Are ‘say on climate’ resolutions the best tool for the job?

'As a governance expert I like shareholder votes but as a social scientist I know the path to net zero is bumpy'

We saw an extraordinary proxy season unfold this year. ExxonMobil was the first US company in history to lose a climate-motivated proxy contest. Three climate experts will be joining the board to help steward the company towards a more climate-friendly business model. In the UK, Glencore, Unilever, Shell and HSBC proposed management resolutions to approve their carbon transition plans, which were overwhelmingly approved by shareholders.

Globally, more than 36 shareholder proposals were filed on climate change-related concerns, an increase of 20% from last year, according to Sarah Wilson at Minerva Analytics.

Climate change is one of the biggest challenges facing our generation. As a result, it is getting more airtime at company AGMs. Overall this is a good thing. We need to stop obsessing over executive pay schemes and start looking at other important, strategic matters – including climate change, social inclusion, and post-Covid recovery. But are ‘say on climate’ resolutions the best tool for the job?


There are practical challenges to this approach. If this concept is rolled out to all equity holdings in major markets, we should not underestimate the workload to read, understand and meaningfully vote on each of those resolutions.

Shareholders can of course rely on third-party proxy agents to do some of the heavy lifting and interpret best and worst practice. But this only gets you part way to the answer. It is essential that specialists in asset managers review and make an in-house decision on each resolution. We should not be outsourcing this important task to proxy advisers, but that means we need the resources internally to undertake the work.

This brings us to the second challenge, which is operational. We need very different skills and expertise to analyse and interpret a ‘say on climate’ vote than we need for other AGM votes. It requires much more cross-team collaboration between governance teams, climate experts and fund managers.

It also requires more time to discuss and debate these issues with all the relevant internal stakeholders within our firm to come to a final decision. With the compressed voting season and short deadlines, this will be hard to do well at scale. And its only worth doing if we intend to do it well.

The final challenge is both a philosophical and, quite possibly, a legal one. As shareholders, what exactly are we approving?

For example, at the recent Royal Dutch Shell AGM, shareholders were asked to approve the company’s climate transition strategy. The strategy was not robust and relied on some unrealistic assumptions. So, while we didn’t support the content of the resolution, we did support the fact management was giving us a chance to vote and have our say. We debated for a long time whether we should vote against the resolution because it wasn’t good enough; or whether we should vote for the resolution because having a mediocre climate plan is better than having no plan at all.

In the end, we abstained because we felt we couldn’t support it, but we also could not vote against it. The resolution received 88.74% support from shareholders – a significant success by most people’s measure. But now that the resolution has passed, what does it actually mean? Is Shell’s management team now given carte blanche to implement the plan, even if it is inadequate or fanciful? Was the vote even a useful exercise? Did it advance Shell on its climate journey? What happens if they don’t implement it?

I’m still wrestling with these questions. As a governance expert, I like the rigour and formality of a shareholder vote. The shareholders have spoken, and now Shell has a plan it can be held accountable for. I also like the internal and external debate it can catalyse, as it did within our own team and with our clients.

But as a social scientist I know the path to net zero is a bumpy one, and that the only way we can collectively rise up to the challenge is through ongoing, tough and honest dialogue with companies. I’m not yet convinced that a single vote at the AGM will actually improve climate outcomes. It can serve as a useful tool, but just like any tool, it needs to be used with precision to be effective.

Ashley Hamilton Claxton is head of responsible investment at Royal London Asset Management and an editorial panellist for ESG Clarity


Natasha Turner

Natasha was global editor at ESG Clarity, part of Mark Allen Financial, and a financial journalist for seven years. She has been shortlisted for Story of the Year and Investment Journalist of the Year...