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European banks’ AGMs dominated by climate as boards face shareholder pressure on fossil fuel expansion

Yet another AGM season is coming to a close – and we’re another year closer to the all-important 2050 north star.

Yet another AGM season is coming to a close – and we’re another year closer to the all-important 2050 north star.

Across the globe, banks have been quick to join the growing momentum pledging a net-zero future.

With 2050 as the deadline, decisions made by bank’s today will decide whether or not they reach this goal – and do their bit to holding the worst impacts of climate change at bay.

Yet, those impacts are already hitting home. In the summer of 2021, Europe saw extreme weather events including the hottest day and warmest summer to deadly wildfires and floods.

With this crisis knocking on our doors, it was a huge focus for shareholders heading into the 2022 AGMs season.

For the first time some banks put their climate plans to a vote, while shareholders challenged others to do more by filing shareholder resolutions.

Here’s some key trends we saw in 2021 that banks would be wise to take notice of.

Fossil fuel expansion was firmly on the agenda

Last year, the conservative energy body – the International Energy Agency (IEA) – warned that to have a 50 per cent change of holding global heating to 1.5C by 2050, there could be no new oil and gas projects.

So, the question facing many banks is with that warning in mind, why do they continue to finance new oil and gas activities.

This AGM season boards of most banks faced questions and often a grilling on the topic.

ShareAction attended or submitted question at the AGMs of 13 European banks. Alongside other campaigners and investors, we asked tough questions about banks fossil fuel polices and how they plan to address the conclusions of the IEA across their climate strategies.

The responses were mixed.

Some banks are now adopting the IEA’s net zero emissions by 2050 pathway into their targets. But very few would endorse the IEA’s finding about new fossil fuel projects.

One chairman said the findings ‘can be interpreted in different ways.’

At HSBC, a statement on behalf of a group of institutional investors was read out, with one of the asks that the bank ceases any direct financing of new oil and gas projects.

After HSBC’s commitment to update its coal, oil and gas policies by the end of 2022, the pressure now needs to be maintained to ensure these policies match up to its 1.5C ambition.

Say on Climate plans failed to impress shareholders

This AGM season saw the first ever ‘say on climate’ votes at European banks.

Popularised by the Say on Climate initiative, they allow companies to produce a plan to disclose and manage their emissions and put this to a shareholder vote at their AGM.

But they have been criticised for allowing companies to secure a mandate on climate plans that are not ambitious enough to respond to scale and urgency of the climate crisis.

UBS was first up in April. The bank gave shareholders just over three weeks to digest its climate roadmap.

The roadmap included 2030 targets to reduce absolute financed emissions by 71 per cent in its loans to fossil fuel companies.

But the strategy failed to include capital markets activities in its targets or update any of its fossil fuel policies.

The plan passed with 77.74 per cent of the vote.

Far lower than any other management backed proposal and less than fossil fuel giants Shell and BHP Say on Climate votes the previous year.

Another bank that put their climate strategy to the test was Barclays.

Barclays is still the number one financier of fossil fuels since the Paris Agreement, so its climate strategy is critical to reducing carbon emissions.

ShareAction analysed the plan it put forward to shareholders and found it ‘lacked the ambition needed to address the climate crisis’, as it failed to make any updates to its oil and gas policy.

Climate wasn’t just put onto the agenda of the meeting by the bank.

Dozens of organisations asked Barclays a question connected to climate, and there were peaceful protests inside and outside the AGM.

Activists challenged the bank on its fossil fuel financing, disrupting the meeting for over an hour, with some gluing themselves to chairs and refusing to be silenced.

When put to the vote, 19.19 per cent of Barclays shareholders voted against the plan, signalling that a significant number of investors want the bank to be more ambitious in its strategy.

The question now is whether these banks will make meaningful updates to their strategies as a response to these votes?

We’ll be keeping a close eye on their next moves.

Resolutions reached new regions as investor pressure saw fossil fuel policy updates at Credit Suisse

Another milestone for this AGM season was the first ever shareholder resolution filed at a Swiss Bank.

A coalition of 11 investors brought the proposal forward in March this year.

It was an important opportunity for the bank to step-up on climate, as well as a way for it to repair trust after a string of scandals.

Credit Suisse responded to the resolution by pledging to update its Arctic oil and gas and oil sands policies to appease shareholders.

Although ShareAction and investors welcomed these commitments, which are an important step forward, they were not enough to withdraw the resolution as shareholders retained concerns about other aspects of Credit Suisse’s climate strategy

We now have the details of the new policies, which are a direct success of investor pressure.

Credit Suisse has introduced corporate finance restrictions for Arctic oil and gas and oil sands. This means the bank will immediately start restricting companies with revenues of 25 per cent from Arctic oil and gas extraction, phasing down every few years to five per cent of revenues by 2035.

This is a significant win. Credit Suisse was found to be the 28th bank globally supporting Arctic oil and gas expansionists by Reclaim Finance last year. We hope Credit Suisse’s commitment will inspire others to take similar action.

Yet we remain cautious as even at a five per cent revenue threshold this could leave some exposure to financing Arctic oil and gas through diversified players.

Although Credit Suisse updated its definition of Arctic, the bank could go further and follow leading practice by aligning its Arctic definition with that of the Arctic Monitoring and Assessment Programme (AMAP).

For oil sands, Credit Suisse will no longer finance companies with revenues of 25 per cent from this sector, which would likely restrict financing to the major oil sands players and is a positive move.

Concerningly, the bank has left a backstop to continue to finance pure play oil sands companies above this threshold if they have ‘materially reduced their overall emissions intensity over time’ and intend to continue this.

Additional information is needed about how Credit Suisse will assess these pathways and what other factors will be taken into account. Oil sands are renowned for their significant environmental and social risks.

Despite our concerns, we welcome and recognise the progress of these policies, and are encouraged at the speed of which they have been deployed, a sure sign that the bank can make progress in a number of other areas as fast?

Different AGM formats and diverse voices offer increased scrutiny for banks

One unique element of the 2022 AGM season was the range of AGM formats banks chose.

Some returned to in-person AGMs. Others kept to completely closed online AGMs, and many opted for a hybrid model - allowing shareholders to attend in-person as well as virtually and ask questions in both settings.

Both Credit Suisse and UBS kept to closed AGMs citing Covid-19 as the reason, a move criticised by Ethos Foundation for restricting shareholder scrutiny.

This wasn’t just an aspect of the European AGMs. In April, it was reported that the AGM of the Royal Bank of Canada moved online at the last minute to avoid Wet’suwet’en Chiefs confronting the bank’s board.

European banks did face questions from affected communities.

Deutsche Bank received statements and questions from people on the frontlines of EACOP, and Barclays was asked a question on behalf of communities affected by fracking in the US.

A long-term high value client of the Barclays asked why the bank wasn’t doing more to ensure a liveable planet and warned of withdrawing all its business.

Some banks also faced questions about their diversity practices and disclosures for the first time by ShareAction.

Although there is still far more work to do to give the people most affected by banks financing decisions a voice at these meetings, many banks received pressure from more viewpoints than ever before.

What’s next?

Although too early to tell what will be in store for next season, but it is likely more banks will be putting their climate strategies to a vote.

This season bank boards have felt the pressure and we hope they will step up their climate commitments in the coming months.

Now it is the responsibility of investors to use their power to engage with banks and hold them accountable to their shareholders concerns.

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