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AUSTRALIA
Where banks have not met activist expectations on climate factors, in Australia, retail and institutional shareholders have shown increasing willingness to press resolutions demanding action. For example, in 2021, activist group Market Forces has lodged or backed resolutions with a number of Australian banks. This followed similar shareholder requisitioned resolutions received by a number of Australian banks in 2019 and 2020. The increased level of activism in this space has resulted in greater focus on the climate statements and targets of Australia’s largest financial institutions, in particular for banks to direct financing away from high-carbon industries to renewable initiatives.
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AUSTRALIA
UNITED STATES
UNITED KINGDOM
Market Forces has also been active in the UK, co-ordinating a shareholder requisitioned resolution at Barclays’ 2021 AGM. This called on Barclays to phase out provision of financial services, particularly project finance, corporate financing and underwriting, to fossil fuel projects and companies and to report annually on progress. The resolution received votes in favour from just over 14% of shareholders voting at the meeting. HSBC was also the recipient of a shareholder requisitioned resolution ahead of its 2021 AGM from a group of retail and institutional investors co-ordinated by the responsible investment organisation ShareAction. The resolution called on HSBC to publish a strategy and targets to reduce fossil fuel exposure in a timeframe consistent with the Paris Agreement. However, it was subsequently withdrawn when HSBC proposed its own resolution, which was supported by the requisitioners, to implement a strategy aligning lending with the Paris Agreement goals and to phase out financing of coal-fired power and thermal coal mining in the coming years. HSBC’s response highlighted a broader trend in the UK in 2021 for listed companies in a range of sectors to propose so-called say-on-climate votes at AGMs, a trend set to continue into 2022.
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ASIA
Similar themes have emerged in Asia. For example, in the past year some major Japanese financial institutions faced demands to reduce financing for fossil fuel projects. Kiko Network, a Japanese environmental NGO, has been involved in proposing resolutions at AGMs for two of Japan’s megabanks, calling on the banks to publish plans outlining their strategies to align their investments with the goals of the Paris Agreement. NGOs and activists in South Korea have petitioned the government to investigate the funding of a coal power project. Banking regulators in key Asian economies are also pursuing sustainable finance agendas, which will enhance climate risk disclosures and increase compliance standards for banks. Meanwhile, the broader global rise of ESG, coupled with greater focus by Asian regulators, is increasing pressure on the region’s banks to rethink lending policies.
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UNITED STATES
In the US, the six largest banks have all made public commitments to align their operations, including the projects and companies they finance, with core Paris Agreement targets. The US Securities and Exchange Commission has recently indicated it will be floating new ESG disclosure requirements for publicly traded companies.
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EUROPE
Calls for greener climate financing have begun to target European banks too, including following publications of policies and strategies considered insufficient by investors. Similar demands were echoed in France. During the Q&A sessions of their 2021 AGMs, several French banks were asked to strengthen their climate financing policies and end support for fossil fuel expansion. Recent responses to these requests have involved strengthened climate commitments including a reduction of their exposure to the fossil fuel industry and opting out of certain projects. Although no European banks have yet followed international peers in submitting say-on-climate resolutions, their emergence in the next AGM season is seen as likely.
Notably, regulatory developments across Europe will likely further increase climate activism in the years to come. Key examples include the 2020 EU Taxonomy Regulation, which classifies which economic activities qualify as sustainable, while the 2021 EU Climate Regulation and recent French legislation will heighten climate-driven disclosure requirements. Ongoing European negotiations over a supply chain due diligence directive, meanwhile, may also contribute to this evolving regulatory landscape.
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THE GLOBAL TRENDS WE ARE SEEING