Shareholders call for companies to respond to environmental concerns

Investors vote on the first of three shareholder resolutions proposed at Rio Tinto, Anglo American and Glencore AGMs this week calling for reporting by these mining companies into how they are managing carbon emissions and investing in low-carbon energy research and development. Rio Tinto at its AGM last Thursday (14th April) was the first company to face a vote although the results will not be available until after the Australian part of the dual listed company has held its AGM next month. The company has already said that it would back these calls for greater disclosure. Anglo American’s AGM is next week and Glencore’s is next month.

The resolutions were proposed by the Aiming for A investor coalition which was originally launched in 2012 by the CCLA, which manages investments for charities, religious organisations and the public sector. The resolutions attracted support from UK and overseas institutional investors. The Local Authority Pension Fund Forum, which is a member of the coalition, reported that the boards of Anglo American and Glencore had also backed their demands.

Similar resolutions were proposed by the coalition of investors last year at the AGMs of oil companies BP and Shell, which were also supported by the company boards, were passed with 95.84% of the votes in favour. However there has been disquiet that BP has not moved far enough to meet the demands of the resolution and its business activities may be continuing to harm the environment.

BP, which also held its AGM on Thursday, faced criticism from responsible investor campaigning groups such as the UK’s ShareAction for its plan to drill for oil in the Great Australian Bight (GAB) from October 2016.

ShareAction said BP was not publishing an environmental report on the project and the lack of transparency is one of numerous financial risks associated with the project which were outlined in a briefing it has produced with The Wilderness Society. The briefing points out the high associated infrastructure costs of the project, which have led to an estimated average break-even barrel price of $104. BP has stated publicly its objective for projects to break even at $60 per barrel.

The briefing also questions the viability of the project in light of the COP 21 agreement to limit rises in global temperatures to well below 2°C, with an ambition for 1.5’, and the increase in regulation likely to accompany this. BP’s reporting against the shareholder resolution on climate risk, passed last year, is weak, the authors believe. The company has not disclosed a business plan for a transition to 2°C, and continues to forecast demand scenarios of 4-6°C. The 9bn barrels of oil estimated in the Bight, if burnt, would produce almost eight times Australia’s annual GHG emissions which will raise questions among investors about BP’s commitment to meaningful action on aligning its business strategy with a 2°C scenario, according to the report.

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