Assets managers are talking a good game on climate but failing to translate their words into action when they vote at fossil fuel companies’ annual general meetings (AGM), according to Reclaim Finance.

It assessed the policies and practices of 30 asset managers at the 2023 AGMs of 75 fossil fuel firms in their portfolios and found that engagement on climate was “cosmetic at best”, with asset managers failing to consider climate in key strategy votes.

Reclaim Finance urged asset managers to “up their game” ahead of 2024 AGMs and base their voting decisions on whether companies have comprehensive climate plans aligned with a 1.5 degree scenario, and appealed to asset owners to actively engage with asset managers to encourage them to adopt robust climate-related voting policies and practices.

While almost all the asset managers assessed had committed to engage on climate issues by joining the Climate Action 100+ coalition, support of companies’ fossil fuel expansion plans was still found to be widespread.

Reclaim Finance said its analysis showed that the majority of asset managers had weak expectations for companies, prioritising disclosure indicators over concrete climate action in their proxy voting policies and making limited efforts to engage on climate issues at 2023 AGMs.

Furthermore, it argued that they were failing to look beyond specific climate votes, which were held at just 15 per cent of the companies analysed, and very few were using routine management-proposed votes to engage with fossil fuel firms.

On average, the asset managers assessed voted in favour of 78 per cent of director re-elections at the companies analysed and only three expected companies to integrate climate-related risks into financial statements.

The analysis also showed that just 9 per cent of climate-related shareholder proposals filed at fossil fuel firms’ AGMs were approved in 2023, and only two companies that organised a vote on their climate strategy received support from more than 80 per cent of shareholders.

“Asset managers talk a good game when it comes to climate engagement, but when it comes to walking the talk, they seem to have forgotten the aim of the game,” said Reclaim Finance stewardship campaigner, Agathe Masson.

“By voting to support these developers' fossil fuel expansion strategies, they are contributing to climate disruption. Asset managers must oppose companies developing climate-damaging fossil fuel projects and vote accordingly at forthcoming AGMs.”

---