Active ownership blog: 2024 voting season spotlight
Voting at shareholder meetings is part of being an active owner. In this blog we share some examples of how we plan to vote on shareholder resolutions.
Autheurs
We use our rights as shareholders to vote at Annual General Meetings (AGMs) to hold companies to account and influence change where needed. We view this as part of our responsibility to ensure votes are cast in the best interests of clients and with the aim of enhancing investment returns. Through this blog, we explain how we plan to vote on a variety of shareholder resolutions. Although sustainability-related shareholder resolutions tend to be more frequently filed in the US, we engage companies globally on sustainability-related topics.
As Kimberly Lewis, Head of Active Ownership, explains: “As a large shareholder of many businesses, Schroders cannot treat every shareholder resolution on climate change, for example, as a statement of our general stance on that issue. We think about the resolution in the context of the company and our engagements with it. Is this resolution adding value and is it really the best way to address the issue for that company?”
Our Engagement Blueprint sets out our guiding principles around active ownership, including our approach to shareholder resolutions. During the voting season between March and June, be sure to check back for regular updates on how we are voting and why.
27 June: How we will vote on living wages at Kroger
On 27 June shareholders of Kroger, the American food retailer, will vote on a shareholder resolution asking the board and management to "exercise their discretion to establish Company wage policies that are consistent with fiduciary duties and reasonably designed to provide workers with the minimum earnings necessary to meet a family's basic needs, because Company compensation practices that fail to provide a living wage are harmful to the economy and therefore to the returns of diversified shareholders".
After examining this proposal, we have decided to vote For based on the analysis below:
1. Is the resolution aligned to our Blueprint?
Yes, under the human capital management theme we ask companies to assess the financial wellness of their workforce to understand how they can support workers. We suggest one such measure could be disclosing the living wage deficit or an equivalent metric. We believe paying a living wage is an important way in which companies can attract and retain talent, and can in turn provide businesses with a competitive advantage and boost performance.
2. Is a shareholder resolution the best way to address the issue?
Yes, we believe that the proponent provides sufficient discretion and flexibility to the company's management to establish living wage policies, which importantly, are "consistent with fiduciary duties". We therefore do not believe the proposal veers into micromanagement, but rather encourages management to design wage policies which meet a family's basic needs, which when carefully considered and designed can help strengthen the business and benefit the company’s shareholders and wider stakeholders. Given the variation in state-level minimum wages and the cost of living in the regions in which the company operates, we would expect wage levels to differ by geography, however we believe that establishing policies which consider a family’s basic needs can help the company navigate the needs of its workforce alongside its other key stakeholders.
3. Does the resolution add value to what the company is already doing?
Yes, although the company has raised wages in recent years, it has also has recently faced employee strikes after failing to reach a deal with unions on a new contract. We believe that designing wage policies to meet a family's basic needs, while upholding its fiduciary duty, can help the company mitigate labour-related risks and associated financial and reputational risks.
4. Can the resolution be implemented without the potential for causing an unintended negative impact?
Yes, we believe that the proposal provides appropriate flexibility to management to design wage policies, factoring in its fiduciary duty as well as interests of other stakeholders. We recognise this is a complex topic, and companies need to assess implications for their long-term financial viability and business competitiveness when considering any changes to their compensation policies. However, we believe that this proposal allows the company to do so while considering how it can design its compensation policies such that they can support a family’s basic needs. Importantly, the proposal does not prescribe specific wages that the company must provide, but instead refers to a variety of frameworks and tools for the company to consider. Therefore, we believe that management can consider these frameworks while designing a policy which fits the specific needs of the company and its stakeholders.
14 June: How we will vote on Toyota Motor Corporation’s lobbying activity
On 18 June, Toyota Motor Corporation, the Japanese automotive manufacturer, will hold its Annual General Meeting (AGM). We believe it is essential to have strong governance policies and practices in place to ensure that businesses act in the best interest of shareholders and other key stakeholders, driving long-term sustainable value creation. Our engagement with the Company has been extensive, during which we have consistently urged them to disclose a clear unwinding policy for their cross-shareholdings. However, in light of the slow progress on this issue and the recent impact-safety test scandal, we have opted to vote Against Akio Toyoda, the Chair of the Board. This decision stems from our governance concerns and our conviction that the right tone from the top is crucial. Our engagement and voting escalation is intended to encourage change that we believe will strengthen the business and maximise returns for our clients over time.
Shareholders of Toyota Motor Corporation will also vote on a shareholder proposal, regarding lobbying activity alignment with the Paris Agreement. The resolution requests a comprehensive report describing how the company’s climate-related lobbying activities align with the goals of the Paris Agreement, including instances of misalignment and planned actions to address these.
After examining this proposal, we have decided to vote For based on the analysis below:
1. Is the resolution aligned to our Blueprint?
Yes. Climate change is one of the priority themes in our Engagement Blueprint. In our blueprint, we ask companies to publicly disclose any climate-related lobbying activity as well as to set out how they align direct lobbying activities and trade association memberships with the goals of the Paris Agreement and their own climate strategies. We believe this resolution could help shareholders better assess how the company is addressing climate-related risks including the financial risks and potential costs to the business from climate transition trends.
2. Is a resolution the best way to address the issue?
Yes. We acknowledge the company’s continued engagement on this issue and responsiveness to improve its existing lobbying disclosures. However, we believe this resolution will encourage the company to produce more complete disclosures on its climate lobbying activities in subsequent years.
3. Does the resolution add value to what the company is already doing?
Yes. Although the company provides some information on its lobbying and political activities1, shareholders could benefit from further information on how the company sets its lobbying activities to understand how the company and its trade associations are engaging on public policy issues.
The company has stated that it is committed to carbon neutrality by 2050. A report could provide shareholders with more transparency on how the company’s lobbying activities support this, which will help investors better evaluate any reputational and financial risks to their business model.
Further details to their existing disclosures requested by the shareholder resolution could include how the company reviews its trade association memberships and mitigates reputational and financial risks associated with misalignment of the lobbying activities conducted by its trade associations with Toyota Motor’s own strategy and with the Paris Agreement goals.
4. Can the resolution be implemented without the potential for causing an unintended negative impact?
Yes. Given other global companies and direct peers to Toyota Motor Corporation are disclosing detailed climate lobbying reports and demonstrating how their lobbying aligns with their overarching climate strategy and decarbonisation goals, we do not believe the resolution has the potential to cause unintended consequences.
