Active ownership case study: Volkswagen

Schroders co-filed a shareholder resolution in April urging the German carmaker to explain how its lobbying activities help to address climate risks.

What were investors calling for?

The group of investors tabled an amendment to VW’s Articles of Association, the agreed written rules about the running of a company. This was intended to ensure that future sustainability reporting includes an assessment of its lobbying’s impact and alignment with its climate goals.

In February 2022 a group of shareholders had presented VW with a draft amendment to their Articles of Association as a means of embedding a commitment to annual disclosure on their climate policy engagement and governance into their sustainability reporting cycle. VW had verbally declined to do so.

Who led the shareholder resolution?

The filing was led by Sweden’s pensions giant AP7 and the Church of England Pensions Board and advised by the international law firm Hausfeld.

It followed more than three years of shareholder dialogue with VW which have not yielded any significant improvement in the company’s position.

Who else supported it?

The filing group included Swedish pension funds AP2, AP3 and AP4 as well as Denmark’s AkademikerPension. The shareholders’ escalation ahead of VW’s AGM on Thursday 12 May was also supported by Climate Action 100+ engagement lead EOS stewardship services at Federated Hermes.

CA 100+ is an investor-led initiative to ensure the world’s largest corporate greenhouse gas emitters take necessary action on climate change.

What’s the issue?

VW does disclose its trade association memberships, however the company lacks a comprehensive disclosure of how those associations’ lobbying goals and activities align with its own climate goals.

It is felt that without that assessment VW risks impeding progress on its climate transition strategy and reputational damage. By embedding this commitment within its Articles of Association it could position itself as a true leader on the path to a low-carbon transition.

It has been assessed positively on only one of six sub-indicators under section seven of the Climate Action 100+ Net Zero Benchmark 2022, “Climate policy engagement”. The one it does address (7.2b) relates only to disclosure of memberships. 

What happened?

VW rejected the shareholder proposal, which means it will not appear on the ballot at its AGM on Thursday 12 May.

This is the second shareholder proposal on climate lobbying that has been put to VW, with the first being rejected in 2019.

The company rejected the latest shareholder proposal on the basis that they deem it beyond the competence of the general meeting: “The Board of Management alone is responsible for deciding on the content of the non-financial report in accordance with the interests of the company.”

The continued rejection of the investor request is in contrast to many of its peers including Mercedez-Benz and BMW, which have both made recent public commitments to include a review of climate lobbying policies and positions as part of their annual disclosures.

What next and what do our experts say?

The Church of England Pensions Board has said it will vote against two management proposals on the grounds of a lack of governance oversight on net zero aligned lobbying disclosure: The approval of the Board of Management and Supervisory Board’s actions in 2021 (agenda items 3 and 4).

Mark Lacey, Head of Global Resource Equities and Fund Manager, and Carol Storey, Active Ownership Manager, have said:

“We are disappointed that a company leading on so many areas of the low-carbon transition has fallen behind on climate lobbying disclosures. Our decision to co-file reflected our belief that looking at the details of the transition matters. In the last few years, we recognise that Volkswagen has significantly improved its leadership capability on this particular issue, and demonstrated how it is lobbying responsibly in support of ambitious climate policy.”


Church of England press release – Investors challenge Volkswagen on climate lobbying

Climate Action 100+ press release – Climate Action 100+ flagged shareholder votes

IIGCC resources: Climate Action 100+ flagged resolutions: Volkswagen AG (VOW3): Annual General Meeting – Thursday 12 May 2022

Climate Action 100+ Volkswagen AG assessment

Important information

This communication is marketing material. The views and opinions contained herein are those of the named author(s) on this page, and may not necessarily represent views expressed or reflected in other Schroders communications, strategies or funds.

This document is intended to be for information purposes only and it is not intended as promotional material in any respect. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The material is not intended to provide, and should not be relied on for, accounting, legal or tax advice, or investment recommendations. Information herein is believed to be reliable but Schroder Investment Management Ltd (Schroders) does not warrant its completeness or accuracy.

The data has been sourced by Schroders and should be independently verified before further publication or use. No responsibility can be accepted for error of fact or opinion. This does not exclude or restrict any duty or liability that Schroders has to its customers under the Financial Services and Markets Act 2000 (as amended from time to time) or any other regulatory system. Reliance should not be placed on the views and information in the document when taking individual investment and/or strategic decisions.

Past Performance is not a guide to future performance. The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested.  Exchange rate changes may cause the value of any overseas investments to rise or fall.

Any sectors, securities, regions or countries shown above are for illustrative purposes only and are not to be considered a recommendation to buy or sell.

The forecasts included should not be relied upon, are not guaranteed and are provided only as at the date of issue. Our forecasts are based on our own assumptions which may change. Forecasts and assumptions may be affected by external economic or other factors.

Issued by Schroder Unit Trusts Limited, 1 London Wall Place, London EC2Y 5AU. Registered Number 4191730 England. Authorised and regulated by the Financial Conduct Authority.