Big Investors Back Climate Activists (Newsletter 5/28)

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Proxy Season Briefing

Climate Change Activists – 3, Large Cap Companies – 0

Engine No. 1 Defeats Exxon

In one of the most expensive proxy battles ever, Exxon lost two board seats to activist investor Engine No. 1, and the activist was backed by major investors including Vanguard and BlackRock, which own about 8% and 6% of the oil giant, respectively.

Chevron Shareholders Support Scope 3 Emissions Reduction

Chevron’s shareholders voted for the company to reduce emissions from customers (Scope 3), and about 61% of investors backed the vote. The proposal, which requested a report on how a drop in demand for fossil fuels would impact the business, was rejected. BlackRock opposed the request noting Chevron has already been responsive to TCFD and SASB reporting, however, the institution voted for a report on climate lobbying in alignment with the Paris Agreement goals. Early results show the proposal only received 48% support.

Caterpillar Investors Push for Reporting on Climate & Diversity

Caterpillar added four proposals to the ballot after investors requested the company report on climate, including net zero by 2050 targets, and diversity & inclusion policies, become a public benefit corporation, and allow shareholders to act by written consent.

Regulatory News

President Biden Continues to Prioritize Climate Reporting and Target Setting

In Biden’s executive order on climate-related financial risk, he encouraged the Federal Acquisition Regulatory Council (FARC) to require all federal suppliers to set Science-Based Targets to comply with the movement towards reducing greenhouse gas emissions to net zero by 2050 and for the companies to report emissions and climate-related financial risk.

Investor Updates

Putnam Debuts Active ESG ETFs

This week, Putnam announced the launch of its first actively managed ESG ETFs, including:

  • Putnam Sustainable Leaders ETF (PLDR)
  • Putnam Sustainable Future ETF (PFUT)
  • Putnam Focused Large Cap Growth ETF (PGRO)
  • Putnam Focused Large Cap Value ETF (PVAL)

The two sustainability funds focus on companies that are leaders in financially material sustainability issues and solutions-oriented companies that offer innovative ways to address key sustainability challenges, respectively. Both funds are managed by superstars Katherine Collins and Stephanie Dobson.

American Century Builds Sustainability Team

American Century named Matt Oldroyd as Head of Corporate Responsibility and Patricia Ribeiro as chair of the new sustainability investment council, which will quickly push forward the firm’s sustainability strategy. The council will also work closely with the ESG and investment stewardship team to enhance its investment capabilities.

Company Spotlight

Best-In-Class Sustainability Reporting

International Flavors & Fragrances Inc. (IFF) conducted a 1-hour webcast showcasing its ESG investor presentation to deliver the company’s updates from 2020. Full of metrics, commitments, and ratings and partnership logos, the presentation laid out what the company has accomplished, proved it is an ESG industry-leader, and mentioned the next steps as IFF merges with DuPont Nutrition & Biosciences. The Q&A section of the call is in the replay which can be found in the events & presentation section of IFF’s IR website.

Additionally, Cummins’ Sustainability Report Archive on its website gives viewers access to links to the auto company’s sustainability report, SASB index, GRI index, key policies, and Cummins’ CDP responses to the water and climate questionnaires. This week, Cummins checked another box and released a TCFD report. The highly detailed document containing its full response shows aligning with TCFD is no small task.

ESG in the Proxy

This year, companies have upped ESG disclosures in the annual proxy statement. Notably, companies are addressing more details on human capital management programs and initiatives. Below are a few examples of how companies are sharing ESG updates within the proxy.

ESG-related Shareholder Engagement and Board Diversity Progress

  • Rite Aid
    • 2021 Proxy Statement is notable for its stockholder engagement section, which outlines the specific ESG topics and achievements discussed with investors, including carbon emissions reduction strategy and efforts around facilitating a diverse workforce (page 4).
    • Additionally, Rite Aid utilizes its proxy to highlight the progress it has made in developing a more diverse Board, with 44% of its Board now being women and 44% now ethically or racially diverse (page 5).

Board Oversight of ESG and ESG Strategy

  • Bed, Bath and Beyond
    • Bed, Bath and Beyond’s Proxy Statement highlights the Board’s focus on and oversight of ESG, including establishing metrics and goals and ensuring a suitable governance structure for overseeing progress (page 32).
    • Also, the filing neatly outlines the company’s ESG strategy, illustrating dedication to push its sustainability programs beyond a few sporadic initiatives (page 33).

ESG Achievements

  • Signet Jewelers
    • Signet Jewelers’ 2021 Proxy Statement stands out for its ESG achievements section, which details the company’s impressive ESG efforts, particularly related to human capital management and other social themes (page 33).
    • A few accomplishments include Signet’s commitment to implementing a company-wide $15 minimum wage in 2022 and the senior leadership team being 50% female (page 36).
  • American Airlines
    • Thoroughly describing its climate change and human capital initiatives, American Airlines provides deep insight into its ESG strategy, which is practical and multi-faceted. In this way, the company conveys its intent and actions for addressing key ESG risks it faces (page 35).

For access to additional guidelines on discussing ESG in the proxy, contact ESG Infinite today. 

News Bites