Peak season 2023: a global breakdown
May 26, 2023
Following on from an INSIGHT INTO PEAK 2023 this blog will bring our focus away from the United States and look at what shareholders are valuing and proposing elsewhere in the world. Therefore, this blog’s focus areas will be the United Kingdom, Europe, and the Rest of the World. The Common theme in these areas is once again heavily dominated by Sustainability as investors look to build a sustainable future and hold companies accountable for their actions.
United Kingdom
The standout proposal in the United Kingdom this proxy season has once again been the filing of climate proposals at BP plc and Shell plc by activist investor group ‘Follow This’. The activist group has proposed very similar proposals for numerous years now at both major oil companies, and 2021 saw the highest number of favourable votes for the proposal at both companies. In short, the proposal aims to ensure the oil & gas majors set more ambitious targets to reduce their emissions and align their business strategies with the goals of the Paris Agreement. The activist group are a firm believer that the oil industry can make or break the Paris Agreement and thus it is imperative that shareholders push these companies to go green.
The proposal at BP has already been voted on and witnessed a small increase in favourable votes from 2022, and it is anticipated that Shell could follow suit. BP came under extra scrutiny after reducing its ambition to cut emissions from fuels which are sold to customers to 20-30% by 2030, from 35%-40%. Similarly, Shell has come under fire for a lack of quantitative short-and medium-term targets to cut the emissions from the products it sells (scope 3 emissions) even though these emissions account for more than 90% of the company’s overall emissions.
Data note: Shell’s 2023 AGM has yet to vote, and the 2019 proposal was withdrawn ahead of the AGM. No proposal filed at BP’s 2016, 2017, 2018 & 2020 AGMs.
Europe.
Across Europe, there has been an array of shareholder resolution trends so far this AGM season. Early in the 2023 season, a heavy focus was seen on Human Rights, particularly in Denmark where Carlsberg, FLSmidth & A.P. Møller – Mærsk all received a proposal from AkademikerPension and LD Fonde. The proposal focused on ensuring the companies communicate their efforts on human rights and labour rights in accordance with the United Nations Guiding Principles on Business and Human Rights (UNGPs). The proposal however received mixed results with FLSmidth’s Board of Directors recommending a vote in favour with the other two Boards recommending shareholders to vote against, demonstrating conflicting opinions of the proponent’s statement. All three vote results ran in parallel with Board’s recommendations indicating the Board’s recommendation had a significant sway on how shareholders voted.
In Europe, Nordic companies continue to receive the highest number of shareholder proposals (please see the graph below). Within the banking industry, companies like Danske Bank, Skandinaviska Enskilda Banken AB, and Swedbank all encountered activism centred around the financing of fossil fuels. The primary focus of the shareholder proposals at these AGMs was to ensure that the banks’ strategies aligned with the Paris Climate Agreement.
Throughout the 2023 proxy season, a diverse range of other proposals related to environmental, social, and governance (ESG) issues were observed. However, two noteworthy examples stood out. Equinor ASA faced shareholder proposals urging the company to consider ceasing its activities in fossil fuel exploration, driven by escalating concerns about the climate crisis. Hennes & Mauritz AB witnessed shareholders advocating for ethical business practices, including the use of organic cotton and improved animal welfare standards, specifically scrutinizing the slaughter methods employed by the Company.
Rest of the World
Shareholder activism has remained relatively quiet in the Rest of the World as we await the Australian and Japanese seasons to gain momentum. The upcoming Japanese and Australian AGMs seasons are scheduled for June and October/November, respectively, and will likely bring more activity around shareholder proposals. Nevertheless, two Australian companies, Santos Ltd and Woodside Energy Group Ltd, have already faced climate-focused proposals this year. These proposals sought enhanced reporting on how capital allocation to oil and gas assets would align with the goal of achieving global net-zero energy emissions by 2050.
While the first part of the proposal did not pass and the second part was a contingent advisory resolution, resulting in both proposals being deemed not applicable, it is worth noting that approximately 18.18% and 14.99% of votes were in favour of the proposals for Santos and Woodside, respectively. Additionally, in 2022, both companies faced significant dissent regarding their climate reports, with only 59.65% and 50.32% of votes cast in favour of Santos and Woodside’s say on climate votes, respectively, highlighting shareholder dissatisfaction. Both companies also experienced increased dissent on director elections at their 2023 AGMs, indicating shareholders’ desire to hold individual directors accountable for climate strategy.
Looking ahead, Japanese banks and energy companies will face scrutiny at their 2023 AGMs. Japan’s three largest banks, Mitsubishi UFJ Financial Group, Sumitomo Mitsui Financial Group, and Mizuho Financial Group, have all been targeted with climate proposals. Activist groups, including Australia’s Market Forces and Japan’s Kiko Network, have put forth these banking proposals and have further suggested three additional proposals in the energy industry. Mitsubishi Corporation, Tokyo Electric Power Company Holdings, and Chubu Electric Power Co are all under pressure to disclose how their capital expenditure aligns with a net-zero pathway by 2050. While climate proposals are relatively new in Japan, with the first one proposed in 2020 at Mizuho Kiko Network, we can expect them to become increasingly prevalent as shareholders continue to prioritize a sustainable future.
Last Updated: 26 May 2023