I say it is well-intentioned, futile, and a drain on the engagement bandwidth of investors who have more effective tools for getting their portfolio companies to mitigate and adapt to climate change. It is modeled after the “Say on Pay” initiative and this has proven to be of no consequence in the U.S., although it may be a bit more effective in a few other jurisdictions. For the most part it has served to insulate directors for accountability on pay and it is likely that “Say on Climate” will do the same. As explained by Anne Simpson, Managing Investment Director, Board Governance and Sustainability at CalPERS, ’’Say on Pay’ has provided a rubber stamp to various versions of pay, ever escalating and unlinked to performance. Hence on the CalPERS side we are returning to voting against board members who sit on the comp committee.”

Group of people participating in a protest against global warming. Climate change protest concept. They are holding banner signs. | GETTY

As with pay, if investors are really serious about climate, they should vote against directors regarding issues such capital expenditures and lobbying that are counter to the Paris Agreement. Furthermore, “Say on Climate” does not bar companies from adopting clearly unambitious long-term targets that are not aligned with science-based targets and essentially playing “rope-a-dope” with their investors.

“Say on Climate” is an initiative of the Children’s Investment Fund Foundation (CIFF), “the world’s largest philanthropy that focuses specifically on improving children’s lives” with an endowment of $6 billion. It was started in 2002 by Sir Christopher Hohn and Jamie Cooper. Hohn is the founder and portfolio manager of the activist hedge fund TCI Fund Management which he started in 2003 and is one of the world’s largest and most profitable hedge funds. As a hedge fund manager, Hohn is known for his aggressive tactics. As a philanthropist, Hohn is known for his generous approach to grant making to benefit a wide range of climate change campaigns run by NGOs.

Climate is one of CIFF’s top priorities. It currently has $580 million in multiyear grants for climate change, second only to the $644 million in grants for child health and development in its 15-item portfolio of philanthropic focus. Hohn himself has contributed £200,000 to the activist climate change movement Extinction Rebellion (XR), which I applaud, since I wrote last November that investors should support XR.

With “Say on Climate” Hohn is bringing his activist hedge fund skills to bear on a problem that is a top priority for his philanthropic foundation. In a video and presentation, Hohn explains the reasons for and objectives of “Say on Climate.” He notes that over 35 percent of total emissions are due to companies, most companies are failing to take sufficient action on climate change, only three percent of listed companies have science-based emissions targets, and the biggest asset managers have appalling voting records on the few climate resolutions that are filed. These are strong and worrying points to anyone who is concerned about climate change, getting the corporate sector to take more responsibility for their role in it, and change their behavior in order to achieve a carbon net zero economy by 2050.

Source link for this article