A climate breakthrough for investor accountability

Ben N. Ratner\

By Ben N. Ratner and Tom Murray

In a key moment of awakening for the oil and gas industry, investors voted for climate and the clean energy transition, causing a shakeup on the board of ExxonMobil.

This moment is not just about Exxon or even about energy companies. It is about major asset managers and other influential investors stepping up, making their voices heard and walking the talk — connecting the dots between their climate rhetoric and their actions.

Credit goes to BlackRock, Legal and General, CalSTRS, CalPERS, New York State Common Retirement Fund and others for aligning their proxy voting for directors with their climate pledges.

This kind of mainstream investor support for climate action is a game changer in the battle to urgently reduce emissions, minimize financial risk and protect communities. The investor message is clear — climate change is a board-level priority.

Climate action brings financial rewards

The business case for the clean energy transition has never been clearer.

Massive shifts in consumer preferences, technology innovation and government action are transforming the playing field, and market leaders must rise to new challenges and opportunities.

The Exxon vote sends the unmistakable signal that climate action is a financial imperative — and leading investors know it.

It is no longer tenable for high-impact companies like Exxon to resist calls to align their business strategies with a decarbonizing economy. Investor confidence is flagging for companies that pursue business-as-usual investment strategies that endanger the safety not just of the climate, but of the dividends that millions of people depend on.

The simple fact is that new products and technologies entering the market have no use for oil and gas.

4 rapid-fire events of note

Some key recent developments:

  1. The International Energy Agency on May 18 issued an urgent call for no new oilfield development and rapid transition away from petroleum-powered transportation.
  2. A day later, Ford unveiled its new all-electric F-150 Lightning pickup truck — the first zero-emission version of America’s most popular vehicle.
  3. A Dutch court ruled that Royal Dutch Shell must slash greenhouse gas emissions much further and faster than planned, 45% by 2030.
  4. And the resounding shareholder vote for change at Exxon, just as investors directed Chevron to set climate targets for its products.

Major corporations have routinely expected shareholders to follow management’s lead. Those days are gone. Shareholders with long-term financial goals are stepping in to ensure that executives don’t prioritize the next quarter at the expense of the next quarter century.

Going even bolder on climate

Investor influence is a notable shift in leveraging the private sector in the climate fight, and one worth celebrating. But there’s more that can be done:

  • The largest asset managers have a troubled track record of voting for climate shareholder resolutions — doing so must become the norm, not an exception. This could be the year.
  • Net zero pledges are only meaningful when backed by emission targets and timelines for clients — especially in carbon-intensive sectors — that ensure progress in the near term.
  • And walking the talk on climate must include supporting public policy, a key ingredient to help companies decarbonize and financiers meet their pledges while managing risk.

With LGIM leading the pack, and BlackRock and now Vanguard picking up pace, asset managers could turn this breakthrough week for investor influence into a turning point that accelerates the shift to a net zero future — one that is clean and prosperous for all.

This post, published on May 28, 2021, was co-authored by Ben N. Ratner, senior director of EDF+Business, and Tom Murray, senior vice president of EDF+Business.

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