This proxy season, investors must step up to improve climate lobbying practices

It is almost five years since the Paris Agreement was signed, and in that time, we have seen an encouraging number of business leaders make ambitious and bold commitments on reaching low-carbon and net zero targets. But we all know actions speak louder than words and one of the biggest obstacles on the path to achieving Paris is continued corporate support for insidious lobbying that undermines the acceleration of the low-carbon transition. That is why shareholder resolutions against lobbying are set to be one of the stories of the proxy season in 2020.

There are signs of encouragement. Next week (19 May) is the AGM of Royal Dutch Shell, who recently responded to shareholder pressure and released a report disclosing all their ties with climate-related industry associations. It came on the same day that Shell has unveiled ambitious targets including becoming a “net-zero emissions energy business” by 2050.[1] While this commitment is admirable, the disclosures showed that the oil major paid the American Petroleum Institute, which has been criticized in the past for running climate denial campaigns, at least $12.5 million in 2019.

A similar chain of events has played out with BP. In the US, the oil major spent heavily to help defeat a Washington State carbon pricing ballot initiative. A little later, BP then launched a pro-pricing PR campaign in the state.[2] Earlier this year, BP vowed to “fundamentally” change, setting a goal of reaching net-zero emissions from its oil and gas production and operations by 2050.[3] While it is a big step forward, shareholders will need to engage with the company and hold it to its commitments. A study by the Transition Pathway Initiative found that 94% of major oil companies do not ensure consistency between their own climate position and their trade associations.

Unfortunately, these murky lobbying practices go beyond the oil and gas sector. A leaked document reportedly suggested that BusinessEurope, a large confederation representing trade bodies across the EU, was planning to “oppose” greater EU ambition on climate policy through a set of classic lobbying tactics of delay and obfuscation.

Turning the tide

At Boston Common, we are part of a rising number of investors making our voice heard on destructive corporate lobbying. Expectations on responsible lobbying practices have moved from it being just a governance issue to how investors now evaluate a company’s overall business strategy. And more tools are now available to help investors such as the PRI’s guidance Converging on climate lobbying: aligning corporate practice with investor expectations while Transparency International has also released a Responsible Lobbying Guide.

For more than a decade, Boston Common has been integrating in our engagement framework how a company is engaging in the political process through its direct and indirect political contributions and lobbying activities as well as public policy engagement. Last year, lobbying disclosure and public policy engagement by our portfolio companies was a central theme across all our core engagements.

In the food and beverage sector, another industry wrought with widespread negative corporate lobbying, we collaborated with the Interfaith Center on Corporate Responsibility (ICCR) to introduce a stand-alone engagement with 11 food and beverage companies. The key asks to companies were to commit to lobbying on nutrition issues only in support of public health and for disclosure of all memberships, lobbying activities on nutrition issues and financial support of lobbying organizations. As investors, we believe it is high time that companies use their public voice to promote progressive policies on nutrition, health and well-being as part of their alignment with the SDGs.

In the banking sector, we have led an investor call for banks to integrate clear public policy positions on climate into their overarching climate strategy. We also ensured that lobbying practices and public policy engagement have been core metrics in our five-year engagement with global banks on climate change.

Last year, we successfully negotiated agreements with three companies we have engaged on lobbying disclosure for a number of years including American Water Works, Oracle and Verizon Communications.

Clearly, momentum is picking up and this proxy season investors are on the frontline for re-channelling corporate influence in lobbying. But we will need investors to speak up this proxy season more than ever before as a report from InfluenceMap indicates that corporate lobbyists have been highly active in the chaos caused by COVID-19 lobbying for climate deregulation, delays to planned climate policy and for financial interventions by governments specifically for fossil fuel production. We are in an era of joint responsibility and in a post COVID-19 world, investors must make it a priority to engage companies on responsible political and lobbying practices.

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Lauren Compere is a Managing Director and the Director of Shareowner Engagement at Boston Common Asset Management, a majority-employee-owned and woman-led investment management firm specialising in U.S. and international responsible investing.

The information in this article should not be considered a recommendation to buy or sell any security. An edited version of the same piece appears in Ethical Corporation.

[1] https://www.axios.com/shell-climate-goals-net-zero-emissions-2050-511670e9-96f7-490d-b7d2-cce82514a2d8.html?utm_source=newsletter&utm_medium=email&utm_campaign=newsletter_axiosgenerate&stream=top

[2] https://www.axios.com/big-oil-lobbying-climate-change-00292385-f4f3-4042-a184-50adb6d60391.html?utm_source=newsletter&utm_medium=email&utm_campaign=newsletter_axiosgenerate&stream=top

[3] https://www.axios.com/bp-carbon-emissions-net-zero-goal-c2e39709-5c9b-45b7-9cb6-dc6de6dee7b5.html?utm_source=newsletter&utm_medium=email&utm_campaign=newsletter_axiosgenerate&stream=top