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By Sharon Kimathi, Energy and ESG Editor, Reuters Digital

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The battle against environmental, social and governance (ESG) policies carries on this week as proxy advisors for oil giant Shell fight for shareholder votes on climate proposals. In a blow for pro-ESG activists, investors at Warren Buffet’s Berkshire Hathaway overwhelmingly rejected climate and diversity initiatives.

Shell shareholders should vote against a climate activist resolution seeking faster emissions cuts, proxy advisory firm Institutional Shareholder Services (ISS) said, while acknowledging the merits of the proposal.

Shell investors will vote at an annual general meeting on May 23 on a resolution filed by the Follow This activist shareholder group which asks the energy giant to align with the 2015 Paris climate deal.

Scientists say the world needs to cut greenhouse gas emissions by around 43% by 2030, from 2019 levels, to have any hope of meeting the Paris Agreement goal of keeping global warming well below 2C above pre-industrial levels.

Shell has recommended its shareholders vote against the Follow This proposal. ISS, whose recommendations steer many investors’ voting, said Follow This’s “argument that intensity metrics are not a substitute for absolute metrics is entirely valid” and is echoed by ISS analysis.

A climate activist attends a protest outside Shell HQ during the company’s first investor meeting since moving to the UK, London, Britain, May 24, 2022. REUTERS/Hannah McKay

It said the merits of the activist resolution are “fully accepted” but if adopted it would “represent a change in strategy from the one that Shell has adopted” which is why ISS recommends a vote against it.

But proxy adviser PIRC on Tuesday recommended Shell investors vote against the energy company’s chair and opposed its annual report for “failing to address climate risks by setting adequate targets.”

PIRC said it, instead, recommended shareholders vote in favor of a climate activist group’s proposal seeking faster emissions cuts.

Meanwhile, Berkshire Hathaway shareholders overwhelmingly rejected six proposals for ESG changes at Warren Buffett’s conglomerate, all of which the billionaire investor and his board opposed.

By margins of at least 3-to-1, shareholders voted against three proposals that Berkshire disclose more about its climate-related risks or greenhouse gas emissions and efforts to address them, and its efforts to promote diversity.

One of the climate disclosure proposals was co-sponsored by the California Public Employees Retirement System (CalPERS), the largest U.S. public pension fund, and was rejected for a third straight year.

But the fight for pro-climate policies is not just limited to the United States as Australia’s 30 biggest pension funds increased their investments in key coal, oil and gas producers by 50% in 2022 despite the funds’ long-term commitments to net zero carbon emissions, environmental activist group Market Forces said.

Superannuation or retirement funds raised their investment to more than A$34 billion ($23 billion) in companies most responsible for expanding fossil fuels, Market Forces said.

“Super funds are making a mockery of their own commitments to net zero by buying up wholesale in companies expanding fossil fuels and letting them get away with trashing our climate,” Market Forces campaigner Brett Morgan said in a statement.

It estimated more than A$140 billion of Australians’ retirement savings are invested in fossil fuel companies through the funds, which have more than 9% of members’ share investments in these firms on average.

Brenda Mallory, Chair of the Council on Environmental Quality, Wilmington, Delaware, U.S., December 19, 2020. REUTERS/Kevin Lamarque

David Duffy, CEO and co-founder of the Corporate Governance Institute, a global education institution, shares his thoughts on the growing ESG backlash:

“I’ve been shocked by the backlash, and unfortunately, it seems that ESG is now firmly caught in the crossfire of the culture wars.

“ESG is a crucial tool for investors to evaluate a company’s long-term viability. By considering the company’s environmental impact, social responsibilities, and governance structure, investors can identify potential risks that may not be apparent in a company’s financial statements. 

“For instance, a company with a poor environmental record may be vulnerable to costly lawsuits, while a company with weak governance structures may be at greater risk of fraud.

“ESG isn’t just about the investors; it helps companies to identify opportunities to improve their operations and become more sustainable. 

“For example, we’ve seen time and again that companies prioritizing their environmental responsibilities can reduce their carbon footprint and save on energy costs, while those that invest in social responsibility can improve their reputation and attract top talent.

“To my dismay, banning ESG is regularly framed as a culture war issue, with some arguing ESG is part of a leftist agenda. This is all despite ESG not being a political issue; it’s simply a tool for investors to assess risks and opportunities. 

“Many companies and investors across the political spectrum recognise the importance of ESG and have been incorporating it into their investment decisions long before the culture wars ignited.”

India’s plans to stop building new coal-fired power plants beyond those already under construction mark a significant victory for climate campaigners keen to cap pollution from the second-largest coal user after China.

The new draft policy, which still has to be approved by the federal cabinet, would signify more aggressive climate targets by the world’s fifth-largest economy, and would leave China as the only major economy openly adding new coal capacity.

A worker harvests cherry tomato grown in desert soil inside a greenhouse at Veggietech, a start-up farm, Sharjah, United Arab Emirates, February 1, 2023. REUTERS/Rula Rouhana

Funds for eco-friendly farming and Ford testing a new fleet of hydrogen fuel-cell vans are the focus of today’s ESG Spotlight.

A U.S. and United Arab Emirates-led initiative to make the world’s farming more environmentally friendly and resilient to climate change has grown to more than $13 billion, a U.S. official said.

The Agriculture Innovation Mission for Climate (AIM for Climate) was launched in 2021 and had achieved commitments of $8 billion last November.

“Climate change continues to impact longstanding agricultural practices in every country and a strong global commitment is necessary to face the challenges of climate change head-on,” U.S. Agriculture Secretary Tom Vilsack said in a statement.

A Ford E-Transit electric van is displayed at the London EV Show, in London, Britain, November 29, 2022. REUTERS/Toby Melville

Meanwhile, Ford Motors said it will test a small fleet of prototype hydrogen fuel-cell versions of its electric E-Transit model to see if they are a workable zero-emission option for customers hauling heavy goods long distance.

Ford will lead a consortium in the three-year project that includes BP, which will focus on hydrogen and infrastructure, and British online supermarket and technology group Ocado.

“Extreme weather events are having a major impact on economies, businesses, and communities as manufacturing plants, buildings, roads, tarmacs, utilities – the foundation of how our world runs – were not built to withstand today’s climate. We’re living in a world designed for an environment that no longer exists.” 

Rich Sorkin, CEO and Co-founder of Jupiter Intelligence, a U.S.-based climate analytics firm

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