Investor heavyweights failing to boot directors on climate commitments

Investor heavyweights are failing to hold board directors of coal, oil and gas companies to account for their climate performance, with an average of more than 95 per cent of shareholder support when it comes to elections.

Ahead of annual meetings for some of Australia’s biggest oil players including Santos and Woodside, research from Market Forces shows there has been no downward trend in support for company directors despite companies with major fossil fuel expansion plans falling short of investors’ climate disclosure expectations.

Market Forces chief executive Will van de Pol said the world’s biggest investment firms are failing to live up to their ‘active ownership’ claims.Credit: David Gray

Market Forces chief executive Will van de Pol said the findings contradict claims from investors that they are driving improved climate governance through active ownership: using their rights as a shareholder to improve corporate behaviour.

“It’s very concerning that the world’s biggest investment firms are failing to live up to their ‘active ownership’ claims when it comes to managing immense climate-related financial risks,” he said. “Directors of companies continuing to exacerbate climate risks by expanding the scale of the fossil fuel industry must face the credible threat that they will be voted off boards.”

Since the launch of the Climate Action 100+ (CA100+) Net Zero Company Benchmark Disclosure Framework – aimed at ensuring the world’s largest corporate greenhouse gas emitters take action on climate change – seven years ago, there has been no notable correlation between a company’s climate performance and voting support for the election of its directors, according to Market Forces’ findings.

The analysis examined director votes at 45 coal, oil and gas companies with some of the largest fossil fuel expansion plans, comparing levels of director support at each company against their performance on the CA100+ benchmark. It found that directors at companies failing to meet any criteria received higher support in 2023 than those who partially or fully met them.

“What that tells us is big investors are routinely failing to deploy one of the strongest tools at their disposal to actually bring companies into line on climate change,” van de Pol said, calling out BlackRock, State Street and JP Morgan Asset Management as having some of the worst records for voting in favour of fossil fuel directors.

A BlackRock spokesperson said the company voted in line with what it thought was in the best long-term financial interests of its customers.

“As a minority shareholder on behalf of our clients, our role is to better understand how company leadership manages risks and capitalises on opportunities to deliver long-term financial returns,” they said. “As a fiduciary, we vote, where authorised to do so, based solely on our assessment of what is in the best long-term financial interests of our clients.”

A statement from State Street Global Advisors said the company “believes managing climate-related risks and opportunities is a key element in seeking long-term value for our clients”.

“As stated in our Global Proxy Voting and Engagement Policy, our asset stewardship team anchors its program on effective board oversight and disclosure of material risks and opportunities, including those that are climate-related.”

A JP Morgan Asset Management spokesperson said the firm had made significant investments into its stewardship team and engagement capabilities, as well as developing its own climate risk engagement framework over the past couple of years.

“The firm has built a team of 40 dedicated sustainable investing professionals including investment stewardship specialists who also leverage one of the biggest buy-side research teams in the industry,” they said.

Australian Super and the Australian Council of Superannuation Investors declined to comment.

The Business Briefing newsletter delivers major stories, exclusive coverage and expert opinion. Sign up to get it every weekday morning.