Why SHARE is engaging with oil & gas companies on climate change lobbying

By October 15, 2019News

By Sarah Couturier-Tanoh, Shareholder Engagement and Policy Analyst

Early in 2019, a report revealed that five of the world’s largest oil producers spent US$1 billion on lobbying to block climate change policies 2016. These large-scale resources reflect the extent of the efforts by the sector to undermine policymakers’ attempts to fight global warming.

Even as some energy sector leaders publicly endorsed the Paris Agreement, they engaged in intensive direct lobbying and financed trade associations, think tanks or political campaigns that hindered development of effective climate regulations. The misalignment between corporate rhetoric and political advocacy represents a significant threat for the fulfillment of the Paris Agreement goals, and the failure to meet those goals – to limit warming to below 1.5 degrees Celsius – also constitutes a material risk for investors.

Companies’ participation in public policy processes can contribute to business strategies and to better policy decisions, both of which can benefit the company’s stakeholders including shareholders. However, it can also generate business risks, especially when lobbying activities are not consistent with the companies’ expressed goals and the best interests of shareholders.

Recently, SHARE joined Climate Action 100+, a coalition of 200 institutional investors led by BNP Paribas, CalPERS and CalSTRS and representing more than US$6.5 trillion in assets, urging 47 US companies to align their climate lobbying with the goals of the Paris Agreement[2]. Shareholder activism on lobbying issues is not new or uncommon. Lobbying shareholder proposals are the most commonly filed proposal in the US, including many filed by SHARE members. What is unique about this initiative is that it is calling out the largest GHG-emitters on the way that lobbying specifically affects humanity’s greatest environmental challenge.

Within Canada, SHARE also approached 28 companies listed on the TSX Energy index earlier this year requesting them to provide additional disclosure on their lobbying activities and political spending. This Canadian-tailored initiative seeks to improve the level of transparency in the oil & gas industry on climate lobbying and to improve board accountability for the company’s actions. SHARE has had dialogue with close to half of these companies and the engagement continues. Although it is too early to assess the overall impact of this engagement on the state of transparency in climate lobbying in Canada, our initiative has served to educate companies about — and help them respond to – investors’ expectations.

When a company is a member of trade associations that are active lobbyists, we look assess how that lobbying activity is aligned with the goals of the Paris Agreement commitments. Royal Dutch Shell recently released an evaluation of its own trade association memberships[3]. As a result, the company left one association (the American Fuel and Petrochemical Manufacturers, some Canadian producers are also members) and putting nine others on watch – including the Canadian Association of Petroleum Producers. Other companies would do well to follow suit.

SHARE will continue its engagement with Canadian companies and will expand this engagement with global companies in collaboration with the Climate Action 100+ group in 2020.

Learn more about SHARE’s work on Climate Risk.

[1] InfluenceMap, https://influencemap.org/evoke/384047/file_proxy

[2] Ceres, 200 Investors Call on US Companies to Align Climate Lobbying with Paris Agreement, https://www.ceres.org/news-center/press-releases/200-investors-call-us-companies-align-climate-lobbying-paris-agreement

[3] https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=2&cad=rja&uact=8&ved=2ahUKEwiMyM_NsI_lAhWrTt8KHT5cCtAQFjABegQIBRAC&url=https%3A%2F%2Fwww.shell.com%2Fsustainability%2Ftransparency%2Fpublic-advocacy-and-political-activity%2F_jcr_content%2Fpar%2Ftextimage.stream%2F1554466210642%2F0a46ab13e36e99f8762ebb021bd72decec2f47b2%2Ffinal-industry-association-climate-review-april-2019.pdf&usg=AOvVaw05PPIQhA40ZSlKwL8KpTVt

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