4 June: How we will vote on deep sea mining at General Motors
On 4 June, shareholders at General Motors will vote on a shareholder resolution asking the company to “disclose the company’s policies on the use of deep-sea mined minerals in its production and supply chains”. Deep sea mining (DSM) has been touted as a potential solution to alleviate the growing pressure on resource supply. However, it is also viewed as a highly controversial activity. The International Seabed Authority decided last year to extend the deadline for developing deep sea mining (DSM) regulation to 2025, in the wake of significant public pressure to maintain a moratorium on this practice until the scientific evidence on its impacts are better understood. Mining practices are unlikely to occur before this date, however exploration of deep-sea sites has already begun. Several auto manufacturers were amongst companies calling for a moratorium.
After examining this proposal, we have decided to vote For based on the analysis below:
1. Is the resolution aligned to our Blueprint?
Yes. In our Engagement Blueprint we have asked companies to put in place comprehensive policies to manage, reduce and avoid negative impacts on nature and biodiversity and to commit to limit and avoid conversion of ecosystems, prioritizing ecosystems of high conservation value. These steps are critical to limit the financial risks associated with the physical risks of nature loss. Studies have shown the deep sea is home to a high variety and volume of species, many of which are new to science. DSM is likely to cause significant marine pollution and destabilize ocean carbon sinks. The economic opportunity from DSM is highly uncertain, particularly with high operational costs due to nascent technologies.
On balance, given this uncertainty and the potential impact on sensitive ecosystems we believe that companies should apply a precautionary principle to DSM – i.e. to not encourage commercial DSM until more knowledge of its impacts has been collated.
2. Is a shareholder resolution the best way to address the issue?
Yes, while the company affirms in its annual general meeting (AGM) proxy statement that it has not invested in deep-sea mineral extraction and does not currently use, nor does it have plans to use, deep-sea minerals in its supply chain, it has also stated that it is “working with third parties to make science-based evaluations and support the creation of a single common standard that establishes a deep-sea extraction framework so data-driven decisions can be made”. The company does not include a clear commitment to limit and avoid the conversion of ecosystems in its responsible sourcing policy. We agree with the proponents that this lack of clarity in the company’s position could expose the company to reputational and regulatory risk including financial risk.
3. Does the resolution add value to what the company is already doing?
A clear policy on the treatment of DSM in the company’s sourcing would clarify the company’s position for shareholders.
4. Can the resolution be implemented without the potential for causing an unintended negative impact?
Yes. While we agree with the company that it is prudent for it to monitor the development of alternative value chains considering the consumer and regulatory pressure towards a fast Electric Vehicle transition, we do not believe that this resolution dictates the company’s position on DSM but encourages it to be candid with stakeholders about their position and how their sourcing of minerals properly considers the financial risks associated with conversion of marine habitats.
24 May: How we voted on TotalEnergies SE on concerns over climate change and governance
On 24 May, the Annual General Meeting (AGM) of TotalEnergies SE, a French integrated oil and gas company took place. There were no shareholder resolutions on its agenda as the TotalEnergies SE Board decided to prevent an advisory shareholder resolution requesting to split the joint chair and chief executive position from being discussed and presented to vote in the meeting. The Board’s decision cited, amongst other reasons, preference for shareholders to submit ‘non-voting’ items to provoke debate in the general meeting over advisory resolutions that require shareholders to exercise voting rights. The resolution was filed by a group of 19 shareholders with approximately 0.9% of the company’s shares. The supporting statement to the resolution cited concerns from shareholders on adequate oversight of the Board of the company’s energy transition strategy.
We decided to vote Against the Lead Independent Director at the Board, to express our concerns about the Board not permitting a shareholder resolution to be put on the agenda of the annual shareholders meeting.
The company also provided investors with the opportunity to opine on the progress delivering their sustainability and climate plans through an advisory vote. Climate change is one of the priority themes in our Blueprint. We believe that companies’ long-term financial success depends on their ability to transition their business models to net zero and adapt to a changing climate. We engage with companies on climate as a way of encouraging positive change that we believe can future-proof their businesses and help to generate returns for our clients. While we believe TotalEnergies SE remains relatively well positioned to navigate the energy transition and has made some progress in this respect, we took the decision to vote Against the board resolution due to insufficient progress and concerns on aspects of the strategy.
We plan to continue our engagement with the company on its climate plans, calling for it to uphold capital discipline, further stress-test its oil and gas project pipeline and clarify actions to achieve its targets, including the role of divestment. We believe this will help enhance shareholder value over time.
24 May 2024: How we will vote on a shareholder resolution asking for disclosure of voting results based on class of shares at Meta
On 29 May, shareholders of Meta Platforms, the parent company of Facebook, WhatsApp, and Instagram, will vote on a shareholder resolution asking the company to disclose the voting results on matters subject to a shareholder vote according to the class of shares. The company maintains a dual class structure for its common stock. Its Class B common stock has 10 votes per share while its Class A common stock has one vote per share. Schroders has co-filed this shareholder resolution along with Wespath Benefits and Investments, led by the Treasurer for the State of Illinois.
We have co-filed this resolution and will accordingly vote For based on the following analysis:
1. Is the shareholder resolution aligned to our Blueprint?
Yes, within the corporate governance theme we ask that companies “consider the interests of stakeholders, including shareholders, in all board and executive team decision making” as well as “provide useful and comprehensive disclosure on governance issues to enable all stakeholders to make informed judgements and decisions.” Whilst the proposal does not go so far as to call for a change in the share class structure, we generally encourage a single class of share capital and ‘one share, one vote.’ We believe that enhanced transparency around the views of shareholders on matters put to them for a vote will encourage management accountability on material issues and improve mutual trust, which can help to strengthen the business over time.
2. Is the shareholder resolution the best way to address the issue?
Yes, we have had a longstanding and constructive engagement dialogue with Meta for a number of years across a range of topics, and we appreciate their increasing willingness to engage with smaller minority shareholders. However, despite numerous engagements on this topic, the company remains reluctant to implement such disclosure and we therefore believe filing and supporting this resolution is an appropriate next step in our engagement to continue to express our request.
