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Dec 02, 2020

TCI goes global with ‘say on climate’ campaign

Hundreds of companies will be targeted over the next two years, hedge fund says

The Children’s Investment Fund (TCI) has significantly expanded its ‘say on climate’ campaign, with resolutions filed at several US-listed companies and plans to target ‘hundreds’ more.

The hedge fund, managed by Sir Christopher Hohn, will also focus on companies in Canada, the UK and continental Europe as it seeks to push management into more urgent action over global warming. 

On a recent webinar, Hohn revealed that his firm had filed resolutions at seven US-listed issuers: Moody’s Corp, S&P Global, Union Pacific Railroad, Charter Communications, Alphabet, Canadian Pacific Railway and Canadian National. 

The resolutions call for companies to disclose annually their greenhouse gas emissions, produce a plan to manage those emissions and hold an annual advisory vote on the plan. Hohn said it was TCI’s ESG policy to file the resolutions ‘wherever we have the votes.’ 

‘I’ve had discussions with the CEO and CFO of Moody’s, which we’ve had almost every Friday for an hour for the last three weeks,’ he said. ‘It’s our clear expectation that they will support the resolution, embrace it and say it is a good thing. And we believe S&P Global will also support it.’

Speaking to Corporate Secretary sister publication IR Magazine, an S&P Global spokesperson says: 'TCI contacted us about their proposal and we continue to engage with them... The company has already begun aligning its strategy to mitigate current and long-term risks and is exploring setting a net zero carbon emissions target.'

Moody’s was unavailable for comment due to the Thanksgiving holiday.

Hohn is encouraging companies to voluntarily propose a say-on-climate vote. But he added that the main way he expects the proposals to be adopted is through investors and NGOs filing resolutions at annual meetings.

The campaign is being co-ordinated by Children’s Investment Fund Foundation (CIFF), the hedge fund’s philanthropic arm, and will rapidly expand over the next two years to target numerous companies.

CIFF is 'working with our grantee partners to file, first in this 2021 season, another set of resolutions in Europe, the UK and the US,’ Sonia Medina, executive director of climate change at CIFF, said on the webinar.

‘In addition, we are gearing up a much bigger wave of these resolutions for the 2022 AGM season [focused on] the S&P 500, where hundreds of major companies globally will find this resolution on their ballot.’

Earlier this year, Spanish airports operator Aena became the first company in the world to adopt an annual shareholder vote on its climate action plan, following pressure from TCI.

The hedge fund argues that climate-plan votes offer a crucial way for shareholders to hold companies to account and are similar to the say-on-pay votes already available in many markets.

Some investors have voiced reservations, however. BlackRock, the world’s largest asset manager, supported the resolution at Aena but said it is ‘mindful of a concern that this kind of say on climate could shift accountability from boards to investors.’

In a voting bulletin, the institutional investor said it would continue to vote against directors when it felt companies had not lived up to expectations. 

Hohn addressed this issue on the webinar, saying climate-plan votes ‘shouldn’t be seen as mutually exclusive with voting against directors. Nothing stops you voting against directors as well as the plan.’

He also dismissed concerns that some investors may struggle to assess climate strategies. He said a whole industry is being created to assist asset managers in this area, while investment firms are building out internal sustainability teams. 

‘It’s becoming a critical part of an investor’s job,’ Hohn said. ‘Maybe you need to change your asset manager if you think it is not qualified.’