Skip to main content
Jul 15, 2021

Say-on-climate proposals used by some to simply appear progressive, SquareWell warns

Say-on-climate issue now ‘one of the most contentious topics’ in 2021 AGM season

A growing number of companies are proactively adopting say-on-climate (SoC) votes, but shareholder advisory firm SquareWell Partners warns that some – particularly in carbon-intensive industries – are doing so in a bid to appear more progressive than their peers.

The idea of an SoC vote was started as a campaign by the Children’s Investment Fund (TCI) in 2019 and has since spread globally. As of June 2021, SquareWell is aware of 32 companies that have submitted (or will submit) an SoC proposal, either management- or shareholder-sponsored, the firm notes.

Additionally, 23 companies have adopted – either voluntarily or following shareholder pressure – the principle of an SoC vote and are subjecting their climate action plans to shareholder scrutiny, adds SquareWell in its new paper on the topic. Its analysis of SoC approaches that have been adopted by companies so far shows, it says, that they ‘vary to a great extent, with some companies putting their climate action plans as a one-off shareholder vote,’ rather than a regular fixture for voting.

Overall, management-sponsored SoC proposals have been supported on average by more than 90 percent of shareholders, says SquareWell, pointing out that only Glencore (UK), France’s Atos and TotalEnergies (formerly Total), S&P (US) and Royal Dutch Shell (UK) saw more than 10 percent dissent (including abstentions) on their climate action plans as of June 2021.


But SquareWell warns that some companies have been using the campaign as a new form of ‘greenwashing.’

‘It is fair to suggest that some of the SoC adopters in carbon-intensive sectors have used the SoC campaign as a defense mechanism against other climate-related shareholder proposals and to appear progressive compared with peers,’ it states.

Squarewell says the onus will now increasingly fall on investors to make sure they do not ‘rubber-stamp’ inadequate climate action plans. ‘Investors should have members of stewardship teams or portfolio managers equipped and able to thoroughly evaluate the rigor of climate action plans, with the help of third parties, if necessary,’ it suggests. ‘With more SoC votes on the way, investors should send a clear signal to companies by using their approval/disapproval vote on both companies’ climate action plans and on director elections.

‘Investors’ voting actions are being put under a microscope, especially at carbon-intensive companies where the stakes are high. Investors’ voting decisions will impact the credibility of their stewardship activities and their own climate narrative, with the potential of being criticized for greenwashing if their actions do not align with their said commitments.’

Indeed, the advisory firm’s analysis highlights diverging asset manager views on the effectiveness of SoC votes, with some pointing to the potential negative impact of such campaigns, including the fact that such votes are advisory rather than binding, concerns that such proposals could shift accountability away from the board and a lack of clear and robust policies in place to adequately assess such proposals.


‘Despite the high level of support management-sponsored SoC proposals have received, some investors have criticized the SoC campaign, for reasons such as its potential to weaken board accountability, the risk of shareholders approving substandard practices and the risk of it jeopardizing future shareholder influence,’ notes Isabella Champion-Sinclair, responsible investment analyst at SquareWell.

‘Some investors, including Calvert Research and Management, consider it premature to put a decarbonization strategy to a vote in 2021 as investors and proxy advisers currently do not have robust policies or qualifications to evaluate or vote on climate action plans,’ SquareWell writes in its analysis.

‘Establishing clear guidelines by both proxy advisers and investors could prevent rubber-stamping on weak climate action plans (the Australasian Centre for Corporate Responsibility in Australia has disclosed how it will judge the credibility of proposed climate action plans). In a webinar hosted by Follow This, TCI’s Chris Hohn also suggested it was important to call out the greenwashing of investors that support plans that do not lead to emissions reductions.’

‘It should also be noted that companies resisting the SoC campaign, or those that create weak climate action plans in the name of SoC, risk future reputational damage, with campaigners, vocal investors and other stakeholders calling out hollow net-zero pledges or inadequate climate action plans,’ Champion-Sinclair warns.


Anna Hirai, SquareWell’s co-head of ESG research, says companies preparing a climate action plan should ‘use the Net-Zero Company Benchmark developed by Climate Action 100+ as well as the TCI SoC guidelines as a checklist for their own climate action plans.’

‘To avoid being criticized for creating a strategy that is lacking, companies must make sure their climate action plans are transparent, based on climate science and in alignment with the Paris Agreement,’ she says. And to address investor concerns, Hirai also advises that companies adopting an SoC vote should disclose publicly what the impact will be on the board.

They should disclose ‘how the board will interpret SoC votes and their course of action in cases of significant shareholder dissent or majority opposition,’ she explains. ‘This shows commitment and accountability, mitigating one of the main criticisms of SoC by investors.’


Garnet Roach

Garnet Roach joined IR Magazine in October 2012, working on both the editorial and research sides of the publication. Prior to entering the world of investor relations, her freelance career covered a broad range of subjects, from technology to...

Senior reporter