3. Does the shareholder resolution add value to what the company is already doing?
Yes, recent shareholder proposals filed at the company calling for a human rights impact assessment, changes to shareholder voting power, majority voting elections for directors, and the establishment of an independent board chair position are all estimated to have received majority support among non-insiders. We believe that greater transparency is needed to concretely understand when concerns are shared by a majority of independent investors to allow for greater accountability and alleviate concerns of board entrenchment.
4. Can the resolution be implemented without the potential for causing an unintended negative impact?
Yes, we are unaware of any technical or practical challenges that would prevent the company from disaggregating vote totals by share class as outlined in the proposal. Over the course of numerous engagement conversations and dialogue we have participated in, company representatives have never claimed that installing such a practice would present an onerous burden for management. In fact, representatives have highlighted that such data is already presented to the Board for their review internally after each proxy season. Furthermore, we have identified other American companies that have already implemented this practice.
22 May 2024: ExxonMobil - how will we vote given our concerns on climate change and governance
ExxonMobil is an American integrated oil and gas company. On 29 May, shareholders of ExxonMobil will vote on four shareholder resolutions, two of which are related to the company's approach to climate change. We voted Against shareholder resolution 4 that asks the company to consider eliminating greenhouse gas reduction targets from pay incentives. We voted For shareholder resolution 7 that asks the company to report on the social impact on workers and communities from the energy transition.
The company's Annual General Meeting (AGM) will take place against the backdrop of the company filing a lawsuit against shareholders who have filed resolutions asking the company to reduce its scope 3 emissions in line with the Paris Climate Agreement, which was ratified globally by all states. The company continues to pursue this litigation despite the withdrawal of the shareholder resolution.
We believe it is essential to have strong governance policies and practices in place to ensure that businesses act in the best interest of shareholders and other key stakeholders, driving long-term sustainable value creation. Furthermore, given the global political commitment to decarbonisation and the negative economic impacts of the changing climate, companies' long-term financial success will depend on their ability to transition their business models to net zero.
In addition to voting on shareholder resolutions, as shareholders we used our regular votes at the company’s AGM to express our concerns about the company's governance and climate plans. We have decided to vote against five Exxon directors who are part of the board's governance committee. We believe that Exxon has made insufficient progress in climate mitigation and adaptation, and its recent litigation strategy has negatively impacted shareholder rights. We believe that such insufficient progress and litigation strategy is detrimental to long-term shareholder value.
We have also voted Against these four directors due to the lack of progress on improving gender diversity on the board.
We also voted against the Say-on-Pay because we expect variable incentive awards to be predominantly linked to financial performance. The majority of long-term incentive (LTI) awards should, therefore, consist of performance-based shares (PSUs), meaning that vesting is dependent on the achievement of pre-determined performance targets. Performance-based variable compensation ensures that executive pay remains aligned to the shareholder experience. However, when a variable award, like Exxon’s LTI, is delivered entirely in time-vesting shares (RSUs), it results in guaranteed pay-outcomes that are not reflective of company performance. Whilst Exxon Compensation Committee may use their discretion to take into consideration certain performance metrics when determining pay outcomes, without clear vesting targets shareholders cannot fully understand how vesting correlates to delivery of performance across these metrics.
We also voted Against the auditor reappointment based on excessive auditor tenure.
Our engagement and voting escalation is intended to encourage change that we believe will strengthen the business and maximize returns for our clients over time.
Below, we will explain how we applied the shareholder resolution framework to two climate-related resolutions at Exxon.
1. Is the shareholder resolution aligned to our Blueprint?
Shareholder resolution 4 is not aligned to our Engagement Blueprint because we support boards holding senior management accountable for performance against appropriate emissions and other climate targets. In Exxon’s case, we believe the energy transition is a particularly material financial risk to the oil and gas sector and emission reductions targets are an appropriate incentive for management.
Shareholder resolution 7 reflects how we address the ‘Just Transition’ in our Blueprint, where we ask companies, for relevant sectors, to identify the key social impacts of companies’ climate transition plans and set out how the company is considering, and mitigating impacts on, affected stakeholders where possible. We believe these actions contribute to the company retaining its social license to operate, reducing its exposure to operational and financial risk.
2. Is the shareholder resolution the best way to address the issue?
On shareholder resolution 4, we believe that shareholders may more appropriately express their dissatisfaction with the construction or design of executive compensation packages through the advisory vote on executive compensation.
On shareholder resolution 7, we believe that supporting this resolution will help convey to management the importance of the social risk of the energy transition and its potential to influence investment returns.
3. Does the shareholder resolution add value to what the company is already doing?
Shareholder resolution 4 requests the company to reduce management incentives related to emissions reductions in its operations, which is, in our view, detrimental to the company’s value.
On shareholder resolution 7, shareholders would benefit from more transparency around the social impact on workers and communities from the company's energy transition strategy and plans to address these impacts. We believe that greater accountability in these areas can help strengthen the business over time.
4. Can the resolution be implemented without the potential for causing an unintended negative impact?
Shareholder resolution 4 appears to be designed to inhibit the company’s actions on climate change mitigation. We believe this would be detrimental to the company's ability to transition to net zero and long-term shareholder value.
Regarding shareholder resolution 7, as there is evidence of corporates producing similar Just Transition reports as requested by proponents, we do not believe this report would present an undue burden to the company.
20 May 2024: Shell Plc - how we will vote on Shell's board resolution on its Energy Transition Strategy and a shareholder resolution regarding scope 3 GHG targets and alignment with the Paris Climate Agreement
Shell Plc, the oil and gas company, is holding its annual general meeting on 21 May 2024. The company's board has presented its revised energy transition strategy to shareholders for an advisory vote. This strategy was last voted on by shareholders in 2021. Key changes include removing 2035 scope 3 targets; removing a target to decrease oil production (stating it has been met); removing constraints on new frontier exploration; and changing executive remuneration incentives from scope 3 intensity progress to increasing liquified natural gas (LNG) volumes. The company has also added a scope 3 absolute emissions target for its oil-based products and reduced its reliance on nature-based solutions offsets.
After examining the board’s resolution and changes to the strategy described above, we have decided to vote Against the energy transition strategy due to insufficient progress and lack of clarity on aspects of the strategy. We plan to continue our engagement with the company on its commitment to transition to net-zero, calling for it to uphold capital discipline, identify potential stranded assets, and provide investors with milestones beyond 2030 to monitor the progress of its energy transition strategy. We believe this will help enhance shareholder value over time.
