Rubber stamps discarded as AGM season approaches

Remuneration and climate change-related policy will be under the microscope

With annual general meeting season just around the corner, investment managers are ready to use their powers to oppose non-climate friendly policies, including votes against the reappointment of directors, Michiel van Esch, an engagement specialist in Robeco’s active ownership department, told our sister publication Expert Investor.

He said investors with their own mandates to decarbonise portfolios are increasingly declining to ‘rubber stamp’ normally routine AGM business.

“For companies that are poorly addressing climate risk, we will also hold the board accountable by voting against either the chairman of the board, the chairman of the sustainability committee and the report and accounts,” Van Esch said.

Eszter Vitorino, senior adviser, impact & sustainable investment at Kempen Capital Management, takes a similar line.

“Company boards should be accountable for the implementation of ambitious policies and targets around relevant risks, including climate change. We are increasingly holding board committee chairs responsible for negligence of climate risks through our voting decisions. We also vote on shareholder proposals in alignment with our 2020 climate change policy.”

Generally supportive

Robeco has developed a framework to assess where it supports shareholder resolutions on climate change mitigation and where it doesn’t.

“But it continues to be a moving target, as the expectations for companies to decarbonise are becoming more demanding,” Van Esch explained.

One way that investors can seek change, he adds, is through shareholder resolutions asking for some aspect of the company’s business to be improved. If enough shareholders support the resolution, the company comes under pressure to adopt it.

“We voted in favour of 70% of environment-related shareholder proposals last year, since we are generally very supportive of shareholders using their rights to drive progress on climate,” Van Esch said. “But there are some conditions for our support.”

“We would normally support any resolution asking for risk mitigation analysis, a request for a strategy on climate, and any reporting based on the guidelines from the Task Force for Climate-Related Financial Disclosures.”

However, he stressed proposals should be aimed at supporting a company in taking its next steps in the climate transition.

Proposals that seek to ban the use of so-called transition fuels, or in certain conditions would emphasise an absolute target over an intensity target, could actually be counter-productive.

Company-led initiatives

Although some companies might require persuasion to adopt climate-friendly practices, many companies deserve praise for taking their own initiative in decarbonising, according to Van Esch.

“When considering a resolution, we also take a company’s own performance and plans into account, including its responsiveness to engagement, the concreteness of its climate programme, and quality of reporting.”

He added that, for companies that do very well on these aspects, their own plan actually might be better than what is proposed via a shareholder request.

Vitorino at Kempen agrees that, in many instances, companies are progressing positively and investor engagement helps this along – but in cases where engagement doesn’t work and companies are unresponsive, the portfolio manager should be quick to act.

“In addition to engaging with companies directly and collaboratively on their climate change-related policies and responsibilities, we also may consider voting against some or all board members if significantly lagging on climate change mitigation.

“An example of this is our vote in 2019 and 2020 at the ExxonMobil AGM, where we have ultimately exited our position in late 2020 due to lack of the company’s responsiveness and progress on this issue.”

According to Vitorino, many of the largest emitters are setting greenhouse gas emission reduction targets with various degrees of detail in their roadmaps towards these targets.

“While the devil is in the detail, there is definitely progress on the corporate commitment side. In the upcoming voting season, having clarity on who is accountable for climate change-related goals and how well they are doing on measuring and communicating their progress, will definitely be an important factor.”

David Czupryna, head of ESG development at Candriam, agrees with the ‘devil in the detail’ point.

“Investors have been applying pressure on companies to take firm commitments to decarbonise. It is essential for investors to scrutinise any such commitment by companies. The ‘climate devil’ is in the carbon neutrality pledges details. There are many ways for a company to aim achieving carbon neutrality, but not all of them have the same success or credibility.”

He adds: “Investors must ensure that any such commitment covers the entirety of the company’s activities and value chain. It sounds trivial, but some companies have taken a carbon neutrality pledge only for some of their activities, such as their European operations. Since climate change is a global phenomenon and a molecule of carbon dioxide emitted in China has the same impact in Europe, partial commitments do not help.”


There is always plenty of attention for remuneration plans, but in the 2021 AGM season (much like last year) there are a couple factors that are going to make it more interesting.

Van Esch elaborated: “First of all, there will be much more engagement with EU companies because of the amendment to the Shareholder Rights Directive (SRD II) requiring more frequent shareholder approval of compensation plans. Our engagement on executive remuneration is going to be closely aligned with our expectations when we vote on these topics.”

He concluded: “Companies that do not meet investor expectations on remuneration will probably have to do much more consultation on the topic in the coming years – we already see that happening now.”

Caroline Le Meaux, head of ESG research, engagement, and voting policy at Amundi, believes executive remuneration remains a prominent issue and in 2020 Amundi voted against executive compensation plans that did not contain ESG indicators, resulting in 31% of negative votes.

“We expect executive compensation to be in line with financial and sustainable performance trends and at an acceptable level to market benchmarks. For companies belonging to the energy sector, we think climate criteria must be included in the variable remuneration metrics.

“Ahead of AGM Season, Yves Perrier, Amundi’s CEO, sent a letter to 500 CEOs and chairpersons of internationally listed companies which sent a clear signal to companies about our position and willingness to vote against management teams who are failing to deliver and are unwilling to communicate.”

Looking to the year ahead, Amundi’s focus will be to engage with companies, asking them to declare an alignment objective with the Paris Agreement under the Science-Based Targets framework.

“Greater transparency on emissions reduction strategies is the most valuable tool to help us understand how companies are taking effective action to prepare for all potential climate scenarios,” Le Meaux said.

In association with our sister publications, ESG Clarity recently launched a Campaign for Better Governance.

It will see us shine a spotlight on investment companies as well as the businesses in which they invest.

Full details can be found here.


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...