PRESS RELEASE
Amsterdam, 6 May 2024, 13:30 CEST
Two proxy voting advisors are stalling climate action by Big Oil
Investors increasingly ignore inconsistent advice from ISS and Glass Lewis.
ISS’ 2024 advice is illogical as it gives only arguments to vote for, yet recommends against.
As ISS and Glass Lewis, the largest proxy voting advisory firms, recommend customers to vote against this year’s Follow This climate resolution at the AGM of Shell, the green shareholder group releases a report of proxy advice on 23 earlier climate resolutions in 2016-2023 (table below). “Luckily, more and more investors ignore ISS and Glass Lewis when it comes to climate votes,” responds Follow This.
While the report shows that the Big Two have huge influence on shareholder voting results at oil majors, their advice is inconsistent and their influence on climate voting is waning. The 2024 ISS recommendation at Shell is outright illogical.
“Why would investors pay for advice that you can get for free from an oil major,” says Mark van Baal, the founder of Follow This that filed the climate resolutions. “In recent years, investors are increasingly dissatisfied with the proxy advice and make their own decisions on climate resolutions, resulting in increasing votes from 2.7% to 20% at Shell, despite the negative advice of both ISS and Glass Lewis.”
2024 recommendations on climate resolution at Shell
ISS proxy advice appears illogical
In its 2024 analysis (see below) presents many compelling arguments to vote for the climate resolution, yet advises shareholders to vote against. The ISS analysis, as seen by Follow This, makes the following points:
- “action in this critical decade is critical”
- “emissions must peak in 2025 and reduce by 43% by 2030”
- “merits of the case [by Follow This] fully accepted”
- Arguments Follow This are “stronger [than in 2023] given the discontinuation of the 2035 target, scaling back of the 2030 target, and growing role of LNG”
- Paris-aligned 2030 Scope 3 targets are “not part of company’s current strategy”
- Acceptance of proposal “might imply the Board must review the strategic direction”
Yet, despite these compelling arguments in favor of supporting the resolution, ISS has recommended to vote against, which appears illogical. The proxy advisor cites “uncertainty about the impact on the Company strategy” as a reason, yet fails to substantiate what this uncertainty would be.
Follow This response
“The impact of our resolution is irrefutably clear: it supports the board to align its targets with the Paris Climate Agreement (and develop the underlying strategy for reaching them) which they can show will lead to significant reductions in global emissions this decade. Shell is not able to do that with the current targets.”
Glass Lewis proxy advice (as seen by Follow This)
Glass Lewis has also advised against last week, as the advisor believes Shell is not lagging its peers: “Given the Company’s existing GHG reduction goals, and its extensive disclosure on the steps it is taking to mitigate its environmental impact, as well as insufficient evidence that would lead us to believe it is significantly lagging its peers, we do not believe that adoption of this proposal would benefit the Company or its shareholders.”
Report on proxy advice 2016-2023
Since 2016, green shareholder group Follow This has filed 23 climate resolutions at nine oil majors. The Follow This climate resolutions support the companies to align its emissions reduction targets with the Paris Climate Agreement*. None of these nine oil and gas companies have Paris-aligned medium-term targets, and all have consistently recommended shareholders to vote against the resolutions.
According to the Harvard Law School Forum on Corporate Governance, ISS and Glass Lewis, two largest proxy voting companies, together control more than 90% of the proxy advisory market.
The following conclusions can be drawn from the voting advice and voting results on climate resolutions filed at nine oil majors in the last 8 years. A table with 23 resolutions is listed below, and the full report is available via Kaja Jakubiec, kajajakubiec@follow-this.org.
1. Glass Lewis supports management far more than ISS
Glass Lewis supports management on 21 out of 23 shareholder resolutions (91%), while ISS supports 14 out of 23 resolutions (61%). In 7 cases, only ISS advised for, in 2 cases both advised for; Glass Lewis never advised in favor on their own. On average, ISS and Glass Lewis followed management in its negative advice 35 out of 46 times (76%).
2. High influence of the advice (see graph above)
The voting results show the influence of the advice: when both advisors advise against, the average vote is 14% and the maximum 30%. If ISS advises FOR, the average is 35%, and if ISS and Glass Lewis both advise FOR, the average is 57%, and votes can be as high as 80%.
3. Waning influence of the advice
In 2016, only 2.7% of investors deviated from the negative advice by voting in favour of the Follow This climate resolution. In 2021, this number jumped to 30% while in 2023 and 2024 it decreased; 20% ignored the negative recommendation and voted in favour.
In the case of positive voting advice, the influence seems to decrease as well. In 2021, positive voting advice led to majorities. In 2022, positive voting advice saw a minority of investors voting in favor.
4. Inconsistency of the advice
At Chevron in 2022, both advisors recommended for. In 2023, both advisors advised against similar resolutions although Chevron did not improve its emissions reduction targets.
At Exxon in 2022, ISS advised for. In 2023, ISS advised against. Exxon doesn’t have Scope 3 targets at all.
In 2022, Glass Lewis advised for at Chevron (that has a weak Scope 3 target) and against at Exxon (that has no Scope 3 target).
5. Inconsistency with voting recommendation policy
The voting policies of both Glass Lewis and ISS indicate they should be consistently recommending in favour of our proposals. For instance, ISS requires proposals to be compared to industry standard practices, which our resolutions do. Similarly, all Follow This climate resolutions are focused on promoting long-term shareholder value, as required by both proxy advisors.
Table showing proxy advice and voting results 2016-2023
* The first Follow This climate resolution requested Shell to invest the profits from fossil fuels in renewable energy. Subsequent resolutions requested Paris-aligned emissions reductions targets all emissions (Scope 1, 2, and 3). Initially, none of these nine oil and gas companies had targets for their product emissions (Scope 3). Today, only ExxonMobil and ConocoPhillips do not have Scope 3 targets. Although the other eight have Scope 3 targets, none of them have a 2030 Scope 3 target in line with Paris. We left the votes on the climate resolutions at Equinor out because the government owns two third of the shares and always votes with management.
