This week, shareholders at the Exxon Mobil Corp. scored an unprecedented victory. Against management's wishes, two-thirds of the investors voted to pass a proposal calling on the oil giant to be more transparent about the impact of climate change on its business. Though the reporting is non-binding, shareholders marked it as a significant win.
“Shareholder understanding of climate risk and the economics of the energy transition collided to catalyze investor voices as never before,” said Tracey Rembert, of the Christian Brothers Investment Services, one of the proposal co-filers, and a service that invests on behalf of Catholic institutions across the globe. “The timing was key, the markets have spoken, climate risk is here.”
But if the vote reflected changing priorities for investors, it also demonstrated the power of faith-based shareholders, who have emerged as crucial advocates in the global fight against climate change.
In fact, Wednesday’s shareholder vote was the second win faith-based groups have seen from Exxon this year. In January, the company announced the appointment of Susan Avery to its board of directors, making her the first atmospheric scientist to hold the position. Less than 24 hours after the historic news broke, the world’s largest publicly traded energy company made a phone call – to a group of priests.
The Midwest Capuchin Franciscan brothers answered. They are small long-term shareholders in Exxon Mobil and have been utilizing their position to file shareholder resolutions calling for a climate specialist to join the board for the past three years. The first two years were unsuccessful. But, the company was struggling with several challenges, including low oil prices and attorneys general looking into allegations that the oil giant lied about the economic threat of climate change. Then, without public warning, Avery was appointed. Exxon Mobil declined to be interviewed, but Rev. Mike Crosby, who led the resolution, told Devex he believes that the faith-based community played a key role in the oil giant’s decision.
“The fact is that we were one of the first to call for a climate change specialist [on Exxon Mobil’s board], we stayed on it and the company came back to us when they made the decision and asked us to withdraw the resolution. They were acknowledging the significance of our resolution in their decision making process,” he said.
With U.S. President Donald Trump reversing most of President Barack Obama’s climate change efforts and his announcement Thursday that the U.S. will leave the landmark 2015 Paris Agreement on climate change, there is increasing pressure for other actors, particularly companies, to step up their efforts on climate action. Just about everyone is pressuring companies: their peers, customers, and most importantly, shareholders. Within the latter group, the faith-based community has emerged as particularly vocal climate advocates. These are nuns, priests, and organizations with religious affiliations that together command hundreds of billions of dollars in assets and have the wherewithal to keep pushing for a global transition to a low-carbon economy.
People like Crosby don’t pick the investments for his organization’s $100 million portfolio ($50 million goes to an endowment fund for a residential high school and $50 million for a self-insurance fund.) At the Midwest Capuchin Franciscan brothers, that task is undertaken by the organization’s financial advisers. The advisors are prohibited from investing in companies that support human abortion and those that receive at least 10 percent of their revenue from nuclear weapons. Crosby’s job is to take note of the companies in the portfolio whose actions, in his opinion, need to change.
More or less, any person or group of people who cumulatively own stock worth at least $2,000 and hold on to it for at least a year can file a shareholder resolution in the U.S. According to the Sustainable Investments Institute, which tracks shareholder resolutions, a record setting 98 climate change resolutions were filed in the U.S. last year. Fifty-two of them, or more than half, were filed or co-filed by members of the Interfaith Center on Corporate Responsibility, the largest coalition of faith-based and values-based shareholder advocates in the U.S.
Resolutions range in difficulty. For instance, asking a company to describe what it is doing to reduce its greenhouse gas emissions is a much easier question than going to an oil company asking them to do a report on their transition to a low carbon economy.
But faith-based shareholders are not deterred. They have been advocating for environmental sustainability since at least the 1990s and started filing resolutions on climate change before the concept was clearly defined. Over the years, the faith-based community strengthened its position by partnering with larger coalitions like Ceres, making their combined voice all the more effective.
Some companies view faith-based shareholders as canaries in the coal mine, the first to inform them on emerging issues like climate change. And the faith community has often been persistent. In May 2016, two groups of faith-based investors filed a shareholder resolution with the Texas-based Occidental Petroleum Corp. Wespath Investment Management, which manages the assets of the United Methodist Church’s pension fund, and the Jewish-rooted Nathan Cummings Foundation, called on Occidental to provide a detailed report assessing the impact of climate change. The resolution received 49 percent of the vote and did not pass.
