Managing 30,000 billion dollars gives you a certain amount of bargaining power. Here is what happens when it is used to persuade companies to change for the better.
US President Donald Trump may believe that climate change is a hoax, but those who manage billions and billions of dollars have fortunately formed a rather different view. And they are beginning to show it through actions. That is the loud and clear message being sent by the campaign Climate Action 100+, which brings together a group of investors who, combined, hold 30,000 billion dollars. And they are using this considerable bargaining power to persuade companies to act on climate, and to do so immediately.
Climate Action 100+ was born in the wake of the One Planet Summit, organised in the French capital by President Emmanuel Macron, together with the United Nations and the World Bank, on the second anniversary of the signing of the historic Paris Agreement on climate. The alliance now counts 280 investors, with a total of 30,000 billion dollars in assets under management. Among them are giants of the calibre of HSBC Global Asset Management (which alone, according to data from last September, manages more than 460 billion dollars) and Legal & General Group (which exceeds one thousand billion dollars).
Their goal? To persuade the hundred most polluting companies on the Planet to radically change the way they operate, aligning themselves with the commitments made under the Paris Agreement. Why should they be listened to? Because shares in these companies are in their portfolios. The fate of companies that turn a blind eye to the challenges of climate, for that matter, has been hinted at in terms that are not even particularly veiled: "Companies whose business models are consistent with the plan established in Paris will find capital far more easily than others," Stephanie Maier of HSBC Global Asset Management explained to Bloomberg.
Read also: Climate Action 100+, ultima chiamata per le cento aziende più inquinanti
The group of investors met last week in Bonn, Germany, to discuss next steps. One of their main objectives is to persuade companies to explain, publicly and in detail, how they intend to adapt to increasingly stringent regulations on climate. There are several concrete ways to apply pressure, as the Bloomberg article notes. Sometimes investors meet with the management of companies; at other times they go so far as to vote against the appointment or renewal of those who do not believe in the climate challenge. Or they divest their capital from fossil fuels, or they submit resolutions at annual shareholder meetings.
Shareholder meetings themselves, the battleground of activist shareholders, are becoming increasingly lively and well-attended. While in the vast majority of cases the interventions of active shareholders serve essentially to flag problems and inconsistencies, gaining media attention, there is no shortage of genuine surprises. As happened on 9 May last at the meeting of Kinder Morgan, one of the largest energy infrastructure companies in North America and the same company behind the mega-pipeline approved by Canadian Prime Minister Justin Trudeau. As reported by the responsible investor coalition Ceres, no fewer than two resolutions received a historic "yes".
The first calls on the company to carry out a projection to assess whether (and how) its business model can withstand an increase in average global temperatures of two degrees centigrade. It is something very similar to what was achieved last year at the ExxonMobil shareholder meeting. The second achievement, meanwhile, is that Kinder Morgan will from now on publish an annual sustainability report covering environmental, social and governance (Esg) issues.
These are many small steps, but until a few years ago they would have seemed unattainable. Now they serve as a signal and a warning, demonstrating that every company — large or small, forward-thinking or sceptical — will have to face the challenges imposed by the Planet.
