In a single day on 26 May this year, the world witnessed how societies’ values can affect financial value. Royal Dutch Shell, ExxonMobil and Chevron – three of the world’s biggest publicly traded oil and gas companies – suffered a climate backlash from courts, activists and their own shareholders.
As more investors begin to integrate sustainability considerations, the motivations are shifting from managing headline risk to addressing the very real vulnerabilities of their portfolios to climate-related financial risk and supporting policy efforts to achieve net zero (especially for public asset owners such as sovereign funds and public pension funds). This in turn is motivating active ownership and shareholder engagement strategies that can be more effective at steering companies in a sustainable direction. Developments in disclosure regulation and data availability are also enabling investors to engage more intensely in sophisticated strategies that require better information for their execution.
This edition of the SPI journal invited contributors to share their insights on shareholder activism and active ownership investment strategies. Representatives from Milieudefensie, the group behind the Shell court case, speak of a ‘sea change’ (p 14) in how the world views the responsibility of financial institutions in funding fossil fuels, while Anne Simpson of CalPERS describes the ‘Exxon effect’, welcoming the news as an indication of ‘how capitalism really is meant to work’ (p 12).
Public asset owners responding to this year’s OMFIF Global Public Investor survey indicated that they are intensifying their efforts in deploying their money in sustainable ways (p 8). A group of eminent signatories, including Christiana Figueres, Olivier Blanchard, Jeffrey Sachs, Nick Stern and others, is calling for Norway’s sovereign fund to join the Net Zero Asset Owner Alliance and ‘align its global voting guidelines with the objective of reducing total portfolio carbon emissions to net zero by 2050 or sooner’ (p 15). By all accounts, the pieces in this month’s journal indicate that despite the continued alertness and focus on recovery from the pandemic, climate remains top of the agenda. The events in May are very likely just the beginning of what is yet to come.