Mark Goyder is a senior advisor to the Board Intelligence Think Tank. He’s the founder of Tomorrow’s Company and co-author with Ong Boon Hwee of Entrusted: Stewardship for Responsible Wealth Creation.
June 2022.
Not a good month for those who worry about climate.
We learned that the warming of the Northern Barents Sea corresponds to 2 to 2.5 times the Arctic warming averages and 5 to 7 times the global warming averages.
The bodies of Bruno Pereira and Dom Phillips were found in Brazil, apparently murdered by those threatened by their investigative trip in the Amazon.
The latest round of climate talks in Bonn, Germany ended with no agreement to help emerging economies deal with climate change.
Meanwhile the Business Round Table of large US companies — which claimed in 2019 to have “redefined the purpose of business” — asked the Securities and Exchange Commission to withdraw its “unworkable” requirement that they disclose their Scope 3 emissions (emissions for which they were responsible through their supply chain).
The Secretary General of the United Nations lost patience with fossil fuel companies:
“We seem trapped in a world where fossil fuel producers and financiers have humanity by the throat. For decades, the fossil fuel industry has invested heavily in pseudoscience and public relations — with a false narrative to minimise their responsibility for climate change and undermine ambitious climate policies. They exploited precisely the same scandalous tactics as big tobacco decades before.”
Less than halfway through the year, the list of extreme weather events has become longer than ever with “powerful floods, terrifying wildfires, and unusually early heat waves globally—notably those in India and Pakistan, Europe, the US, and parts of East Asia. Freak hail storms have battered Germany and Mexico City, and US forecasters expect an above-normal hurricane season. extreme weather was experienced in Europe and in North America.”
Eight weeks ago, three top climate scientists described Net Zero as our latest illusion.
A new report by Intellidex suggested that one of the biggest obstacles to the flow of capital to developing countries was the rise of ESG: many ESG strategies focus on avoiding risk — especially of the reputational sort — rather than achieving positive impact.
Optimism is difficult, Yet we can and must be positive.
We need to concentrate directly on the steps that enable us as individuals and groups to influence the outcome.
We can hit the streets and protest — although our government has decided to make it more difficult. We can use our power as consumers — I bought my first can of pale ale from Toast Ale this week after hearing the company’s story from co-founder Louise Ziane.
And we can have influence as shareholders. Consider two examples from the website of Share Action. Barclays is the number one financier of fossil fuels. Share Action found that the plan it put forward to shareholders lacked ambition. 19% of shareholders voted against the plan. Meanwhile, other activists challenged Barclays by directly disrupting the meeting for over an hour, with some glueing themselves to chairs.
Share Action has had direct success at Credit Suisse, the 28th most significant bank globally supporting Arctic oil and gas extraction. Share Action moved a shareholder resolution demanding improvements. In what it sees as “a direct success of investor pressure”. Credit Suisse has now introduced corporate finance restrictions for Arctic oil and gas and oil sands, immediately affecting companies with revenues of 25% from the Arctic, reducing that threshold to 5% by 2035.
So, if, like me, you are not tempted to glue yourself to a chair at a bank’s AGM, is there more we can do?
Yes.
We need to cut out the middleman.
In Share Power — how ordinary people can change the way that capitalism works, and make money too, Merryn Somerset Webb says: “if we are to have our say over the future of our economy, we need to do more to reunite owners of equities with the rights of owners of equities.”
And she comes up with six ideas of things we need from regulators, listed companies, and fund managers. The first two are:
- Persevere with making it easy for individual investors to get and use votes.
- Fund managers should be reporting individually to every shareholder what companies they have in their portfolios, what their companies do, what votes are coming up that might affect their behaviour, and asking shareholders for a view on how they should vote.
Somerset Webb advocates re-opening AGMs to face-to-face challenge. Plus mandatory livestreaming to those who cannot attend. Listing has become too complex, with governance codes being revised every two years. The tax system should be changed so that the favourable treatment of debt on which the less accountable and often extractive Private Equity funds rely is removed. All companies should have one NED responsible for engagement with end beneficiaries.
To this, I would add radical legislation to imitate the Welsh Future Generations Act. I would make impact on future generations a criterion for every decision made by the Financial Conduct Authority, not to mention Ofgem, Ofwat, and every other company regulator.
These changes could energise what Tomorrow’s Company has always described as the Golden Thread of stewardship, which connects ordinary savers and citizens to the ownership and direction of companies.
Last year, Engine No1, a climate-focused hedge fund, won two seats on the Exxon board for climate-focused directors. Change is possible. Be gloomy by all means, but active as well.
Some will glue themselves to chairs. Others will mobilise their shares. Let’s celebrate the conscientious disruptiveness of both.
