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Asset managers could have changed outcome of 10 climate disclosure proposals

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Asset managers could have changed outcome of 10 climate disclosure proposals

Two of the biggest global asset managers had enough sway behind their votes that they could have ensured that a significantly larger number of shareholder proposals on climate change gained majority support in the 2017 proxy season, according to a new report.

The report comes ahead of the 2018 proxy season, which typically runs from late April through early June. According to a Ceres resolution tracker, shareholders have submitted nearly 50 climate-related resolutions for the upcoming season.

During the 2017 season, shareholders of publicly traded companies passed three climate disclosure proposals — for PPL Corp., Occidental Petroleum Corp. and Exxon Mobil Corp. — but at least 10 other energy company shareholder proposals on climate issues came relatively close to passing by garnering at least 40% support. A March 12 report by the 50/50 Climate Project found that BlackRock Inc. could have tipped the scales for 10 climate proposals on energy companies in 2017 had it voted for them, and Vanguard Group Inc. could have ensured that eight of those proposals gained majority support had it voted yes.

Accordingly, either BlackRock or Vanguard could have changed the outcomes for AES Corp., Ameren Corp., Dominion Energy Inc., DTE Energy, Duke Energy Corp., First Energy Corp., PNM Resources Inc. and Southern Co. BlackRock could have also pushed the votes over the line for Devon Energy Corp. and Marathon Petroleum Corp.

Vanguard and BlackRock, respectively, backed 15% and 9% of key climate shareholder initiatives in 2017, and both voted for 14% of proposals for companies to specifically examine the risks they face under the Paris Agreement on climate change, which seeks to limit global warming to no more than 2 degrees Celsius above preindustrial levels. While the asset managers' overall support for climate disclosures declined compared to the 2016 proxy season, their support for any 2-degree scenario proposals marked a dramatic shift from the prior year when they voted against all those initiatives.

Exxon Mobil and Occidental published climate reports after the majority of their shareholders passed initiatives. Some companies have decided to act before it comes to that. Duke, which in 2017 saw 46.4% of its investors vote in support of climate disclosure, plans to release a climate report in March, according to a company spokesman.

More broadly, the report by the 50/50 Climate Project showed that the top two dozen asset managers supported an average of 51.3% of key climate stakeholder proposals and 55.67% of 2-degree scenario proposals. Of those, the 10 biggest asset managers supported general climate initiatives an average of 31.6% of the time and 2-degree scenario proposals about 28.3% of the time.

Big investors in recent years have joined the effort — through shareholder resolutions, public letters and behind-the-scenes conversations — for energy majors and top-performing companies in other sectors to analyze and disclose their climate risks.

Some of the asset managers contend that examining only how they voted on proxy initiatives offers an incomplete picture of their broader engagement with companies.

"We view voting our proxies as one piece of our broader governance strategy that includes a combination of voting proxies, engaging with company management and directors, and advocating," Vanguard spokeswoman Carolyn Wegemann said in an emailed statement. "Vanguard's funds evaluate each proposal on its merits and may support those in which we believe there is a logically demonstrable linkage between the specific proposal and long-term shareholder value of the company."

BlackRock spokesman Ed Sweeney emailed a statement he pulled from the company's 2017 bulletin on why it voted against Occidental management on the climate change assessment proposal.

"As a long-term investor, we are willing to be patient with companies when our engagement affirms they are working to address our concerns. However, our patience is not infinite — when we do not see progress despite ongoing engagement, or companies are insufficiently responsive, we will vote against management," Sweeney said. "We view a vote against management as a sign of a failed engagement, not as the start of the process."

Shareholder proposals are advisory in that companies are not legally required to take action on even those supported by a majority of shareholders.