Investor engagement with oil and gas companies has achieved “derisory” results and must be radically improved, including by voting down directors, according to an open letter NGO Reclaim Finance sent to 50 large investment firms yesterday.
The letter stated investors ought to vote against strategic routine resolutions, suspend new investments and make public statements for oil and gas companies which still have fossil fuel expansion plans and make limited investments in sustainable energy.
Strategic routine votes Reclaim Finance advises targeting include the re-election of directors, the approval of remuneration, the approval of financial statements, and the payment of dividends.
The lacking efforts to mitigate global warming can be seen in the fact only nine of the 34 oil and gas companies targeted by the Climate Action 100+ (CA100+) have committed to achieving net zero by 2050 on all scopes, the letter stated. It also noted none of the targeted companies have a short-term decarbonisation target covering all scopes and only two have published a decarbonisation capital expenditure plan.
In terms of where the fossil fuel companies are putting their money, the non-governmental organisation (NGO) said 96% of upstream oil and gas companies continue to open new fields with the sector representing only 1.2% of total clean energy investment globally – amounting to the sector investing only 2.5% of its total capital spending.
Investors were told: “Oil and gas companies’ resistance to change should lead investors to completely overhaul their engagement practices with the industry.
“In particular, we believe that it’s time for climate-minded investors to suspend new investments in oil and gas companies, including the purchase of bonds, until they have committed to stop developing new upstream and midstream oil and gas projects.
“We call on you to fully use your leverage as shareholders, which includes making public statements, go beyond voting on climate-related resolutions and vote against strategic routine votes to unambiguously oppose and sanction these companies until they satisfy your asks.”
Among recipients of the letter were Aviva Investors, abrdn, Amundi, Baillie Gifford, Schroders, HSBC AM, LGIM, BNP Paribas AM and DWS.
Reclaim Finance acknowledged the oil and gas sector has been the focus of collaborative and individual engagement initiatives by the investment community on climate issues for many years, including the creation of the CA100+ and investor groups filing climate-related shareholder resolutions at annual general meetings.
“Despite these efforts, the results achieved are derisory in the context of climate emergency, as acknowledged by the Carbon Disclosure Project and the World Benchmarking Alliance which recently stated that ‘the oil and gas sector has made almost no progress towards the Paris Agreement goals since 2021’,” the letter stated.
The NGO noted while some oil and gas companies have made certain commitments around climate change, they are mostly disclosure-oriented rather than action-oriented and are inadequate compared to the emissions reductions required to limit global warming to 1.5°C.
