Danielle Fugere, president and chief counsel at As You Sow, discusses the non-profit’s latest thinking on climate risk and the need for measurable net-zero emissions targets
Danielle Fugere is president and chief counsel of As You Sow, one of the most influential shareholder advocates in the US. During the 2021 proxy season, As You Sow initiated 188 engagements with 142 companies. It filed 86 resolutions, 21 of which went all the way to a vote. The firm received average support of 43.3 percent across its resolutions, gaining majority support on five.
Here, Fugere talks to IR Magazine about how the investing landscape has evolved on climate issues, why US investors turned their backs on say-on-climate votes, and the importance of net-zero plans.
Can you explain As You Sow’s history of shareholder advocacy on climate-related issues? We’ve been working on climate for more than a decade. What’s been interesting about climate and shareholders is that it’s been an evolving arena. When we first started working on it, climate wasn’t part of the dialogue. Our goal when we started out was the need for finance to be taking account of climate.
Every shareholder should be looking at the risks, and companies should be providing information about the risks. The shareholder asks have evolved as we’ve learned more about the science. How have you seen investor sentiment on climate-related issues evolve? The finance arena now recognizes the risk priced into activities and lending. If you’re doing business as usual in a world that is decarbonizing, that will not work well for you. Recent votes reflect that – there’s concern about the risk to climate, companies and investors. Climate change is causing on-the-ground impacts that are costing firms more money, and we’re seeing supply chains that are breaking down.
I look to Climate Action 100+ as a very good indicator of where large institutional asset managers are with regard to climate. Climate Action 100+ has set forth its benchmark very clearly that companies need to put their money and capital investments toward a plan for net-zero impact.
We’re also seeing a focus on accounting. Companies historically have described risk as separate, but [shareholders] are now asking companies to address climate on the books. From the governance perspective, investors are absolutely looking to the audit committees and what they are doing to make sure this happens. This brings together the movement toward boards being responsible for climate action.
As You Sow engaged with 81 public companies on climate during the last year. What was the most memorable? This past year was significant in many cases, but I think General Electric was a major example of where shareholders are landing. We asked GE to set targets for Scope 3 emissions. It wasn’t quite ready to do that so we filed a proposal and GE’s management actually recommended that shareholders vote in favor of it. [The proposal received 98 percent support.]
Having followed up with the company since, it has set those targets now and is working toward them. The company had not been in front of the climate curve and it was paying the price – value was declining and shareholders were unhappy. GE re-evaluated, brought in a new CEO and adjusted its new business plan. Shareholders seem to be in support of that. It’s a good example of a company that recognized how harmful its stance on climate issues was to its business.
This year, As You Sow engaged with a number of companies about offering a say-on-climate vote, which has gained momentum in Europe. But it didn’t garner the same enthusiasm in the US. Why is that? In the US, we’ve had the whole say-on-pay issue and the failure to vote meaningfully against questionable pay packages. In working with the Forum for Sustainable and Responsible Investment, we said we didn’t think [say on climate] was a good idea.
It’s difficult for shareholders to say what is a good or bad plan. Some of the largest institutional investors were very clear that they didn’t think approving of climate plans was something they could – or should – be doing. There was significant pushback. But what we can say is that the science tells us we need to be aligned with net-zero and every company needs to take responsibility for its own emissions – its Scope 1 through Scope 3 greenhouse gas emissions. Countries can create policy, but companies need to be responsible.
If not a say-on-climate vote, what’s the best mechanism for a shareholder advocate like As You Sow to hold companies accountable on climate? We tell companies they need to set a net-zero target, as well as short, medium and long-term targets to figure out how to get to net-zero. Some companies will say they don’t want to overpromise, but our response is that we’ve given every company enough time and there’s been insufficient progress across the board.
Companies aren’t making change at the speed needed to hit net-zero goals. Every decision they make – whether it’s related to the product line, the buildings, the energy the company uses or how the employees get to work – needs to be aligned with net-zero. Most companies are saying they understand where they need to go, which is a sea change. But there’s still some reluctance from some companies to go out on a limb.
How sympathetic are you to that reluctance? I’ve talked to plenty of companies that understand the need for lofty goals, but that are also uncertain about how to break those goals down into short, mid and long-term targets. Companies are reluctant to set targets they’re unsure they can meet. The conversation and the world are changing and nobody knows how to meet a net-zero target yet. But that’s why we ask to see the short and mid-term targets, to see whether they’re aligned with a net-zero end-goal.
Investors are realistic about what companies are going to do: they make plans they may need to change in the future. For investors, it’s about how companies work toward those plans. We’re not trying to punish firms that are making a good faith effort but not achieving their objectives. It’s really about whether they’re setting targets and working toward achieving them.
If you had to suggest one emerging environmental issue in the world of shareholder advocacy, what would that be? We and others are starting to think about the issue of offsets. We’re seeing a lot of companies that are relying significantly on offsets rather than emissions reductions so it’s going to become an important topic of discussion. There are a lot of folks out there who want to make a lot of money with offsets. Climate Action 100+ has said that you need to reduce emissions – you can’t just do offsets.
I want to underscore the importance of that. Companies can certainly buy offsets to compensate while they reduce their emissions, but using offsets as the first port of call is unacceptable.
