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Opinion: Shareholder pressure works

Wednesday, June 16, 2021

Many insurers, pension funds and banks invest in companies that demonstrably cause damage to people, animals or the planet. If that is the case, the NGOs that work together in the Fair Finance network expect those investors to have a meaningful and time-bound dialogue with these companies, and/or to exert public pressure. That is also what international guidelines, such as the OECD Guidelines for Multinational Enterprises and the Paris Climate Agreement, require of them.

In the past year, NGOs asked insurers, pension funds and banks to exert pressure as shareholders on companies in various sectors such as:

  • Arctic oil and gas extraction;
  • Arctic mining;
  • Companies working closely with the military junta in Myanmar;
  • Oil companies in the field of the climate crisis;
  • Pharmaceuticals on better access for developing countries to vaccines and medicines and combating tax avoidance;
  • Companies involved in tax avoidance
  • Companies involved in violations of labor rights and human rights

It differs quite a bit how investors react to this. Some contact NGOs. For example, they want to collaborate strategically and exert targeted pressure on companies. Some investors enter into discussions with companies, but the outcome remains weak or invisible. Some stick their head in the sand.  Still others try to put pressure on companies both behind the scenes and publicly, and feedback whether or not something comes of this. 

A few are even prepared to attach consequences to this: if dialogue or public pressure does not yield sufficient results within a reasonable period of time, the investment is stopped because it can no longer be justified.

When shareholder pressure has paid off:

  1. In May and July 2020, Russian miner Norilsk Nickel was again responsible for a major environmental disaster in the Russian Arctic, as it had been in 2016. ABP and ING are investing heavily in this company, and NGOs called on them to put pressure on them to reduce the damage and to tighten structural policies on arctic oil and gas extraction and mining. ABP published a statement saying "dialogue with Norilsk Nickel intensifies". This is great, but it would be even better if ABP would also publish whether this dialogue yielded concrete results, and to tighten up their policies on this topic.

  2. In January, then-US President Trump asked oil companies to drill in a nature reserve in arctic Alaska. Nationale Nederlanden sent a letter to the oil companies in which NN invests requesting them not to drill. In the end, oil companies gave up and Trump's plan backfired. Heavy pressure from US civil society, investors from multiple countries and political changes in the US may have contributed to this. It was also positive that Achmea, for example, tightened its policy on arctic oil and gas extraction. In June, President Biden suspended all permits to drill for oil and gas in the nature reserve.

  3. Several insurers, pension funds and a single bank responded positively to requests from NGOs to put pressure on companies in Myanmar. ASN Bank entered into talks with two telecom companies that may inadvertently become involved in censorship in Myanmar. One of those companies recognized this risk and signed a statement from the Myanmar Center for Responsible Business. The bank decided to exclude the other company because it did not recognize the risks and was not interested in taking steps to prevent involvement in human rights violations. Two other banks refused to act in response to requests from NGOs and a third did not respond at all to requests to do so.

    Various insurers and pension funds reacted more positively. ABP successfully pressured South Korean steelmaker Posco C&C on its links to military-controlled company. ABP, various insurers and a bank also engaged in dialogue with the French oil company Total. Following this mounting pressure, Total stated on May 26 that 'cash distributions to the shareholders of the company have been suspended. 

    A positive move, but the vast majority of Total's payments to the military junta continue. In recent weeks, various insurers and pension funds have expressed interest in signing an investor statement addressed to Total.

  4. In 2021, no oil company is pursuing a sufficiently concrete climate policy that is in line with the goals of the Paris Climate Agreement. Milieudefensie and other NGOs achieved great legal success in May when a Dutch court called Shell's climate policy 'not concrete and full of conditions' and forced Shell to achieve a net 45% reduction in CO2 emissions by 2030 compared to 2019. Various Dutch insurers, banks and pension funds also exerted pressure on Shell through dialogue and support for the 'Follow This' shareholder resolution. For the first time PFZW also supported. Unfortunately, ABP did not.

    In May, shareholders critical of ExxonMobil's grossly inadequate climate policy successfully pushed for representation and are now also on the board. In May, 61 percent of shareholders also voted in favor of Chevron's firm climate ambitions in the Follow This climate resolution.

  5. In 2019, the Fair Insurance Guide published a practical study on access to affordable medicines and tax avoidance by pharmaceutical companies. Some insurers have been exerting shareholder pressure on pharmaceutical companies for several years now. On a positive note, Aegon joined this in 2020. Several insurers and NGOs collaborated in 2020/21 to target pharmaceuticals through behind-the-scenes engagement, investor statements and shareholder resolutions.  Oxfam and Achmea jointly submitted a shareholder resolution to Johnson & Johnson. Resolutions at both Pfizer and J&J received over 30 percent of the vote. Several pharmaceutical companies were prepared to enter into discussions with insurers. Some announced steps for more affordable covid-19 vaccines. NGOs are requesting additional steps in areas such as the release of patents . In addition, it remains that pharmaceutical companies are still doing little to combat large-scale tax avoidance.                                                                                                                                  
  6. Following a report by the Fair Insurance Guide on arms trade, Athora NL (former Vivat), together with Achmea, among others, entered into a discussion with an arms company.

  7. At the end of 2020, Oxfam published research showing how oil companies, including Total, are avoiding tax via the Netherlands. Uganda for example is missing out on millions in tax revenue. The study's recommendations provided guidance for investors in Total, such as pension funds and insurers. A large insurer entered into talks with NGOs and announced that it would enter into a dialogue with Total about its tax avoidance. A large pension fund took the recommendations from the study seriously and wrote to NGOs that it 'wants to strongly promote transparency in companies about their tax position as part of tax policy and to make it clear in discussions with companies that we expect transparency on this subject from them, that the tools that GRI (Global Reporting Initiative) and public CbCR (Country by Country Reporting) offer are very important to us in this regard.'

  8. Oxfam America, along with others, filed shareholder resolutions on labor rights and human rights earlier this year to Amazon, and again to food company Kroger. NGOs contacted insurers in the Netherlands that invest in these companies to exert pressure through dialogue and support for shareholder resolutions. Actiam stated that it supports both resolutions. Kroger published much improved human rights policy prior to its shareholders' meeting, after which Oxfam America withdrew its resolution  .

NGOs can and want to help banks and investors to address companies about their negative impact on people, animals and the planet. Sharing knowledge and looking together for good moments to increase shareholder pressure on companies can make sense. 

But what cannot continue are years of pointless conversations without results, or minuscule steps by companies that nonetheless earn big revenues. In the absence of good will or actual results by companies, shareholder pressure for their exclusion from investment funds should be inevitable.

Peter Ras

Written by Peter Ras

Project Leader Fair Finance Guide Netherlands, and Senior Policy Advisor Development Cooperation and Transparent & Accountable Finance Oxfam Novib

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