A shareholder resolution was also filed at Shell’s AGM this year. It states that: “Shareholders support the Company, by an advisory vote, to align its medium-term emissions reduction targets covering the greenhouse gas (GHG) emissions of the use of its energy products (Scope 3) with the goal of the Paris Climate Agreement: to limit global warming to well below 2°C above pre-industrial levels and to pursue efforts to limit the temperature increase to 1.5°C. The strategy for achieving these targets is entirely up to the board. You have our support.”
After examining this resolution, and despite supporting the principle of alignment with the Paris Climate Agreement, we have decided to vote Against it. We explain our rationale for this using our shareholder resolution framework below. In summary, it is our view that there are potential negative unintended consequences to the way in which the resolution has been filed that could increase financial risk. More details below.
1. Is the shareholder resolution aligned to our Blueprint? Yes. Climate change is one of the priority themes in our Engagement Blueprint. We believe that, given global political commitments to decarbonization, companies’ long-term financial success will depend on their ability to transition their business models to net zero, and adapt to a changing climate. We engage with companies on climate as a way of encouraging change that we believe will strengthen their business and help to maximise returns for our clients. To that end, we ask companies to commit to decarbonise business models towards net zero by mid-century and to set long-, medium- and short-term science-based targets, covering scopes 1, 2 and relevant scope 3 greenhouse gas emissions.
2. Is the shareholder resolution the best way to address the issue? No. We believe that voting against Shell’s Energy Transition Strategy, as we have done, is a more effective route to encourage change with respect to the company’s current strategy and management of climate transition risk, given our concerns about the potential unintended negative consequences to the company of the shareholder resolution (see point 4).
3. Does the shareholder resolution add value to what the company is already doing? Unclear. This resolution has the potential to bring benefits by encouraging Shell Plc to provide better evidence of how it aligns with the goals of the Paris Climate Agreement, specifically regarding the emissions related to the products it sells. However, we believe there is too much potential for unintended negative consequences of voting in favour of the shareholder resolution (see point 4).
4. Can the resolution be implemented without the potential for causing an unintended negative impact? No. The proponents assert that the shareholder resolution is advisory, while Shell maintains that the company’s articles of association prevent this from being possible. UK shareholders have the right to file a resolution proposing to direct the board on how it should act on a matter. The model articles (article 4) in the UK Companies Act 2006 enable shareholders to “direct the directors to take, or refrain from taking, specified action”.
On reading Shell’s articles of association, in particular article 94, any shareholder resolution has to be a special resolution, i.e. it requires 75% support to pass. Shell’s articles also require any shareholder resolution to amend the company’s articles of association. This is confirmed by the notice of meeting. The articles must provide clear and explicit instructions to the board, the company's shareholders, or any other relevant party. We do not believe that the resolution is worded in such a way as to amend or add a new article to Shell’s articles of association. We acknowledge the filing shareholders’ attempts to avoid being prescriptive. However, this also means that the resolution, if incorporated into Shell’s articles, is unclear on what concretely the board should do to respond to the resolution, should it pass, as implementing the resolution can be subject to multiple interpretations. We therefore believe that, should it pass, the resolution would likely expose the company to financial risk.
20 May 2024: How we will vote on human rights standards for indigenous peoples at JP Morgan Chase
On 21 May, shareholders of JP Morgan Chase, the US financial services company, will vote on a shareholder resolution asking the company to produce a report “outlining the effectiveness of JPMorgan Chase & Co.’s policies, practices, and performance indicators in respecting internationally recognised human rights standards for Indigenous Peoples’ rights in its existing and proposed general corporate and project financing.”
After examining the resolution, we have decided to vote For based on the below analysis:
1. Is the resolution aligned to our Blueprint?
Yes, under the Human Rights theme of our Blueprint, we ask companies to apply the principle of Free, Prior and Informed Consent before a potentially impactful project begins and commit to address grievances and disputes constructively and proactively with local communities and indigenous groups. We believe by doing so companies can help manage reputational damage and financial risks. Moreover, we outline in the Blueprint that companies should assess the effectiveness of their human rights due diligence processes, in line with the UN Guiding Principles on Business and Human Rights. We believe that such application, commitment, and assessment can help to mitigate reputational and financial risks.
2. Is the shareholder resolution the best way to address the issue?
Yes, as a global company which provides financing to a variety of sectors, we believe that the company has exposure to human rights risks, including risks related to Indigenous Peoples. We believe that the requested report would benefit shareholders as they seek to understand how the company manages relations with its stakeholders, and the associated regulatory, reputational, and financial risks.
3. Does the shareholder resolution add value to what the company is already doing?
Yes, although the company provides explanation on the frameworks it uses to identify and manage environmental and social (E&S) risks, an assessment of how effective these practices are would allow shareholders to better understand their robustness, and the company’s ability to mitigate any risks which may have financial implications.
4. Can the resolution be implemented without the potential for causing an unintended negative impact?
Yes, some of JP Morgan’s peer banks provide more detailed disclosures on how they manage risks related to indigenous peoples. We do not believe the request is overly burdensome and producing the report could potentially help the company examine its practices in line with best practice. In its annual report, the company states that "failure to satisfy expectations concerning environmental, social and governance concerns” is one of its reputational risk factors, and we believe that producing this report could help the company to manage this risk and associated financial risk.
20 May 2024: How we will vote across a number of shareholder resolutions filed at Amazon
On 21 May, shareholders of Amazon.com will vote on 14 shareholder resolutions that have been filed at the company across a range of ESG issues.
We have had a longstanding constructive engagement dialogue with Amazon and have been encouraged to see it progress sustainability issues in recent years, including those aligned to our engagement efforts, such as health and safety disclosures. We believe that progress in these areas will help strengthen the business and enhance shareholder value over time.
We acknowledge that the size and diversity of the company means it potentially faces a larger number of ESG-related and financial risks and opportunities than others. We seek to evaluate each resolution on a case-by-case basis. However, we are concerned by the large number of shareholder resolutions filed this year at Amazon and believe it is important in this case to consider the resolutions together in the context of the company and our engagement. We therefore believe it is necessary to focus our support for shareholder resolutions on those we believe are most material to the company and, if implemented, would best serve the company’s long-term sustainability and financial performance, in line with our engagement strategy.
