Q4 | DECEMBER 2021
University Network for Investor Engagement
CLIMATE
Our 2021 Q4 report highlights some of the milestones from client engagements over the past three months. Learn more about ongoing engagements as we prepare for proxy season and welcome aboard new clients for 2022 and beyond.
Table of Contents
NET ZERO COMMITMENTS
Agreement with Scotiabank to accelerate net-zero transition
“The role of bank lending decisions is among the most important, and least well understood levers available to accelerate climate transition,” says Jennifer Story, Associate Director of Climate Advocacy.
Canadian banks have lagged their global peers in terms of their climate action, and have been widely criticized for their continued role in financing high-emitting projects. “In the past year, we have started to see Canadian banks play catch up to their European peers. I am hopeful that their late start will provide Canadian banks an opportunity to move into a leadership position.”
In November, 2021, SHARE filed a shareholder proposal at Scotiabank, on behalf of the Trottier Family Foundation. The Foundation joined SHARE’s engagement program in 2020, and filed a proposal for the first time this year.
The proposal called “to ensure that the financial products and services it provides to the energy sector are aligned with both the Paris Agreement, and the IEA’s 1.5°C climate change scenario requirement.”
We were prepared to take this proposal to a vote – and test whether investors have come to terms with the reality of the IEA’s report” said Anthony Schein, Director of Shareholder Advocacy.
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“In the end, however, the SHARE team and the Trottier Family Foundation saw positive commitments from Scotia, and seized the opportunity to work constructively to accelerate an orderly transition.” Under the terms of the agreement negotiated, the Bank has committed to developing and implementing tools implementing public-facing tools that the bank can use, and investors can see, to measure the carbon risks in its lending portfolio.
The Bank will report publicly to investors on how it is applying these tools in its engagement and client lending practices. The Bank committed to working with SHARE and the Foundation over the course of 2022 as it develops its assessment tools. “Investors have been frustrated in the past by banks’ ‘just trust me’ approach” said Story, referring to banks’ previous assurances that they were having tough conversations with their lending clients about climate risk. “But, Scotia has agreed to pull back the curtain and let investors see whether there is rigour to the approach.”
According to Schein, the agreement provides a road map for the kinds of actions other can take. “When it comes to meeting a 1.5 degree scenario, what matters isn’t just our own direct emissions – but how we leverage our positions to bring down emissions more broadly, through our lending, through our purchasing, through how our products are being used.”
ANALYSIS – OIL WELL CLEAN-UP PROGRAM
Alberta’s oil cleanup program: A cautionary tale for investors and regulators
By Mike Toulch, SHARE and Sharmeen Contractor, Oxfam America
In April 2020, the Government of Canada launched a $1.7 billion fund to clean up abandoned and inactive wells to reduce greenhouse gas (GHG) emissions and create jobs, as part of its emergency response to the COVID-19 pandemic.
Alberta received the majority of the funding – roughly $1 billion – and immediately established the Site Rehabilitation Program (SRP) to administer the funds. Oxfam Canada and the Parkland Institute evaluated Alberta’s roll-out of the program in their report “Not Well Spent” and observed issues with effectiveness, inclusion, and transparency, which should concern investors and policymakers. Some of the report’s findings include:
- The SRP appears to be a bailout for the oil and gas industry. At the time of the report’s publication, $800 million had been disbursed and more than half ($500 million) was allocated to 15 large oil and gas companies, relieving their environmental liabilities and in direct violation of the ‘polluter pays’ principle.
- The effectiveness of the program to achieve emissions reductions was questionable and went unmeasured. Environmental risks did not appear to be a priority in site selection, even though these wells are a significant source of methane emissions.
- Jobs created are non-permanent and in predominantly non-unionized companies. Though Alberta made many publicized attempts to include Indigenous participation, efforts fell short of expectations; Indigenous company participation was significantly low compared to non-Indigenous companies.
- Lack of transparency makes it challenging to assess how funds are spent. Information related to number of sites completed, locations of sites approved for grants, GHG emissions reductions, job creation, and community engagement, especially Indigenous participation is not readily available.
Roundup of Climate-Based Investor Statements
SHARE is often asked to sign investor statements in support of a new set of investor principles or expectations, or asking a specific company to take action on an issue.
Here is a round up of statements signed by SHARE in the fourth quarter of 2021.
Board responsibility for sustainability commitments
In response to an email sent by the ICCR, SHARE has signed on to an investor letter urging the top shareholders in Procter and Gamble (P&G) to oppose the re-election of Angela Braly to the company’s Board of Directors.
This investor letter follows a Green Century proposal filed in 2020 that received 67% support calling on P&G to address supply chain deforestation. Although P&G has released a Forestry Practices Report in response to the proposal, investors remain concerned that P&G fails to address the underlying risks and fundamental issues raised in the initial shareholder proposal. As the chair of P&G’s Governance & Public Responsibility committee, Angela Braly is largely responsible for the company’s failures in this regard.
ISS Treament of Climate Change in Voting Guidelines
SHARE signed on to a climate letter led by Majority Action asking Institutional Shareholder Services (ISS) to make changes to its benchmark proxy guidelines for the 2022 shareholder season to expand and disclose its analysis on company climate performance and whether or not they are in alignment with a 1.5°C scenario. Additionally, the letter asks that ISS incorporate company climate performance into its vote recommendations.
This letter fits within Majority Action’s broader strategy of urging investors to vote against directors at companies that fail to implement plans consistent with limiting global temperature rise to 1.5°C as discussed within their 2021 Climate in the Boardroom report.
Investor Expectations for a Just Transition
SHARE signed on to an ICCR joint statement on investor expectations for the just transition. Labour groups, environmental justice groups, and community-based organizations were consulted early in the process to inform the tone and foundations of the statement.
The statement calls on companies and investors to adopt and advocate for: (1) a foundation for decent work, job benefits, and working conditions; (2) equitable opportunities for quality jobs; (3) investing in impacted communities; (4) transparency and accountability (including with Indigenous People); (5) support for just transition policies at all levels. The statement also directly calls for a racial equity and human rights foundation to underpin just transition principles.
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