20 Jun 2023 4 min read

The big vote question this proxy season: shareholder resolutions on climate

By Jeannette Andrews , Karoline Herms , Dror Elkayam

In this blog, we set out our approach to voting on climate-related shareholder resolutions, and provide some examples of the types of resolutions that are being filed with increasing frequency.


How LGIM considers climate-related shareholder proposals

We will generally support shareholder resolutions on climate when these are:

  • Requesting ‘say on climate’ vote structures
  • Requesting additional disclosure and reporting to evidence the company’s alignment to published net-zero goals and interim targets
  • Requesting disclosures or changes aligned to our minimum expectations of climate-transition plans, or our sector-specific expectations as set out in our Climate Impact Pledge Sector Guides

We carefully assess most climate-related shareholder resolutions. While considering the asks from the ‘principle’ point of view, and gauging their alignment with our detailed sector expectations, we pay close attention to the specific details and restrictions proposed by these resolutions.

Below, we highlight some of the climate-related shareholder resolutions we are most commonly asked about by our clients and stakeholders, and outline our approach to voting on these. 

Fossil fuel financing and expansion

As investors advocating for a just and orderly energy transition that satisfies all aspects of the energy ‘trilemma’ (energy security, affordability and sustainability), we continue to emphasise that company boards need to closely consider their strategy and risk appetite for fossil fuels into the near future. 

We continue to see shareholder resolutions being filed that seek to halt the financing or production of new fossil fuel projects. In considering these, we particularly look at:

  • Types of fossil fuels. We support the immediate halt to financing of thermal coal. However, where a shareholder resolution groups all commodities together without differentiating between thermal coal and other extractives, the resolution is less likely to gain LGIM’s support
  • ‘Phase-down’ versus ‘phase-out’. We believe the term ‘phase-down’ – meaning to gradually lessen dependency on fossil fuels, primarily oil and gas, as the global economy decarbonises – leaves space for continued consumption into 2050 and beyond in line with the IEA’s position that oil and gas will still play a role in the economy even under the most stringent scenario of 1.5o We are therefore more likely to support this type of proposal
  • Resolutions allowing boards to devise their own time-bound energy transition strategy are more likely to be supportable

Scope 3 targets

We recently released a thought piece on the importance of Scope 3 in the climate transition. We will generally support resolutions that seek to expand and improve the level of Scope 3 disclosure and target-setting.

However, we have some concerns about requiring extractive companies to set short- and/or medium-term absolute Scope 3 targets. Our initial analysis suggests such companies would probably only be able to achieve these objectives by selling or winding down a significant proportion of their business. We remain generally unconvinced that the sale of high-carbon assets to alternative owners without appropriate decarbonisation restrictions is the best way to achieve a tangible change in real-world carbon emissions in a just and sustained way.

Our stance is being kept under dynamic review as we look towards 2024.

Nuclear power

We are seeing nuclear-power-related shareholder resolutions being classified as climate-related resolutions by service providers and key LGIM stakeholders. LGIM believes there is a need for nuclear within the energy mix, subject to economic conditions and various expectations on how environmental and social impacts are managed.

Anti-climate shareholder resolutions

This year, we have seen an increasing number of resolutions that on the surface purport to be supportive of the energy transition but when considered in depth are actually designed to promote anti-climate views. We do not support such resolutions.

Wording of shareholder resolutions

We continue to see climate-related shareholder resolutions globally that are poorly worded, with either requests that are so vague that it is unclear what the proponents’ expectations are, putting potentially broad restrictions on companies; or very prescriptive requirements over short timeframes to change business strategy. Such proposals are unlikely to gain our support.

Other considerations

We will continue to take a nuanced and company-specific view on how to vote when it comes to climate-related shareholder resolutions. In addition to considering the categories set out above, our voting decision may also take account of:

  • Whether we consider a company to be a ‘laggard’ in its climate plans (as assessed using LGIM’s Climate Impact Pledge ratings and engagement activity)
  • The differentiating factor of binding and non-binding resolutions
  • Our own historical engagement activity

Timeline of LGIM’s voting activity on climate change

  • 2020: LGIM publishes sector-specific net-zero expectations under the Climate Impact Pledge
  • 2021: LGIM calls on companies to propose a ‘say on climate vote’
  • 2022: We publish our criteria for supporting management-proposed climate transition plans
  • 2022: We voted in support of 78% shareholder resolutions on climate and opposed roughly two-third of management-proposed climate transition plans
  • 2023: We have seen an increased number of shareholder-proposed climate resolutions, especially in the US, but a declining level of support from the market

Transparent in our voting

To learn more, see our 2023 and 2022 pre-declaration blogs, and our past voting disclosures.

Jeannette Andrews

Senior Global ESG Manager

Jeannette has responsibility for implementing LGIM's corporate-governance strategy across engagement, integration, voting and the development of ESG products. Jeannette represents LGIM on the UK's Company Reporting & Auditing Group. Jeannette joined LGIM in 2015 from USS Investment Management where she held the title of Senior Analyst, Responsible Investment. Jeannette joined USS in 2008, dividing her time between developing and implementing USS's stewardship policies and working as an equity analyst where she was responsible for researching and making stock recommendations for a £420 million global equity income portfolio. Prior to that, she worked for five years as a governance analyst at Manifest Information Services, a proxy voting service provider. Jeannette graduated from Anglia Ruskin University in 2008 and holds the CFA and CAIA charterships. In 2014 Jeannette was recognised by Financial News as one of the 40 under 40 Rising Stars of Asset Management.

Jeannette Andrews

Karoline Herms

Senior Global ESG Manager, Investment Stewardship

Karoline is part of LGIM's Investment Stewardship team as sector lead for the Financials industry, as well as sharing specialist responsibility for LGIM’s responses to company engagement request on executive pay proposals. Karoline joined LGIM in 2020 from Boudicca, a specialist proxy solicitation and corporate governance advisory firm, where she was Senior Corporate Governance Consultant advising both investors and corporates on best practice, shareholder voting and engagement during her four-year stay. Prior to that, she managed UK research teams at the Investment Association and Institutional Shareholder Services (ISS), involved in the analysis and engagement on company proposals in the areas of director elections, pay, M&A and activism, and company legislation. Karoline holds a degree in Business Studies and an MA in Corporate Governance, as well as having graduated with ICSA.

Karoline Herms

Dror Elkayam

Senior Global ESG Manager, Investment Stewardship

Dror joined the investment stewardship team in 2021 as a Global ESG Analyst, leading engagements with the energy and mining sectors, as well as the development of LGIM’s ESG scores. Dror Joined LGIM from Georgeson, a boutique corporate advisory firm, where he acted as an adviser to investors and corporates on shareholder engagement strategies, in preparation for general meetings, proxy contests and M&A in the UK and globally. Prior to that, Dror had spent nearly five years at Bloomberg as an ESG specialist. Dror graduated from Bar-Ilan University in 2012 with a BA in Economics and Business Management and obtained the CFA chartership in 2019.

Dror Elkayam