Below we use examples to explain how we have applied our shareholder resolution framework to help us reach our voting decisions across the slate of resolutions filed at Amazon this year, with the aim of directing our support to the issues we believe are most material to enhancing long-term value for shareholders. Within each question of our shareholder resolution framework, we refer to some of the resolutions tabled at Amazon to illustrate how we assessed them in the context of the full slate of resolutions and their materiality to the company. You can see our full voting records in our vote disclosure website.
1. Is the resolution aligned to our Blueprint?
· Proposal 4: Shareholder Proposal Requesting an Additional Board Committee to Oversee Public Policy -– Against
· Proposal 5: Shareholder Proposal Requesting an Additional Board Committee to Oversee the Financial Impact of Policy Positions -– Against
· Proposal 16: Shareholder Proposal Requesting an Additional Board Committee to Oversee Artificial Intelligence -– Against
In considering the shareholder resolutions filed at Amazon we consider our current engagement priorities with the company, aligned with our Blueprint, with the ultimate goal of enhancing shareholder value over time. While many of the resolutions do align with our priorities within the Blueprint, three proposals ask for the formation of a new board committee, two on public policy, one on artificial intelligence. We do not believe that these proposals align with our Blueprint, as we do not seek to mandate board committee structure at companies where we believe the issues are already being sufficiently addressed by the existing board committees.
2. Is the shareholder resolution the best way to address the issue?
· Proposal 6: Shareholder Proposal Requesting a Report on Customer Due Diligence – For
Proposal 14: Shareholder Proposal Requesting a Report on Customer Use of Certain Technologies -– Against
Our assessment of whether a shareholder resolution is the best way to address the issue raised by the proponent considers market-specific and regional contexts. We also aim to prioritise the most material financial issues to the company. With this in mind, we will support the proposal asking for reporting on customer due diligence efforts and vote against the proposal asking to address the human rights impacts of facial recognition technology. We believe that the latter would be addressed by the implementation of the former, particularly noting that the proponent’s main concerns centre around the sales of certain technology to law enforcement agencies. Beyond this, we note that other technology companies do have customer due diligence processes in place, so we do not believe that this would be an overly burdensome request.
3. Does the shareholder resolution add value to what the company is already doing?
· Proposal 12: Shareholder Proposal Requesting Additional Reporting on Freedom of Association – Against
· Proposal 17: Shareholder Proposal Requesting a Report on Warehouse Working Conditions - For
We compare here how we have applied this question in relation to the proposals asking for third-party assessments of freedom of association and working conditions. We will support the proposal asking for an assessment on working conditions, and vote against the proposal on freedom of association. While the company does continue to face scrutiny in both these areas, in recent years this has become more focused on broader working conditions. Moreover, through our engagement we understand that the company appears to have a workplace relations team and freedom of association policies in place. We would prefer that the company’s efforts are first directed towards addressing concerns about working conditions, which should include respect for freedom of association, and the third-party assessment would better inform shareholders on how the company is improving its practices that will help strengthen its business.
4. Can the resolution be implemented without the potential for causing an unintended negative impact?
· Proposal 13: Shareholder Proposal Requesting Alternative Emissions Reporting - For
For this question we consider how we plan to vote on the environmental resolutions facing the company. One such proposal asks the company to provide greater disclosure on material Scope 3 emissions. While we understand the company perspective on this resolution around the practicalities of collecting and uncertainty surrounding certain Scope 3 data given the nature of their business, we believe that efforts should be made by the company to increase the breadth of what is included in its Scope 3 reporting. We also note that the company is asking for suppliers to disclose more emissions data with them where possible, which should allow for a greater ability to capture Scope 3 data. We believe this information can help shareholders better assess how the company is addressing financial risks and costs to the business related to climate and therefore plan to support this resolution.
20 May 2024: How we will vote on McDonald's phasing out the use of medically important antibiotics
On 22 May, shareholders of McDonald’s, the US fast food company, will vote on a shareholder resolution asking the company to adopt an “enterprise-wide policy to phase out the use of medically important antibiotics for disease prevention purposes in its beef and pork supply chains.” The proponent asks that the policy include, at the board’s and management’s discretion, “global sourcing targets with timelines, metrics for measuring implementation, and third-party verification.”
After examining the proposal, we have decided to vote For based on the below analysis:
1. Is the resolution aligned to our Blueprint? Yes, in our Blueprint we ask companies to establish a policy on the responsible use of antimicrobials within animal husbandry and take action to improve value chain standards, with the aim of helping to reduce regulatory risk and enhance shareholder value.
2. Is a resolution the best way to address the issue? Yes, the World Health Organization describes antimicrobial resistance as “one of the top global public health and development threats” and the World Bank estimates that it could result in $1 trillion to $3.4 trillion in GDP losses per year by 2030. Antimicrobial stewardship in the food supply chain is also a growing area of focus for regulators and policy makers, including in the European Union and United States, and we believe adopting this proposal may help the company keep pace with the evolving regulatory landscape and maintain its competitiveness over the long-term.
3. Does the resolution add value to what the company is already doing? Yes, although the company has set goals regarding antimicrobial stewardship, including establishing “market appropriate targets for use of medically important antibiotics” in the beef supply chain, we believe that adopting a policy which phases out the use of antibiotics for disease prevention purposes in its beef and pork supply chains will help the company to better manage regulatory, financial and other related risks.
4. Can the resolution be implemented without the potential for causing an unintended negative impact? Yes, the company has demonstrated that it is working with its supply chain to drive change and improve data collection to work towards its existing antimicrobial stewardship goals. Given the wide-ranging risks associated with antimicrobial resistance, we believe asking the company to phase out the use of medically important antibiotics for disease prevention purposes in its beef and pork supply chains is an appropriate next step as the company works to progress its efforts in this area.
13 May 2024: How we will vote over Equinor’s CAPEX alignment to Paris Agreement
Equinor, the Norwegian oil and gas company, is holding its annual general meeting on 15 May. Shareholders will vote on a resolution asking the Board to update its strategy and capital expenditure plan, considering the company’s commitment to support the goals of the Paris Agreement and the Norwegian Government’s expectations for the company to align with the Paris Agreement. The resolution also requests the updated plan to “specify how any plans for new oil and gas reserve development are consistent with the Paris Agreement goals”.
