Big banks face less pressure on climate from shareholders

Fewer proposals part of wider shift

Canadian banks face another round of shareholder proposals focused on environmental, social and governance issues at their annual meetings this year, but little new on climate.

TD faces a refiled proposal from last year that it provide more details on its transition plans, and all of the Big Six banks face a refiled resolution that they adopt a shareholder advisory vote on their environmental and climate change targets and plans.

The one notably new resolution this year is from several New York City pension funds, which are pushing RBC to report how its low-carbon energy funding compares with its fossil fuel funding.

The eight proposals contrast with the 13 filed last year that were pushing RBC, TD, BMO, Scotiabank, CIBC and National Bank to increase action on climate change.

The change at Canadian banks is part of a wider shift away from using shareholder proposals to push for climate action, said Hortense Bioy, global director of sustainability research at Morningstar Inc.

“I think the momentum is slowing down across the board,” she said. “What we are seeing is an overall lower level for ESG proposal, and climate in particular, which started last year compared with previous years.”

Part of the reason, at least in the U.S., is significant pushback from Republicans against asset managers and others from supporting these proposals.

The change is also happening in part because early resolutions were more about pushing companies, including banks, to start measuring and reporting their emissions and to set targets to reduce them.

Many, including Canadian banks, have started to do that, so proposals have been getting into the trickier territory of pressing them on more specifics, such as details on transition plans or more ambitious targets, said Bioy.

“As the climate crisis deepens, we are seeing investors wanting to push companies even more beyond just disclosing basic or minimal climate data.”

Companies generally push back and urge shareholders to reject any proposals that are overly prescriptive.

Investors for Paris Compliance was careful in its wording to avoid that criticism when pushing TD to provide more details on its plans, said Matt Price, executive director of the advocacy group.

“We’re basically just telling TD, we want to see more meat on the bone. We’re not saying what the meat has to look like.”

The bank’s plans are too vague, with little detail on how they will achieve their targets or urge clients to improve their emissions, said Price.

He pointed to what RBC’s done in recent months, such as releasing its client engagement approach on climate, and setting a target to triple renewable funding by 2030 to around $15 billion, as examples of progress.

Discussions with TD haven’t been encouraging, so the group refiled its proposal this year after getting 23.5 per cent support, along with 5.4 per cent abstaining, in their vote last year.

Price hopes to get more support this year to establish that there is growing investor demand for details.

TD said in its response that its Climate Action Plan already describes its approach, and that the plan continues to evolve as the bank engages on work toward net zero.

RBC, meanwhile, said in response to the New York comptroller’s resolution that it disclose its low carbon to fossil fuel funding ratio that it has released numerous disclosures on climate that it believes provide sufficient transparency.

The comptroller submitted a similar resolution to several U.S. banks, but withdrew it from JPMorgan after the bank committed to reporting the ratio.

Withdrawing proposals from a vote is common as the two sides talk more ahead of the proxy release.

Other proposals still facing a vote include banks disclosing their executive to employee pay ratio, holding AGMs in person, assessing how shareholder value might be affected by bank fossil fuel divestment and increased country-by-country compensation disclosure.