John Galloway is global head of investment stewardship at Vanguard, Inc. This post is based on a publication by Vanguard Investment Stewardship. Related research from the Program on Corporate Governance includes Social Responsibility Resolutions by Scott Hirst (discussed on the Forum here); The Agency Problems of Institutional Investors by Lucian Bebchuk, Alma Cohen, and Scott Hirst (discussed on the Forum here); Index Funds and the Future of Corporate Governance: Theory, Evidence, and Policy by Lucian Bebchuk and Scott Hirst (discussed on the forum here); and The Specter of the Giant Three by Lucian Bebchuk and Scott Hirst (discussed on the Forum here).
“Say on Climate” proposals encourage companies to disclose climate-related risks, targets, and transition plans in line with the reporting framework created by the Task Force on Climate-related Financial Disclosures (TCFD), a framework that Vanguard supports. By enabling shareholders to vote on these disclosures, companies gather important feedback on how their climate strategies relate to the goals of the Paris Agreement and meet shareholder expectations. While robust disclosure alone is not a guarantee of a credible transition plan, it is a key component that will enable investors to make informed decisions.
In recent months, we have seen an increase in the number of Say on Climate proposals presented to shareholders at company annual meetings. The specific form of these Say on Climate proposals varies by region and in specific details, but generally includes three requests:
- Annual disclosure of greenhouse gas emissions and progress on goals
- Disclosure of the company’s strategic plan for reducing future emissions and managing climate-related risks, and
- The right for shareholders to cast recurring votes on the company’s climate plan or report
Some companies have put forth Say on Climate votes as management proposals, while others have publicly opposed shareholder proposals on the topic. And in some cases, a company has come to an agreement with an activist group on future plans, which has led the group to withdraw the proposal.