The company in its response states its energy transition plan demonstrates a business model and strategy that are already aligned with the Paris Agreement's most ambitious 1.5°C goal. They also stress that more investments in energy production and infrastructure are required to secure supply and reduce the cost of energy.
After examining this proposal, we have decided to vote For based on the analysis below:
1. Is the resolution aligned to our Blueprint?
Yes, climate change is one of the priority themes in our Blueprint. We believe that companies’ long-term financial success depends on their ability to transition their business models to net zero and adapt to a changing climate. We engage with companies on climate as a way of encouraging positive change that we believe can future-proof their businesses and help to generate returns for our clients. To that end, one of our expectations is that companies “Allocate capital to limit warming to 1.5°C, focusing on regions and technologies with the greatest climate impact”. We ask companies to set out how they will align their loans and/or investments toward activities that support the company’s climate goals and targets.
2. Is a resolution the best way to address the issue?
Yes, we acknowledge the company is leading on decarbonisation action relative to its sector. Nonetheless, we believe this resolution will encourage the company to produce more complete disclosures and provide further evidence to its claims that the strategy is already aligned with the Paris Agreement goals.
3. Does the resolution add value to what the company is already doing?
Yes, we believe this resolution could help shareholders better assess how the company is addressing climate-related risks and potential costs to the business from climate transition trends. In particular, it requires further disclosures from the company, stress-testing its decisions of new reserve development.
4. Can the resolution be implemented without the potential for causing an unintended negative impact?
Yes, the resolution is not asking the company to halt its production of oil and gas immediately in a way that could cause unintended consequences, it merely is requesting the company’s board to demonstrate that its strategy and capex are aligned to its and the Norwegian government stated ambition to be aligned to the Paris Agreement or else revise its strategy and capex. We believe that by disclosing this information, Equinor will provide greater transparency to investors on the alignment between its commitments and implementation of its strategy.
3 May 2024: Suncor Energy Inc: How we will vote on Suncor’s climate disclosures
On 7 May, shareholders of Suncor Energy, a Canadian integrated energy company, will vote on a shareholder resolution asking the company to disclose audited results assessing a range of climate transition scenarios on the assumptions, costs, estimates, and valuations underlying its financial statements. The proponent is not seeking that Suncor change its judgements on which net zero scenario the company utilizes, or timing and pace of the energy transition. Instead, they are looking for Suncor to perform a sensitivity analysis against multiple climate transition scenarios and discuss the quantitative impact on the company’s financial statements.
After examining this resolution, we have decided to vote For based on the analysis below:
1. Is the resolution aligned to our Blueprint?
Yes, within the climate change theme of our Blueprint we ask companies to "conduct climate-scenario analysis across short-, mid- and long-term time horizons” as well as to “reflect material climate factors in the company’s annual report and accounts”. We ask for companies to include in their financial reporting climate-related risk to fully understand how climate risk from the transition to net zero or from the physical impacts of climate change could impact the company’s balance sheet under a range of scenarios. We believe companies who provide robust financial reporting considering any risks, challenges and potential opportunities in a changing global energy environment will be better placed to respond, protect and strengthen the long-term value of investments and will help investors better evaluate any reputational and financial risks to their business model.
2. Is a resolution the best way to address the issue?
Yes, given the role the company plays in the global energy market and their current plans to focus on their oil sands business during a time when these assets are exposed to high carbon risk, we believe the requested information is material to shareholders’ understanding of potential financial risks and challenges to the company’s financial statements.
3. Does the resolution add value to what the company is already doing?
Yes, whilst Suncor has disclosed medium-term financial risks associated with their refining business due to declining revenues because of decreased demand for products and services, they have yet to disclose transition risk associated with other parts of their business. As such, further detailed reporting on the impacts of potential energy transition scenarios on its financial statements is required for shareholders to understand associated financial risk.
4. Can the resolution be implemented without the potential for causing an unintended negative impact?
Yes, we believe the report requested by the proponent will provide shareholders with additional insight into the climate and energy transition risks that Suncor is potentially exposed to, we do not foresee potential negative impacts from additional disclosures. We believe oil and gas companies need to reflect in their financial reporting how changes to measures such as future oil price, impacts of production growth and asset valuation are considered within the context of different climate scenarios and potential impacts upon their balance sheets.
30 April 2024: How will we vote on Eli Lilly’s resolution on patent exclusivities
On 6 May, shareholders of Eli Lilly, the US pharmaceutical company, will vote on a shareholder resolution asking the company to “establish and report on a process by which the impact of extended patent exclusivities on product access would be considered in deciding whether to apply for secondary and tertiary patents.” The proponent explains that “secondary and tertiary patents are patents applied for after the main active ingredient/molecule patent(s) and which relate to the product.”
We plan to vote For this resolution based on the below analysis:
1. Is the resolution aligned to our Blueprint?
Yes, in the human rights theme we ask companies to develop clear strategies for access to and affordability of fundamental products and services, including medicines. We believe that doing so can enhance the competitiveness and value of businesses over time.
2. Is the resolution the best way to address the issue?
Yes, the resolution asks the company to evaluate the impact of extending patents may have on access to medicines. The company states it is “committed to equitable and affordable access to our medicines so that our breakthroughs can transform more people’s lives”. We believe that producing a report which outlines the process the company has in place to understand the impact of patent extensions on access will help shareholders understand how it is living up to this commitment.
3. Does the resolution add value to what the company is already doing?
Yes, although the company says that it considers “patent life” as one of many factors in its U.S. pricing strategies, it is unclear the process by which the company uses to evaluate the impact of patent extensions on access and affordability.
4. Can the resolution be implemented without the potential for causing an unintended negative impact?
Yes, several other large US pharmaceutical companies have provided greater disclosure on this topic, and we do not believe that producing this report will be overly burdensome or result in a competitive disadvantage.
30 April 2024: Berkshire Hathaway: How we plan to vote on Berkshire Hathaway’s Diversity and inclusion report
On 4 May, shareholders of Berkshire Hathaway, the US holding company, will vote on a shareholder resolution asking the company to report on the effectiveness of the company's diversity and inclusion efforts.
