Norway’s $1.4tn oil fund will step up its use of shareholder proposals to send messages on environmental, social and governance topics to US companies after quietly testing them out at a small number of annual meetings.
The world’s largest sovereign wealth fund filed shareholder proposals on climate for the first time this year at four US companies but did not publicise them until now, its head of corporate governance told the Financial Times.
Two companies — Packaging Corporation of America and Marathon Petroleum — gave commitments on climate so the fund withdrew its proposals while in two others — NewMarket and Westlake — the annual meeting voted on the oil fund’s motion.
“It was a new thing for us. It’s a test case with four companies,” said Carine Smith Ihenacho, the Norwegian fund’s chief corporate governance officer.
She added that the fund considered the trial a success and would probably step up use of shareholder motions in the future.
“We would like to do more on climate but also consider other areas across the ESG spectrum,” she said. “It will most likely be in the US.”
Norway’s oil fund is one of the most influential investor voices on ESG, owning on average 1.5 per cent of every listed company in the world.
For decades it was worried about being too outspoken as a shareholder, but in recent years it has taken a more active stance, becoming the first big shareholder to declare how it will vote at the annual meetings of all 9,000 companies it owns five days in advance.
It is also stepping up its demands for all companies to set various targets to ensure they have net zero carbon emissions by 2050 — and its four test proposals this year asked the selected businesses to do that.
“The beauty of it is that sometimes we see shareholder resolutions where we agree with 70 per cent, or 40 per cent, or 80 per cent. With this we get our views out there,” Ihenacho said.
She underscored that filing a shareholder motion was a last resort, and particularly suited to companies in the US, both because it was easier to file proposals there and because American companies lagged behind their European counterparts in ESG matters.
“I see the shareholder proposal as a very nice add-on. It may become quite an important tool. It is nice to be able to formulate our own proposal to companies. With the experience we have had we definitely see it as a strong add-on,” she said.
But she stressed that voting “consistently” at annual meetings and dialogue with companies and their boards would remain the most important tools. “We will never reach that many companies with our proposals. It is a time-consuming and resource-intensive tool,” she said.
At NewMarket, a producer of lubricant and fuel additives which has a free float of 72 per cent, the oil fund’s proposal received the support of 28 per cent of shareholders, with 60 per cent against and 12 per cent abstaining. Westlake, a chemicals and plastics company, will disclose the results of last week’s annual meeting by Wednesday.
The fund filed 21 shareholder proposals at 13 US companies between 2009 and 2015 on proxy access and splitting the role of chief executive and chair, but has not filed one since and had not previously done so on climate.