By Matt Wirz
A billionaire hedge-fund manager is bankrolling an unprecedented
campaign to force dozens of the world's largest companies to
publish carbon-emission reduction plans and put them up for
shareholder vote.
Frustrated by the pace at which corporations are cutting
emissions, Christopher Hohn is backing a global effort to speed
things up. He is working with nonprofit groups and investor
organizations to get at least 100 of the companies in the S&P
500 stock index to adopt the initiative by the end of 2022 --
voluntarily if possible and through proxy battles at annual
shareholder meetings if not.
"There will be resistance from some companies but I'm willing to
put it to the vote," said Mr. Hohn, who has used shareholder
activism to make his firm, TCI Fund Management Ltd. one of the most
profitable hedge funds in the world.
TCI has filed shareholder resolutions on the issue with Google
owner Alphabet Inc. and Charter Communications Inc., among others.
Railroad operator Union Pacific Corp., energy drink maker Monster
Beverage Corp. and online travel behemoth Booking Holdings have all
received shareholder resolutions backing the policy in recent weeks
from a nonprofit group aligned with Mr. Hohn. Similar drives are
under way in Europe and Australia.
Union Pacific is discussing the initiative, called Say on
Climate, with its shareholders and has invested in several
environmental, social and governance areas, a spokeswoman said. A
spokeswoman for Charter declined to comment. Alphabet, Booking and
Monster Energy didn't respond to requests for comment.
The success of these proxy fights will depend on the response of
much bigger money managers, like BlackRock Inc., State Street Corp.
and Vanguard Group, which can often single-handedly swing a vote.
The firms are the biggest shareholders of Alphabet, Union Pacific
and Booking, and among the largest of Charter and Monster Beverage,
according to data from S&P Capital IQ.
Mr. Hohn has publicly chastized the investing giants for what he
calls their "appalling" environmental voting records in the past,
but in private he is courting them to support this new
initiative.
Mr. Hohn might seem an unlikely environmental crusader. He is
better known for fighting management of companies like ABN Amro
Bank Holding, the London Stock Exchange Group PLC and Wirecard AG
to boost his investment returns.
But the hedge-fund manager has been a leading philanthropist for
two decades, and in recent years his $6 billion charitable
foundation, the Children's Investment Fund Foundation, has focused
more on climate change. Now he is proselytizing on the issue in
financial markets, using a combination of public shaming, cajoling
and boardroom brawling to get other investors and the companies
they own to join his campaign.
"As shareholders, we can't wait on regulators to solve this,"
Mr. Hohn said. "It's on investors to show how seriously they treat
this threat."
An advisory panel to the top U.S. commodities regulator
published a report in September saying that climate change could
pose a systemic risk to the U.S. economy, and that delay in
responding to it could be devastating. National governments are
still in the early stages of understanding how different climate
risks interact, according to the report.
U.S. regulators haven't laid down many rules on climate
disclosure. Many large companies have advertised environmental
initiatives but few commit to concretely reducing emissions. While
90% of companies in the S&P 500 publish annual sustainability
reports, only 12% have approved targets to cut carbon emissions
that are based on scientific research, according to nonprofit group
CDP Inc., which runs an environmental disclosure system for
companies and governments.
Some large money managers -- particularly those who champion
environmental, social and governance, or ESG, investing -- have
been pushing companies to reduce emissions through what they call
"engagement." They use public communication and back channels to
move management along, but rarely force change through shareholder
votes. Blackrock and Vanguard supported less than a fifth of proxy
votes on key climate resolutions in 2020, according to data from
Morningstar Inc.
"They are owners but they don't act like owners -- they treat
management with kid gloves," said Wolfgang Kuhn, a director of
ShareAction, a responsible-investment nonprofit. "Their voting
behavior is they endorse management almost 100% of the time."
Mr. Hohn used his own brand of engagement with Moody's Investors
Service, of which TCI owns 3.5%, sending the company's chief
executive a letter criticizing the low score it had received on
climate disclosure from CDP. The credit rating firm adopted Say on
Climate voluntarily in December, becoming the first U.S. company to
do so.
"Our score at the time was a D, which TCI said was
unacceptable," said Mark Kaye, chief financial officer at Moody's.
"But our score this January was an A. Say on Climate helps signal
the level of seriousness with which we want climate to be
treated."
For less responsive companies, Mr. Hohn is putting forward
shareholder resolutions and marshalling nonprofits to do the same,
then lobbying big asset managers to vote in favor of them.
BlackRock reviews every shareholder resolution on its own merits
and won't give wholesale support to the campaign, said Sandy Boss,
who joined the firm in April to run its shareholder interactions.
Still, the initiative aligns with a shift that began at BlackRock
in July to vote more aggressively on climate-related shareholder
resolutions. The firm supported eight out of nine environmental
proposals in the second half of 2020, according to a BlackRock
report. Chief Executive Larry Fink emphasized the new approach in a
public letter this week.
Supporting shareholder resolutions, "was historically a
last-resort tool, " Ms. Boss said. "Now it's a primary tool."
Mr. Hohn spoke personally to Ms. Boss last autumn to garner her
support for his first Say on Climate proxy fight against Spanish
airport operator Aena SA, a company of which he was a shareholder,
and BlackRock voted in favor of the resolution. Aena's management
initially recommended shareholders oppose the measure before
changing tack after it became clear that a majority of investors
favored it, Mr. Hohn said.
Aena disagreed with certain details of Mr. Hohn's proposal, a
company spokeswoman said. "We managed to overcome them and reach an
agreement, which is an excellent example of Aena's strong
commitment to the environment."
It remains to be seen how well this strategy will work against
companies that TCI doesn't own shares in and with which Mr. Hohn
has little influence.
The Aena vote, which passed, caught the attention of Andrew
Behar, chief executive officer of As You Sow, a leading U.S.
nonprofit that represents shareholders to engage public companies
on ESG policy implementation. A few weeks later, the foundation Mr.
Hohn founded reached out and arranged a grant for the nonproft to
start rolling out the campaign in the U.S., Mr. Behar said.
As You Sow has engaged with about 75 companies, sending them
letters asking them to voluntarily adopt the policy, while filing
resolutions against Union Pacific, Booking and Monster
Beverage.
While Union Pacific intends to set carbon reduction targets, it
has yet to do so, and neither Booking nor Monster "have established
greenhouse-gas emission-reduction targets or have goals to procure
renewable energy," Mr. Behar said.
That is only the beginning, according to Mr. Hohn.
"You only need to buy $25,000 of stock and hold it for one year
to file a shareholder resolution in the U.S. and $2,000 in Canada,"
he said. "With $12 million you can buy enough shares to file them
with every company in the S&P 500."
Write to Matt Wirz at matthieu.wirz@wsj.com
(END) Dow Jones Newswires
January 28, 2021 09:14 ET (14:14 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.
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