We plan to vote For this resolution based on the below analysis:
1. Is the resolution aligned to our Blueprint?
Yes, in our Engagement Blueprint we ask companies to disclose metrics to assess inclusive culture and set targets for increasing inclusivity, and to assess the effectiveness of diversity and inclusion programmes. We believe that by creating diverse and inclusive cultures, companies can benefit from improved decision making and problem solving, which may positively impact financial performance and enhance shareholder value.
2. Is a resolution the best way to address the issue?
Yes, as the company has not been responsive to engagement, and we believe supporting this resolution will help convey to management the importance of this topic and its potential to influence investment returns.
3. Does the resolution add value to what the company is already doing?
Yes, although the company has made some improvements to its diversity disclosures, such as its US Equal Employment Opportunity (EEO-1) data, the company provides very limited information on its human capital management data. Shareholders would benefit from more transparency of the effectiveness of company's diversity and inclusion efforts to assess how it is building an inclusive workplace.
4. Can the resolution be implemented without the potential for causing an unintended negative impact?
Yes. The percentage of S&P 100 companies reporting on topics including quantitative gender diversity statistics, culture initiatives, and talent attraction and retention has significantly increased. We do not believe this report would present an undue burden to the company.
25 April 2024: How we will vote over Paccar’s climate lobbying
Paccar, the US trucking company, is holding its annual general meeting on 30 April. Shareholders will vote on a resolution asking it to disclose information on if and how its lobbying activities align with the Paris Agreement, the international treaty on climate change, and the steps being taken to address any areas of misalignment.
Paccar says it “already evaluates and publicly discloses in its annual environmental report to CDP its direct and indirect climate lobbying activities, and the activities’ alignment with the Paris Climate Agreement". However, the proponent argues that the company’s disclosure of its lobbying activities through CDP is insufficient. In 2023, this same proposal received 47.4% support, indicating substantial shareholder interest in this matter. Despite this, the company has not taken action to address any misalignments between its lobbing activities and the Paris Agreement objectives.
After examining this proposal, we have decided to vote For this resolution based on the analysis below:
1. Is the resolution aligned to our Blueprint?
Yes. Climate change is one of the priority themes in our Engagement Blueprint. In our Blueprint, we ask companies to publicly disclose any climate-related lobbying activity as well as to set out how they align direct lobbying activities and trade association memberships with the goals of the Paris Agreement and their own climate strategies, with the goal of understanding how such activities will influence investment returns. Investors could benefit from better disclosure of Paccar’s lobbying activities to understand how the company and its trade associations are engaging on public policy issues. The company has stated that it is committed to reducing emissions to 2030. A report could provide shareholders with more transparency on how the company’s lobbying activities support this, which will help investors better evaluate any reputational and financial risks to their business model.
2. Is a resolution the best way to address the issue?
Yes. We believe this resolution will encourage the company to produce more complete disclosures on its climate lobbying activities.
3. Does the resolution add value to what the company is already doing?
Yes. Although the company sets out some information on its lobbying and political activities through its CDP disclosures, shareholders could benefit from further information on how the company sets its lobbying positions, reviews its trade association memberships, and mitigates reputational and financial risks associated with misalignment of the lobbying activities with the Paris Agreement goals.
We believe this resolution could help shareholders better assess how the company is addressing climate-related risks and potential costs to the business from climate transition trends.
4. Can the resolution be implemented without the potential for causing an unintended negative impact?
Yes. Given other global companies and direct peers to Paccar are disclosing detailed climate lobbying reports and demonstrating how their lobbying aligns with their overarching climate strategy and decarbonisation goals, we do not believe the resolution has the potential to cause unintended consequences.
We believe that by disclosing this information, Paccar will provide greater transparency to investors on the alignment between its climate strategy and lobbying efforts.
25 April 2024: How we will vote on a resolution asking Kellanova to report on pesticide usage in supply chain
On 26 April, shareholders of Kellanova, the food and beverage company, will vote on a shareholder resolution asking the company to issue a report on the risks it associated with pesticide use in its supply chain.
We plan to vote For this resolution based on the below analysis:
1. Is the resolution aligned to our Blueprint?
Yes. In 2024, we updated the Engagement Blueprint to align with the goals of the Global Biodiversity Framework and the Taskforce on Nature-related Financial Disclosures (TNFD). The Global Biodiversity Framework has a target to reduce pollution and reduce excess nutrients lost to the environment by a half by 2030. This target seeks to address the growing risks posed to biodiversity and ecosystem services from excess use of pesticides and fertilisers in many locations. To address these risks, under the theme of natural capital related risk and management we ask companies to take action to protect endangered, threatened or protected species. Specifically, under sustainable food and water, we ask companies to disclose and seek to increase the share of products sourced from regenerative agricultural practices and to develop environmental management plans for the sustainable use of fertiliser and pesticides with the goal of strengthening long-term competitiveness and value.
2. Is a resolution the best way to address the issue?
Yes. Pesticide residues are found in drinking water, soil, rainwater and a vast number of food products, resulting in significant collateral damage such as declines in pollinator species and soil degradation. There is rising risk for companies reliant on pesticide usage from both the physical and financial risks of nature loss and a growing risk of litigation. The resolution encourages the company to align with peers on producing specific reporting on the risks of pesticide usage in the supply chain.
3. Does the resolution add value to what the company is already doing?
Yes. While the company has already made some commitments to encourage the reduction of inputs like fertiliser and pesticides, and works with farmers to support them to take up regenerative agricultural practices, we agree with the proponents that it will be useful for the company to go further, by producing a specific report which will detail pesticide usage and specific risks to human health; soil quality and biodiversity, and specific plans to mitigate those and related financial risks.
4. Can the resolution be implemented without the potential for causing an unintended negative impact?
Yes, many companies in the food sector disclose information on pesticide risks. Moreover, we do not believe that the request is overly burdensome, and the resolution is sufficiently flexible to allow the company to take steps following the report's findings that are aligned with its strategy.
16 April 2024: How we will vote on Nestlé’s reporting on food and beverages according to their healthfulness
On 18 April, shareholders of Nestlé, the food and beverage company, will vote on a shareholder resolution asking the company to adopt an amendment to their Articles of Association, to include specific reference to reporting on key performance indicators (KPIs) on the absolute and proportional sale figures of food and beverage according to their healthfulness.
