What is shareholder activism?
When an individual or group of shareholders seek to influence a company’s management and decision-making by using their ownership stake it is known as shareholder activism.
On the climate side of things, shareholders can group together and place pressure on companies to do more in consideration of climate change.
By reaching a collective shareholder threshold they can introduce resolutions for new directions at Annual General Meetings (AGM). A shareholder resolution is a formal way of communicating shareholder views on issues to company management which is then put to a vote for adoption.
Follow This, a green investment group, were successful in using this method in 2021, with 61% of shareholders voting in favour of a resolution calling for oil company Chevron to cut scope 3 emissions (value/supply chain and product related emissions).
In another example, ClientEarth, acting as shareholders of Enea, brought the fossil fuel company to court. Enea’s plans to build Europe’s largest coal fired power plants were argued to be an indefensible financial risk to shareholders, given increasing costs of carbon and falling renewable energy prices. ClientEarth won the case, forcing Enea to abandon their plan.
Why is shareholder activism important?
As mentioned in our post on climate litigation, there is a need for systemic change overall, and shareholder activism is another application of Cathedral Thinking – taking long-term steps to build tomorrow’s system.
Just like all climate actions, shareholder activism is not a panacea, but is a means to make structural change in some of the most powerful and climate impacting organisations today.
Money talks
Because of how pension funds work, pension holders are often indirect shareholders in less-than-sustainable companies, and in many cases prop up the carbon economy.
Collectively, pension holders possess the power to influence the direction of their pension funds towards more responsible investments.
Communicating directly with fund managers or trustees, can urge them to prioritise and invest in ESG-aligned assets.
ESG stands for Environmental, Social, and Governance, and is a framework used to assess an organisation’s business practices and performance on various sustainability and ethical issues.
However
One mistake people can make when wondering what to do with their money is assuming there are objective choices out there: that there is a right or wrong answer when it comes to managing our finances.
Alice Ross, Investing To Save The Planet
Research is key to understanding the underlying and ensuring close alignment to your ethics and intended outcomes.
What would you do/what do you think?
What companies would you target?
How much change can this sort of activism bring about?
Will it bring about systemic change? Or will the system co-opt it?
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