Can shareholder action influence the Bank’s climate policy?


Through Cary Springfield, International banker

On April 23, Standard Bank investors called on the South African lender to disclose its climate change commitments ahead of its Annual General Meeting (AGM) on May 27. The shareholder group included three asset managers – Aeon Investment Management, Abax Investments and Visio Fund Management – along with activist shareholder organization Just Share, all of whom co-filed a non-binding advisory resolution to shareholders asking Standard Bank to publish a report detailing its strategies and targets for reducing its exposure to fossil fuel assets for the year ending December 31, 2021. In doing so, the dossier provides yet another example in an ever-growing list of actions taken by shareholders campaigners demanding higher levels of accountability from financial institutions in their efforts to tackle climate change.

Just Share’s director of climate engagement also added that by not providing such a strategy, it becomes impossible for shareholders to accurately assess Standard Bank’s commitments to align its lending practices with the Accord. of Paris (climate) of 2015. “This non-binding resolution simply calls on the bank to reveal whether it has such goals,” he said, adding that there is no reason why the lender should not has not already agreed to provide such a document. And while shareholders acknowledged that Standard Bank has previously provided its policies on coal financing, “none of the bank’s information provides a strategy or measurable goals.” As such, shareholder groups exert increasing pressure on the global banking system to increase transparency on issues that impact the climate, such as its exposure to fossil fuel assets.

Indeed, a number of banks are now under similar pressure to provide detailed information. At the Royal Bank of Canada’s annual meeting of shareholders on April 8, 31.05% of shareholders voted in favor of a proposal filed by SumOfUs – a global not-for-profit rights organization that advocates for greater corporate responsibility – asking the bank to adopt quantitative, time-bound targets to reduce greenhouse gas emissions. “The (RBC) vote was significantly higher than expected, especially since the proposal does not enjoy any advisory support from ISS or Glass Lewis. We are pleased to see that shareholders have given RBC a strong mandate to go further and faster on the climate, ”said Amelia Meister, SumOfUs lead activist.

And earlier this year, some of HSBC’s biggest shareholders, led by the ShareAction campaign group, called on the UK bank to step up its commitments to cut fossil fuel-related lending and turn its climate ambitions into tangible goals. “As Europe’s largest bank and second-largest provider of fossil fuel finance, HSBC has the unique opportunity to help the financial services industry move towards Paris-aligned commitments rather than mere ambitions,” said Jason Mitchell, co-head of responsible investing at the world’s largest publicly traded hedge fund company, Man Group.

In this case, the investors, who together manage $ 2.4 trillion in assets among themselves, appear to have achieved minimal success. In March, HSBC announced a resolution committing it to phase out funding for coal power and thermal coal mining by 2030 in the European Union (EU) and the OECD (Organization of economic cooperation and development) and by 2040 elsewhere. . The resolution will be put to a vote at HSBC’s annual general meeting on May 28. “Today’s announcement shows that strong shareholder engagement can deliver real results and sets an important precedent for the banking industry,” said Jeanne Martin, senior campaign manager at ShareAction. the relocation of HSBC. “Net zero ambitions must be supported by phasing out fossil fuels, and today HSBC has taken an important step in that direction.”

For shareholder action to be effective, it requires a majority – or at least a substantial block of votes – to ensure the bank changes course and reduces its exposure to fossil fuels. This is, however, easier said than done. More recently, a Barclays shareholder group coordinated by Australian nonprofit Market Forces filed a resolution in February calling on the UK bank, which is Europe’s largest fossil fuel banker, to cut its funding of coal, oil and gas activities. in accordance with the objectives set in the Paris climate agreements. But in early May, only 14% of shareholders supported such a proposal. Such a low number is clearly a setback for environmentalists, but perhaps even more baffling is that Barclays advised shareholders to vote against the resolution ahead of the meeting.

As Adam McGibbon, UK campaign manager for Market Forces, explained, the figure meant institutional investors had “serious questions to answer” about their commitment to action on climate change. “Having seen Barclays climate policies fail to curb its investments in fossil fuels last year, dropping investor support for climate change action this year compared to 2020 is either indifferent or the incompetence of many large investors, ”said McGibbon. And according to Bank On Our Future, a network of organizations and social movements committed to lobbying the UK’s biggest financial players on climate change, although it has said it wants to align its operations with it. ‘Paris Agreement,’ Barclays is not doing enough to meet this ambition. For example, Barclays has yet to commit to ending its funding of coal, oil and gas – an absolute must to meet the Paris targets ”.

