ESG voice gains traction as shareholders go green

It has been years in the making, but increasingly, the green vote is making itself heard in the corporate sector with more companies starting to pay greater attention to environmental, social and governance (ESG) issues.

The latest example comes from JP Morgan’s annual shareholder meeting.

While shareholders narrowly defeated a resolution calling for the largest bank in the US to issue a report “outlining if and how it intends to reduce the greenhouse gas emissions associated with its lending activities in alignment” with the goals set out in the Paris Agreement, the fact that 48.6 per cent of investors voted for the resolution should be an eye opener.

Shareholder activist group As You Sow says the vote sent a strong message to the banking giant regarding its ongoing support of fossil fuels.

The bank already said it would end or phase out loans to some fossil fuel interests and has announced that it would appoint a new lead independent director, replacing former ExxonMobil boss Lee Raymond, who has a long history of denying that climate change is real.

Closer to home, nearly half of Santos’ (ASX:STO) shareholders backed resolutions calling for the oil and gas company to set targets aligned to the Paris Agreement and to review its membership of fossil fuel lobby groups.

While the resolutions were not put up for vote at the company’s annual general meeting in April, chairman Keith Spence acknowledged that climate change was clearly important to shareholders.

“Our company is already taking industry-leading action towards emissions reduction, and we will continue to engage constructively with shareholders on climate change, and work towards our shared aspiration of net zero emissions by 2050 over the coming year,” The Guardian quoted him as saying.

Fellow gas major Woodside (ASX:WPL) faced a louder call to action with more than half of its investors supporting a non-binding resolution for the company to cut both its own emissions and the Scope 33 emissions released by consumers of its liquefied natural gas products.

While acknowledging the shareholder interest in climate change, chief executive Peter Coleman argued that gas had a role to play as it released less emissions when burned compared to coal.

Norway’s giant sovereign wealth fund, which famously owns an estimated 1.5 per cent of all shares listed on global stock exchanges by investing — rather ironically — in the country’s North Sea oil revenues, has also taken an increasingly green stance and recently moved to sell its shares in AGL Energy (ASX:AGL) and placed BHP (ASX:BHP) on an “observation list”.

There is also evidence that ESG funds have withstood the impact of the COVID-19 pandemic better than their non-ESG peers, with Rainmaker Information noting that Australian Ethical Investment (ASX:AEF) was one of a few products to deliver a positive return in 12 months.

AEF has been making investments that meet the criteria set out in its Ethical Charter since 1986 and has gained increasing traction in the last couple of years.

Giant fund manager BlackRock has also flagged a shift in its investments towards more sustainable industries.

All this comes as criticism is flung at an Australian government review that called for Australia’s $2bn Climate Solutions Fund to be given “an expanded, technology-neutral remit so they can support key technologies across all sectors”, a move that could open up funding for carbon capture and storage (CCS) technology.

The Institute for Energy Economics and Financial Analysis says doing so would leave Australia at the risk of being left behind as the rest of the world moves towards zero emissions.

It added that there has not being a single unsubsidised coal CCS project in the world.

Greenpeace Australia also took aim at the government’s plan to use the COVID-19 pandemic to grant fossil fuel companies tax breaks and reduced environmental overight.

“With much of the country still recovering from the coal-fired bushfire crisis, the Morrison government is prioritising winding back already weak environmental protections and giving even more generous tax breaks to cashed-up miners while government revenue nosedives,” the organisation said.