Shareholders prick carbon conscience of SA’s corporations

● It was a tale of two AGMs.

On Wednesday, outgoing Sasol chair Mandla Gantsho and members of his board faced more than three hours of aggressive questioning from shareholders at a packed AGM in Bryanston.

It was noisy shareholder democracy in action. And while accountability for the group’s $12.6bn (R184.6bn) Lake Charles debacle was one issue, much of the focus was on environmental issues — with the board having declined to table climate change-related resolutions from six large investors.

On Thursday, FirstRand chair Roger Jardine presided over an amiable AGM in Sandton, lasting less than an hour — including the vote on two climate change-related resolutions, proposed by activist investors, which the banking group’s board agreed to table.

Shareholders voted overwhelmingly in favour of one resolution, which FirstRand’s board had endorsed, but rejected the other, which the board had not supported for practical reasons.

The votes follow one on similar resolutions tabled at Standard Bank’s AGM in May and could well pave the way for more AGM action at JSElisted companies — not only on climate change but on anything from gender pay parity to safety.

It’s part of a trend in which investors globally and locally increasingly look at “ESG” (environmental, sustainability and governance issues) when they value companies. Growing appetite for sustainable investing has seen the JSE’s sustainable investment index outperform its two benchmark indices over the past three years, noted JSE CEO Leila Fourie.

Jardine said: “The whole area of ESG is growing globally. Shareholders are becoming much more interested in the behaviour of the companies they invest in, from staff practices to policies on social issues and climate change.”

As it happens, the Sasol and FirstRand AGMs came in a week in which the UN warned that the world is on course for a 3°C global temperature spike, with disastrous consequences, even if countries met commitments made under the 2015 Paris Agreement to keep global warming to below 1.5°.

Jardine said despite SA’s commitments to be carbon neutral by 2050, it is on a trajectory for a rise of between 3°and 4°. “We accept that the climate science is compelling and at FirstRand we want to be a part of a discussion that would take SA forward.”

But banks cannot do it alone: the government, trade unions and other communities need to see how SA can manage away from carbon-intensive industries. Nor is it an indulgence, he said — if SA doesn’t change, it risks losing exports (such as fruit and wine) as other countries move to bar imports from carbon-intensive countries.

The rise in activist investing on climate change issues in SA has been led by shareholders such as the Raith Foundation, a private philanthropic foundation that funds social justice projects, and Just Share, but it is increasingly being taken up by large institutional investors.

At Sasol the latest round of climate change-related resolutions, which sought greater transparency from Sasol on how its long-term greenhouse gas emission reduction strategy and executive rewards align with the Paris Agreement, was proposed by a group of asset managers led by Old Mutual and Sanlam. Having engaged with Sasol, they reportedly didn’t know until the notice of the AGM was published that the board had not tabled their resolutions.

Nor was this the first time — Sasol, SA’s second-largest carbon emitter after Eskom, refused to table similar resolutions from Just Share and Raith at last year’s AGM, citing legal opinion and committing to address the issues in its first “Climate Change Report”. Sasol has now published this, committing to reduce its greenhouse gas emissions by at least 10% by 2030 and to publish a detailed roadmap in the coming year.

New CEO Fleetwood Grobler told the AGM the group recognised that the climate change issue needed further urgent action, but this involves difficult questions of balance: “In SA … our climate change strategy has to take into account the multiple, interwoven challenges we face as a country.”

At FirstRand, Jardine also cautioned that the answers are not simple, given how integral coal is to SA’s energy fabric and the need to balance social, economic and environmental considerations in moving away from it. FirstRand recently published a coal policy that commits it to keeping its financing for new coal to no more than 0.5% of its lending book, and its overall coal financing to 2%.

It will also adopt and publicly disclose an overall policy on fossil fuel lending by October 2020 (including oil and gas) — complying with the shareholder resolution proposed by Raith and Just Share tabled at the AGM and supported by 99.92% of shareholders.

The board did not support the other resolution — to report on FirstRand’s assessment of its exposure to climate-related risks by October 2020 — essentially because it believes the time is too short for so complex a task. But the resolution still got the support of 33% of shareholders — a bit lower than the 38% who supported a similar resolution at Standard Bank.

Activist investing is being taken up by large institutional investors