Climate Buttons
Climate activists handed out buttons in support of action on climate change at the 2016 General Conference in Portland, Ore.
Glenview, IL—In a historic corporate proxy voting season, Wespath Benefits and Investments (Wespath), through its Wespath Investment Management division, successfully filed and actively supported shareholder resolutions asking the world’s largest oil and gas companies for greater transparency on how they are preparing for a low-carbon future.
In an unprecedented level of support, 67% of shareholders approved Wespath’s resolution at Occidental Petroleum’s annual general meeting on May 12 calling on the company to provide a detailed report assessing the impact of climate change. The resolution, co-filed with the Nathan Cummings Foundation, was the first of its kind in the United States to receive support from a majority of shareholders. At the meeting, the Chairman of Occidental committed to working with Wespath and other investors to expand its climate-related scenario planning and disclosure. Wespath is encouraged that this will enhance the company’s long-term resilience to an energy sector in transition.
On May 31, a similar resolution at ExxonMobil also made the headlines as it gained the support of over 60% of shareholders. Wespath voted in favor of the resolution at Exxon and collaborated closely with the lead filers, including the financial arm of the Church of England.
Earlier this year, Chevron responded to a similar resolution led by Wespath in 2016 that received the support of 41% of shareholders. In March 2017, Chevron published a new report, Managing Climate Risks: a Perspective for Investors, which Wespath acknowledges as a first step toward explaining to investors how the company assesses climate change scenarios as an element of its strategic planning efforts. Wespath had re-filed the resolution ahead of the 2017 proxy season, but announced in May that it had withdrawn the 2017 resolution and will instead continue to engage the company to provide robust climate risk reporting.
A Sea Change in Climate Risk Reporting
This year appears to be a turning point for investors supporting meaningful climate risk scenario planning and disclosure. The groundswell of activity demonstrates the importance of shareholder engagement in creating more sustainable companies and financial markets. Dave Zellner, Wespath’s Chief Investment Officer said, “Wespath believes the historic 67% vote in support of our proposal at Occidental Petroleum, and the similar level of support at Exxon, represents a sea change in how investors are addressing the transition to a low-carbon economy.”
Mr. Zellner added, “By voting for these resolutions, investors are affirming that the preparation for a future that is less reliant on fossil fuels is an issue the global business community cannot ignore.”
Low-Carbon Transition—Addressing Risks and Opportunities
Even though the Trump Administration announced last week its intent to withdraw the United States from the Paris Accord on climate change, Wespath continues to believe that a global transition to a low-carbon economy is inevitable and already underway. Over 190 of the world’s countries remain committed to the terms of the Accord, along with numerous U.S. states, cities and corporations. As a prudent fiduciary, Wespath recognizes that the threats resulting from climate change represent material investment risks because the world’s responses will create winners and losers across companies, industries, and countries, ultimately impacting investment returns.
In May, committees of Wespath’s Board of Directors accordingly approved an investment belief related to this low-carbon economic transition. This belief is part of a broader set of Investment Beliefs outlining 10 guiding principles that help define Wespath’s investment philosophy and support its mission to provide investment services aligned with the values of The United Methodist Church.
Legislative Risk to Shareholder Rights
Wespath intends to continue to file shareholder resolutions selectively and strategically as they represent a powerful form of engagement.
However, the U.S. House of Representatives voted June 8 on the Financial CHOICE Act (Creating Hope and Opportunity for Investors, Consumers and Entrepreneurs), a bill meant to repeal and roll back significant portions of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Along with a community of institutional investors, Wespath opposes elements of this bill setting prohibitively difficult barriers to the filing of shareholder resolutions and other provisions relating to proxy voting. Wespath believes these would severely prohibit its ability to fulfill its fiduciary obligations to beneficiaries through corporate engagement. In May, Wespath wrote a letter to members of the House of Representatives raising concerns about these provisions of the bill, which can be found here. (Editor's Note: According to a National Public Radio report, the Financial CHOICE Act faces dim prospects of passage by the Senate).
Wespath will continue to use its leadership position as the largest reporting faith-based pension fund in the world, to promote more sustainable companies and financial markets creating long-term value for the participants and institutional clients it serves