AGM 2024 MEMO: Climate Trends and Votes to Watch

April 19, 2024

Each April and May, Wall Street banks and insurance companies host annual general meetings (AGMs). AGMs are an opportunity for shareholders to vote for or against corporate leadership and on critical resolutions on a range of issues including climate change and just transition. The Sierra Club delivered the signatures of over 7,000 people to their state pension fund staff and Boards of trustees requesting their support for the resolutions and vote-no campaigns described below. The petition can be found here, and our slate of flagged votes here.

• Learn more: "The Most Important Climate Elections You've Never Heard Of"

This AGM season, shareholders are pushing financial institutions and other corporate polluters to increase climate-related disclosures and align their business strategies with pathways to reach climate goals.

According to the International Energy Agency, in order to meet the goals set out in the Paris Agreement - net-zero emissions by 2050 and limit global temperature rise to 1.5C - development of new fossil fuel projects and associated infrastructure must end. Accordingly, financial institutions must stop financing and facilitating this fossil fuel expansion.

In the fight for a livable planet, shareholder votes are some of the most important elections that most people have never heard of. And while not everyone gets to vote, everyday people rely on asset managers and pension funds to steward their savings. Shareholder advocacy groups make sure that big investors are held accountable and use their power to vote in support of climate action.

Key climate-related themes and votes to watch during the 2024 AGM season:

1. Vote AGAINST board members at financial institutions failing to adopt 1.5-degree aligned business plans.

Why it matters

The board plays a critical role in determining the direction of the company, including whether to prioritize emissions reduction strategies, incorporating just transition frameworks, or striving to address environmental justice concerns. Director votes happen annually, allowing investors to weigh in on critical issues, even if a shareholder resolution on the same topic hasn't been filed. Investors have increasingly been turning to director votes as an important corporate governance tool, including at financial institutions, in recognition of the important role that banks and asset managers play in the low-carbon transition.

Key votes to watch

• At US banks, Boards of Directors are facing Vote No campaigns at Goldman Sachs, JPMorgan Chase, and Bank of America, for either failing to have oil & gas exclusion policies or failing to set absolute emissions targets for financed emissions in the oil & gas sector.
• At US asset managers, investors are looking to vote against the appointment of Amin Nasser, present and CEO of Saudi Arabian oil company Saudi Aramco, to the BlackRockboard.
• At US Insurance Companies, Board Directors are facing Vote No campaigns at Chubb, The Hartford, Travelers, and W.R. Berkleyfor failing to disclose insurance-associated (scope 3) emissions.

1. Vote AGAINST board members at 1.5-degree misaligned oil & gas and utility companies

Why it matters

The board plays a critical role in determining the direction of the company, including whether to prioritize emissions reduction strategies, incorporating just transition frameworks, or striving to address environmental justice concerns. Director votes happen annually, allowing investors to weigh in on critical issues, even if a shareholder resolution on the same topic hasn't been filed.

Key votes to watch

• Investors recommend voting AGAINST the entire Board of Directors at Oil & Gas companies that do NOT have a medium-term GHG reduction target that covers at least 95% of its scope 1 and 2 emissions and relevant scope 3 emissions. Targeted companies include ExxonMobil, ConocoPhillips, and Occidental Petroleum.
• Directors at oil & gas companies and utilities that are otherwise 1.5 C misaligned, including due to poor policy engagement scores, are facing NO votes against relevant committee chairs at Chevron, Berkshire Hathaway, NRG Energy, Southern Company, WEC Energy Group, Dominion Energy, Duke Energy, First Energy, and PPL.

1. Vote YES for Human Rights, Indigenous Rights, and Environmental Justice

Why it matters

While the "E", or environment, is often highlighted in ESG, the social side of corporate governance is also a key issue for company risk exposure, especially as global goals and corporate goals orient increasingly toward not only a decarbonization strategy but a just transition. Adopting policies to address social risks is the first step in corporate governance, but the implementation of those policies is also of interest to investors. Evaluating the impact and efficacy of social policies is therefore critical information for investors. Resolutions are asking the companies to report on the efficacy of existing Free, Prior, and Informed Consent (FPIC) policies and to report on the Environmental Justice (EJ) impacts of financing and underwriting in the energy and power sectors.

Key votes to watch

• The Sierra Club Foundation filed an environmental justice impact reporting resolution at Goldman Sachs.
• Resolutions on respecting Indigenous people's Free, Prior, and Informed Consent(FPIC) have been filed at JPMorgan Chase, Citigroup, Travelers, and Wells Fargo.

1. Vote YES for Responsible Stewardship

Why it matters

Many financial institutions have touted stewardship as a central tool in hitting their net-zero commitments. In addition, an increasing number of clients are interested in ESG investments, including investment products labeled as "climate-safe" and "decarbonization" or "transition" oriented. For financial institutions to meet their commitments to shareholders and clients, and to stay relevant in a changing investment environment, they must accelerate stewardship efforts on climate.

