was launched, designed to encourage the asset management industry to commit to a goal of net-zero emissions by 2050. By August, it had 128 signatories from around the world managing more than US$43 trillion (£31.6 trillion) of assets.

Based on the activity in 2021, we anticipate more climate-related proposals will happen at annual meetings for large and small corporations around the world. Especially as the number of climate-related catastrophes continue to cause significant loss of lives and money. For example, in 2020, 22 weather-related incidents cost US$96 billion (£70 billion) and claimed 262 lives in the U.S. alone.

Changes needed

Governments around the world are making commitments to slow temperatures from rising 1.5 degrees Celsius. This means changes are needed in the oil industry to comply with those commitments.

Investors are likely to see many changes both in companies and the ESG investing world thanks to proxy voting. For example, industries with high levels of emissions will likely incorporate planning for adaption into a lower carbon world, which has the potential to change earnings reports. Also, the U.S. Securities and Exchange Commission is discussing requiring asset managers to have carbon disclosures. And many more asset managers are indicating they are considering joining the Net Zero Asset Managers initiative.

With the proxy votes and court cases we've seen in 2021, oil companies are already facing challenges to the traditional business models they use. Climate influence is now a risk all companies are facing with greater impact because asset managers are looking at how companies plan - and accomplish - carbon deductions.

As proxy voters, investors are taking advantage of another way to influence their values. With proxy voting both individually and through asset managers, they can make a difference in the world.


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Stephen Metcalf

Head, Sustainable Investing