Glass Lewis overview of Say on Climate votes

Glass Lewis, one of the leading proxy advisory firms, has published a paper setting out its views on Say on Climate votes. The paper notes that ‘Say On Climate’ votes, where listed company shareholders are given the opportunity to vote on climate-related proposals, are becoming an increasingly important part of the 2021 annual general meeting season. Both boards and shareholders are putting forward proposals for votes on climate-related matters.

The proxy firm concedes that there are many positive aspects to Say On Climate resolutions but that they also present a number of challenges for investors and companies, particularly if the resolution relates to a company's strategy or plans. Glass Lewis notes that views in the investor community are mixed, albeit that many investors are supportive of such resolutions.

Glass Lewis distinguishes between proposals that involve additional disclosure by companies, which it strongly supports, and those that offer a shareholder vote on a climate plan or strategy. It says it will generally recommend against management and shareholder proposals requesting that companies adopt a policy that provides shareholders with an annual vote on a climate-related plan or strategy.

On other proposals, Glass Lewis states that given their broad variety, and the lack of standardisation on how shareholders should evaluate these resolutions before voting, it will review each resolution on a case-by-case basis. The paper gives examples of various climate-related

resolutions proposed to date and also provides examples of best practice disclosures in support of such resolutions.

Glass Lewis concludes:

Given the significant risks faced by companies and investors as a result of climate change, investors need companies to provide clear and comprehensive information that allows them to incorporate these risks into their investment decisions. In recent years, significant progress has been made with respect to the disclosure that companies are providing on this issue, aided by bodies such as the TCFD, which allows for a more comprehensive and comparable approach to how companies are incorporating climate-related issues into their strategic decisions.

We believe that there are many positive aspects to a Say on Climate vote; it ensures companies are providing robust climate-related information to shareholders on an annual basis and it places the issue of climate on the agenda for both companies and investors. Although we welcome these positive developments, we believe that Say on Climate also presents a number of challenges for investors and companies.

These challenges include:

  • a lack of engagement from companies with the broader market regarding the concerns that have been expressed by investors about companies’ use of Say on Climate;
  • an absence of legal clarity or codified best practice standards to assuage investors’ concerns;
  • questions about the scope and utility of Say on Climate votes being adopted on a broad, non-targeted basis; and
  • a potential lack of a thorough and highly technical understanding of climate-related issues on the part of the investment community, broadly, which may hinder investors from fully understanding or being able to interpret companies’ climate transition plans.

Glass Lewis says that it intends to codify its approach in advance of the 2022 AGM season, following investor, corporate and stakeholder engagement.

The Glass Lewis paper can be found here.

Published 28 May, 2021

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