We plan to vote Against this resolution based on the below analysis:
1. Is the resolution aligned to our Blueprint?
Yes. The resolution relates to two areas of our Engagement Blueprint: sustainable food and water under the Natural Capital and Biodiversity theme, and access to fundamental products and services under the Human Rights theme. We ask companies to “develop clear strategies for access to and affordability of fundamental products and services for underserved and/or vulnerable communities, including in low- and middle-income countries, for example medicines, nutrition, technology/connectivity and finance”.
2. Is a resolution the best way to address the issue?
No. We consider it essential that Nestlé improve the health and nutrition of their products. This is especially important in the context of potential regulation to tackle rising costs to governments and consumers from food related diseases and supporting appropriate investment in healthier product categories. However, we do not believe the resolution as framed is the most effective way of working with Nestlé management to improve the health of their products. We are particularly concerned about the resolution’s aim to enforce a binding change to the company’s Articles of Association. We consider it important that Nestlé is given the flexibility to set an appropriate strategy in line with its ambitions that can accommodate new and emerging evidence on best practice. We also think it is important that any such target and reference point concerning proportional sales figures is benchmarked appropriately so as not to inadvertently impact business decision making around any future disposals and acquisitions. We consider that amending the company’s Articles of Association would be micromanaging the approach that Nestlé takes to achieve this.
3. Does the resolution add value to what the company is already doing?
No. We welcome the steps Nestlé took last year to provide more transparency about the nutrition of its products in line with Health Start Rating (HSR) and to set an absolute target to grow the sales of healthy products over the last year. This resolution does go one step further by requiring a ‘proportionate target’. We have been engaging with the company at board and executive level on its approach to improving nutrition in line with the asks in our engagement blueprint and will continue to do so. We are encouraged that Nestlé is moving towards best practice and think that added value to shareholders will arise from Nestlé setting its own strategy towards healthier products, rather than through an inflexible amendment to its Articles of Association.
4. Can the resolution be implemented without the potential for causing an unintended negative impact?
No. We consider it may be anomalous for the company to have a specific section in their Articles of Association on health, over and above specific detail on other material issues, of which there are many. Amending the Articles of Association would bind the company in a way that would not allow it the flexibility to adapt to changing circumstances. Therefore, it is important that the company’s Articles of Association remain sufficiently broad to accommodate any new evidence on best practice on nutrition and health.
5 April 2024: How we will vote on Lennar Corporation’s LGBTQ Equity and Inclusion Disclosures
On 10 April shareholders of US homebuilding company Lennar Corporation will vote on a shareholder resolution asking the company to report on the company’s LGBTQ equity and inclusion efforts in its human capital management strategy. The proponent argues that while the company already supports the business case of inclusion, nationally there is growing incidence of LGBTQ individuals experiencing harassment and discrimination, and strong inclusion policies can present a competitive advantage to companies taking action.
We plan to vote For this resolution based on the below analysis:
1. Is the resolution aligned to our Blueprint?
Yes, diversity and inclusion is one of our priority engagement themes, and within this we ask companies to disclose policies around inclusion and how the company provides for the needs of a diverse workforce. Diversity across multiple dimensions brings a valuable range of outlooks and opinions, and when paired with an inclusive culture, we believe it can lead to higher-quality work, better decision-making and problem-solving, and greater team satisfaction. This, in turn, can help drive company productivity and profitability and create stronger returns and value for investors.
2. Is a resolution the best way to address the issue?
Yes, we believe that this resolution will encourage the company to expand its disclosures in relation to diversity and inclusion efforts.
3. Does the resolution add value to what the company is already doing?
Yes, we recognise that the company acknowledges and has taken significant steps to create a diverse and inclusive workforce, including with respect to LGBTQ individuals. However, current disclosures lack quantitative information around the workforce composition, and include minimal specific references to LGBTQ inclusion. We believe additional information, particularly around how the company assesses the effectiveness of inclusion programmes and whether Lennar collects anonymised data on sexual orientation and gender identity, would be helpful to better understand the company’s progress on inclusion and help inform human capital management strategies.
4. Can the resolution be implemented without the potential for causing an unintended negative impact?
Yes, many companies, including in the construction industry, have adopted and disclose information on diversity and inclusion strategies. Moreover, we do not believe that the request is overly burdensome and it allows the company flexibility to determine how it could expand existing inclusion disclosures based upon current activities.
28 March 2024: How we will vote on Air Canada’s in-person shareholder meetings
Air Canada currently uses a virtual-only format for annual general meetings (AGMs). On 28 March shareholders will vote on a shareholder resolution asking the company to instead hold AGMs in person, with complementary virtual meetings. The proponent argues that virtual meetings should not replace in-person meetings, as both options afford shareholders their choice of how to participate in AGMs.
We plan to vote For this resolution based on the below analysis:
1. Is the resolution aligned to our Blueprint?
Yes, under the Corporate Governance theme of the Blueprint we ask companies to engage in continuous dialogue with shareholders on material issues, including addressing any significant dissent before or after shareholder meetings. We believe in-person meetings provide an important forum for the board to hear directly from shareholders, and a virtual-only format does not allow shareholders sufficient access to present their views.
2. Is a resolution the best way to address the issue?
Yes, virtual AGMs have grown in popularity in recent years, and while the virtual format is authorised under many Canadian companies’ corporate statutes, we believe the in-person format should be preserved as it presents an opportunity for shareholders to address the board directly. In the absence of regulations requiring a hybrid format, we believe supporting this resolution is the best way to address the issue.
3. Does the resolution add value to what the company is already doing?
Yes, Air Canada has used a virtual-only format for the past five years, pre-dating the rise in virtual AGMs during the Covid-19 pandemic. Although the company maintains that its ongoing shareholder engagement efforts provide an adequate supplement to in-person AGMs, we believe the option of in-person attendance at pivotal moments of the year, such as the AGM, is an important way in which the company signals its embrace of shareholder rights.
4. Can the resolution be implemented without the potential for causing an unintended negative impact?
Yes, although hybrid formats remain less popular than virtual or in-person only AGMs, we believe hybrid meetings present the optimal way for shareholders of diverse geographies and interests to attend meetings. We do not believe a hybrid format would present undue burden to the company.
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