About Say On Climate
Say On Climate enables investors to use their influence and votes to ensure that the world’s largest companies take necessary action to limit climate change to 1.5°C. It calls on companies to publish climate transition plans and ensure annual accountability such as a shareholder vote at the Annual General Meeting (AGMs).
Why Say on Climate exists
The Intergovernmental Panel on Climate Change (IPCC), the body of the world’s leading climate scientists, has warned that greenhouse gas emissions from human activity are changing the Earth’s climate in “unprecedented” ways. This has far-reaching consequences for every company in every sector.
Without rapid reductions in greenhouse gas emissions, temperatures are likely to rise by more than 1.5C above pre-industrial levels, breaching the ambition of the 2015 Paris climate agreement, and bringing widespread disruption and devastation.
Limiting human-caused global warming requires net zero CO2 emissions. Only rapid reductions in greenhouse gases in this decade can put us on track to prevent such climate breakdown, with every fraction of a degree of further heating likely to compound the accelerating effects.
Companies are responsible for approximately 40% of global greenhouse gas emissions and only a small percentage of companies currently have a credible plan to reduce their emissions. Companies will have to make significant changes to their operations, supply chains and the products they sell to prevent some of the widespread adverse impacts and related losses and damages associated with climate change.
Accordingly, investors have an essential role to play in ensuring that the companies in their portfolios properly manage the risks and opportunities in the transition to net-zero emissions. Say on Climate enables investors to use this influence in line with climate action.
Say on Climate:
Say On Climate is an initiative involving ACCR, CDP and ShareAction with support from the Children’s Investment Fund Foundation (UK).
The details of each company’s climate transition plan will vary case-by-case but the principles of transparency and accountability are the same. Plans must include clear targets, specific actions, strong governance and an annual shareholder vote.
The first step is to enter into dialogue with company management. Debate is healthy and can lead to the right outcome without investors needing to file a shareholder resolution. If companies refuse to disclose adequate climate transition plans or any other climate-related commitments then shareholders may consider filing a shareholder resolution demanding that the company publish one. The investor’s right to file shareholder resolutions will depend on the local law where the company is incorporated. ClientEarth and Institutional Investors Group on Climate Change (IIGCC) have produced a guide for institutional investors to be used to guide them on the procedures on filing climate-related shareholder resolutions in Europe.
The United Nations Environment Programme estimates that GHG emissions need to be reduced at an average rate of 7% every year until 2030 to achieve net zero emissions. Investors must therefore ensure that companies are held accountable for their progress each year, by voting on Say on Climate proposals as well as board appointments, accounts and remuneration.
Benchmarks for measuring the quality of a company’s climate transition action plan are already widely available and continuously improving. If a company fails to make adequate improvements to its climate transition plan in response to a shareholder engagement, then shareholders may consider filing shareholder resolutions or using routine votes aimed at holding key individuals accountable for failing to implement a credible climate transition plan. These actions could include: demanding executive remuneration is linked to emission reduction targets; demanding removal of members of certain committees (e.g. audit) and/or the management or the board of the company. This approach is additional to, not instead of, other voting practices relating to climate change.
The Task Force on Climate-Related Financial Disclosures (TCFD) recommendations provide a crucial high-level framework for reporting on climate-related financial information including transition plans. The Transition Plan Taskforce provides more detailed guidance on developing, implementing and disclosing a transition plan and how this should form an integral part of wider business strategy.
No, resolutions in favour of annual shareholder votes on climate transition plans are complementary to other votes on critical climate matters, such as disclosure, audit and other board votes.
Say on Climate has primarily been used for publicly listed companies but investors can also use the Say on Climate approach for private companies to demand that management takes action to address their emissions.