Pressure can also be exerted through formal legal channels. Commonwealth Bank of Australia (CBA) shareholders sued the bank in 2017, alleging it violated the Corporations Act 2001 with the release of its 2016 annual report, which did not disclose the business risks of climate change , in particular the possible investment in Adani Mining’s controversial Carmichael coal mine. And before the court made a ruling on the case, shareholders withdrew their action after the ABC released its 2017 annual report, in which the bank acknowledged the risk of climate change and pledged to undertake a climate change scenario analysis to estimate the risks to the business of the ABC.

And it is not only the shareholders of commercial banks who can act. Shareholders of development banks – often in the form of entire countries – also have a crucial role to play in ensuring that these banks’ lending practices are environmentally sound. “We can no longer afford large fossil fuel infrastructure anywhere. Such investments only make our situation worse. They are not even profitable, “said UN Secretary-General António Guterres in a recent speech at the Petersberg Climate Dialogue 2021.” So we need the shareholders of multilateral development banks and institutions Development financiers are working with the management of these banks to finance low-carbon, climate-resilient development, aligned with the 1.5-degree target. ”

Part of the problem seems to lie in the fact that many banks still seem to engage in the practice of “greenwashing”; that is, to give the public the misleading impression that it is more committed – and takes more action – to curbing its environmentally harmful activities than is the case in reality. According to the American environmental organization Sierra Club, the American lender Bank of the West may well have been engaged in such a practice. Mainly through its slogan “What on Earth”, its “climate-conscious checking account” and its “1% for the planet” credit card, the bank – a 100% subsidiary of the French investment bank BNP Paribas – asserts the environmental position of any major American bank ”. But according to the recently released Banking on Climate Chaos report, BNP Paribas increased its funding of fossil fuel projects by 142% between 2016 and 2020 and also increased its lending to fossil fuel companies by 41% between 2019 and 2020. make BNP Paribas the world’s largest financial backer of offshore oil and gas projects.

Bank of the West responded to Sierra, noting that it has “the strongest restrictive funding policy of any major US bank” and that it has less than 1% exposure to fossil fuels across the board. his wallet. “We will continue to be transparent about what we do and do not fund and will work diligently to address the urgent role that finance plays in climate change.” However, such commitments do not hide the fact that the bank’s parent company is among the most serious climate violators in the world and, as such, a level of greenwashing seems to have been adopted. “Banks admit that fossil fuel companies are the biggest emitters of the climate, but they are not taking immediate action to phase out fossil fuel financing at all levels,” Ginger Cassady, executive director of Rainforest Action Network (RAN) and main editor of the report, told Sierra. “Many of these banks are pledging for 2050 to align with the Paris Agreement when they need to act now on fossil fuels. Any bank that makes a ‘net zero by 2050’ political commitment and then treats it as a license to continue business as usual is guilty of greenwashing.

The report itself analyzed the fossil fuel financing activities of the world’s 60 largest commercial and investment banks – bringing together their leading roles in lending and underwriting debt and equity issues. – and found that lenders invested a total of $ 3.8 trillion in fossil fuels from 2016 to 2020. “Seventeen of 60 banks have recently pledged to achieve ‘net zero’ financed emissions. But our analysis shows that for many of the world’s worst fossil fuel donors, these plans so far have been dangerously weak, half-baked or vague, ”according to the report, which ranked JPMorgan Chase as the worst fossil fuel banker. in the world. this period, although its funding in this area declined significantly last year. Citibank is the second worst fossil bank, followed by Wells Fargo, Bank of America, Royal Bank of Canada and MUFG (Mitsubishi UFJ Financial Group), while Barclays is the worst in Europe and Bank of China (BoC) the most big offender in China.

Convincing these banks to transform their methods of financing fossil fuels remains a difficult prospect in most cases. Nonetheless, small battles are won by activist shareholder organizations, indicating that changes can be made, albeit at a gradual pace.

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