Then three factors came together to create a groundswell of support for resolutions asking for climate-related disclosures, said Dave Zellner, chief investment officer at Wespath. First, 195 nations ratified the Paris Agreement, second the Task Force on Climate-related Financial Disclosures released recommendations that gave strong support to conducting the type of scenario analysis shareholders have been requesting. And third, investors are increasingly realizing that requesting this information aligns with their fiduciary duty.
Wespath and Nathan Cummings refiled the resolution with Occidental for 2017. And last month, roughly one year after the original resolution was filed, its successor passed with 67 percent support. “We were very pleased with the outcome,” Zellner said.
Companies are more aware of climate change issues today than ever before. Nearly half of the Fortune 500 companies in the U.S. now have fixed targets to reduce their carbon footprints, according to a report published in April by a group of organizations including Ceres. And nearly two dozen companies, including Bank of America and Walmart have said that they will power their corporate operations with 100 percent renewable energy due to plummeting costs in the renewables sector. In contrast, only a handful of companies agreed to such terms a few years ago.
Meanwhile, energy giants, including Exxon Mobil and Chevron, have pledged their support for the Paris Agreement. Darren Woods, Exxon’s chairman and CEO, wrote in a blog post that the landmark agreement creates “an effective framework for all countries to address rising emissions.” But, according to the aforementioned report, both Exxon Mobil and Chevron, along with several other large energy companies, have no set targets to reduce greenhouse gases, enhance energy efficiency or plans to shift to renewables. Oil companies’ reporting of their greenhouse gas emissions remains largely voluntary, making it difficult to track independently. All that is part of the reason why despite companies’ increased knowledge of climate change issues, there’s still a need for shareholder activism, argue some investors.
“In the absence of national carbon regulation, U.S. corporate actions remain voluntary for the most part,” said Wespath’s Zellner. “Hence long-term investors are compelled to engage companies regarding the risks and opportunities associated with the transition to a low-carbon economy. We believe this type of corporate engagement supports our role as prudent fiduciaries.”
But not everyone believes that shareholder activism, especially regarding fossil fuel companies, is effective. “You can support a resolution asking for more transparency so they can report on things, but shareholder activism is not going to stop fossil fuel companies from doing what is their core business,” said Yossi Cadan, global divestment senior campaigner at the environmental group, 350.org. Cadan finds it particularly “troubling” that faith-based groups are engaging with oil companies. “I’m not sure how you can have a moral high ground, be faith-based, and say despite all that we continue to invest our money in those corporations that actually are causing already so much suffering and destruction in our world,” he said.
“350.org is insufficient in its strategy,” Crosby responded. The Roman Catholic Franciscan brotherhood that he belongs to has roughly 200 shares of Exxon Mobil, among other oil companies. Those shares are worth roughly $18,000, a tiny fraction of the multi-billion dollar business. “Nothing changes because we divested our shares [and] somebody else picked it up on Wall Street who doesn’t care about climate change.”
It’s difficult to determine how effective faith-based shareholder activism is. But in general their success rate is as mixed as it is with other investors petitioning companies. “It’s often been very effective and other times the company will push back and say no,” said Tim Smith who was the head of the ICCR for 24 years and is now working for an investment company, Walden Asset Management, as its director of Environmental, Social and Governance Shareholder Engagement.
Influencing companies to shift their behavior can also be a lengthy process and some members of the faith-based community face the additional challenge of being questioned for their business acumen. “They sometimes get put in a ‘do good investor’ category as a way to marginalize them. However, after an engagement starts with faith-based investors, companies often see that they have done their homework, are well informed and often propose actions that make good business sense,” Smith said. “Clearly they’re overcoming any simplistic categorization.”
This piece is the second in a three-part series looking at the role faith-based organizations and individuals play in combatting climate change. Read the first story, For faith-based organizations, climate change is a natural fit, here.