February’s Guest Article is by Louise Rouse, FairPensions’ Director of Investor Engagement and looks at their recent initiative to engage with leading oil producers about their oil sands projects
The 2010 AGM season could herald both a new era of public accountability for companies and their investors and a template for future shareholder activism. Having successfully galvanised the largest coalition of individual and institutional shareholders seen in the UK to file shareholder resolutions on oil sands at BP plc and Royal Dutch Shell plc, FairPensions has now brought together a group of major UK civil society organisations to assist with an unprecedented mobilisation of the public to petition their pension funds in favour of the resolutions. Organisations who will be mobilising members and supporters include The Co-operative, WWF, UNISON and PCS.
Earlier this week, FairPensions, with the support of The Co-Operative, launched an innovative internet tool (available via www.countingthecost.org.uk) enabling members of the public to directly contact their pension funds in support of resolutions on tar sands due to be voted on at the BP and Shell AGMs this Spring. The resolutions, which were co-filed by a diverse group of fund managers, pension funds, foundations and faith groups call upon BP and Shell to report on the investment risks associated with tar sands projects and their plans to address such risks. Investors are concerned that BP and Shell are failing to properly account for future legislation over carbon emissions, high operational costs, environmental clean up costs and the risk of litigation as a result of indigenous community impacts. The co-filers feel this is not a prudent approach and that the companies are risking both financial and reputational damage in the long term by developing potentially unsustainable assets.
The financial crisis and the emergence of what Lord Myners calls “the ownerless corporation” has led to the general public expecting greater accountability from both companies and institutional investors. Nevertheless people also feel largely powerless to influence the behaviour of major corporates and institutional investors. Many people have little idea that their pension provider holds shares in major companies on their behalf. By providing individuals with a quick and easy means of contacting their pension provider, the FairPensions’ web tool enables citizens who are concerned about tar sands to engage the finance sector in demanding financially and environmentally responsible voting decisions at the BP and Shell AGMs.
These business case-focused Shell and BP resolutions have been described by Dr Simon Harris, the Head of Strategy and International Business at Edinburgh University Business School, as a “sophisticated, less banal approach … to using shareholder power”. Providing the ultimate owners of large companies with the opportunity to register their views on corporate strategy through their pension provider may be set to become a more common feature of institutional investor decision-making on topics ranging from executive remuneration to the composition of boards of directors.
FairPensions is a UK-based educational foundation which was launched in 2005 to focus on Responsible Investment in the pensions industry. Their work is based on evidence that investors who consider human rights, business ethics and the environment in their policies are not only doing what’s morally right, but what’s financially prudent.