Key votes to watch

• Resolutions requesting reporting on proxy voting (mis)alignment with client values have been filed at Goldman Sachs, State Street, JPMorgan Chase,and BlackRock, while Bank of America, and Citigroupface resolutions on allowing custom proxy voting options for clients.
• The Sierra Club Foundation filed a resolution seeking a report "specifying whether and how BlackRockcould use stewardship (other than proxy voting policies) to better address clients' demands to go beyond disclosure to effectuate real-world decarbonization."
• Resolutions requesting reporting on ESG proxy voting have been filed at JPMorgan Chase, State Street, and BlackRock

1. Vote YES for Climate Disclosures & Target Setting

Why it matters

As climate risk, including transition risk, grows, investors need relevant information to understand how companies are (or aren't) preparing for these risks. Climate-related disclosures are therefore increasingly important and decision-useful information for responsible investors. Climate-related disclosure resolutions are not new and continue to be a foundational part of stewardship while target-setting resolutions reflect the urgency of decarbonizing the economy.

Key votes to watch

• Resolutions requesting disclosure of the ratio of clean to fossil energy were filed at Morgan Stanley, Bank of America, and Goldman Sachs. Similar proposals were withdrawn for commitments at Citigroupand JPMorgan Chase.
• Chubband Travelerswere both asked to measure & disclose greenhouse gas emissions associated with underwriting.
• Investors continue this year to request companies set medium or long-term carbon emissions reduction targets or adopt transition plans. Such resolutions have been filed at AIG, DTE Energy, Southern Company, Berkshire Hathaway,and CenterPoint Energy.

1. Vote YES for Lobbying Disclosures

Why it matters

Investors have long been asking companies for greater disclosure of corporate political spending and lobbying, as investors recognize the role that public policy plays in effectively responding to climate changeand, increasingly, as setting the stage for incentives for a decarbonized economy Corporate activities to influence public policy are a critical piece of information to help investors understand if companies' political activity is in line with stated climate goals.

Key votes to watch

• Resolutions requesting lobbying disclosures: Edison International, Capital One, Morgan Stanley, Goldman Sachs, Wells Fargo, Bank of New York Mellon, and Bank of America.
• Some resolutions ask for disclosure of the alignment of the company's lobbying practices with the Paris Agreement. These resolutions were filed at Wells Fargoand American Express.

For additional information on these resolutions and shareholder meeting dates, please see Proxy Preview.

Trends to Watch this AGM Season

This year will see several resolutions calling for greater disclosure. Transparent disclosure on ESG issues, including climate, is critical to ensure investors have the information they need in order to make prudent investment and stewardship decisions. This is a change from the last several years, where investors filed several resolutions requesting stronger policies and targets. This is partly in response to the political environment created by the so-called "anti-ESG" movement, which had a chilling effect on support for these types of resolutions last year. Larger asset managers have thus far been unwilling to support more action-oriented resolutions, and the SEC has blocked several others.

This should not be taken to mean that investors do not support actions that go beyond disclosure - in fact, investors agree that disclosure is only one part of risk management, and it is still necessary for companies to tailor their business strategies to respond to emerging risks, including climate change. Disclosure-focused asks should be seen as the floor, not the ceiling, of what should be expected from these companies. Ambitious, science-aligned emissions reduction targets, policies, and transition plans are necessary components of robust business strategies.

Shareholder Resolution Success

Votes represent not just moral support for an issue - they represent capital and power. Even a 10% vote total might not seem like a lot, but it represents a significant amount of capital pushing for change and dissent from board recommendations.

A System Set Up to Fail

AGMs at financial institutions represent a unique instance of conflicts of interest. The largest shareholders of major banks, such as JPMorgan Chase and Goldman Sachs, are the major asset managers, like BlackRock and Vanguard. In turn, the asset management arms of these same banks own massive shares in the major asset managers. The results are thus often obvious - these companies rarely vote against each other, even when the risks of inaction are increasingly apparent. But as fiduciaries, they should prioritize their clients' interests first, not staying in the good graces of their peers on Wall Street.

Climate Change Poses Systemic Risks to the Economy

Climate change poses a systemic risk to financial markets and is expected to have unprecedented impacts on the global economy. Investors have a responsibility to consider these risks in making not only investment decisions, but also decisions regarding their stewardship strategy. That is to say, investors' responsibility on climate extends beyond capital allocation decisions - they must be active stewards, holding portfolio companies accountable and pushing them to align their business with broader climate goals and deliver emissions reductions in the real economy. This year, it is as critical as ever for investors to support resolutions that encourage a comprehensive approach to the management of acute and systemic climate risk.

About the Sierra Club

The Sierra Club is America's largest and most influential grassroots environmental organization, with millions of members and supporters. In addition to protecting every person's right to get outdoors and access the healing power of nature, the Sierra Club works to promote clean energy, safeguard the health of our communities, protect wildlife, and preserve our remaining wild places through grassroots activism, public education, lobbying, and legal action. For more information, visit www.sierraclub.org.

Fossil Free Finance