Companies and investors lock horns over sustainability ahead of annual meetings

BP joins AT&T, Chubb, PepsiCo, Axon and BJ’s Wholesale Club in blocking shareholder proposals on environmental and social issues

BP has become the latest firm to face legal threats from its shareholders over a decision to stop them voting on sustainability-related proposals. 

It was revealed this week that the British oil major planned to block a climate resolution filed by Dutch non-profit Follow This, on behalf of 16 institutional investors.  

The decision is the first of its kind in the UK, according to Lindsey Stewart, director of institutional insights at Morningstar.  

“I can’t think of any other circumstances in which a resolution that has been properly filed and meets all the right thresholds has just been excluded in this way,” he says, describing the move as “pretty extreme”. 

Follow This has threatened to take legal action if BP doesn’t back down and let investors vote on its request for more information on how the firm plans to maintain shareholder value if demand for oil and gas drops.   

While the case may be ground breaking for the UK, it’s part of a growing global trend. 

A handful of US companies and their ESG-focused shareholders have already locked horns this proxy season. 

Telecoms firm AT&T was sued by four pension funds in New York City last month, after refusing to table their proposal on Diversity, Equity & Inclusion disclosures. 

A U-turn swiftly followed, and AT&T will allow the vote. 

Likewise, PepsiCo has just climbed down after a legal challenge over its decision to exclude an animal welfare resolution, and the Nathan Cummings Foundation settled a case against taser specialist Axon Enterprise, after the firm agreed to skip the voting process entirely and fulfil the foundation’s request for more information about political spending. 

There are ongoing cases against BJ’s Wholesale Club, which doesn’t want to accept a proposal on deforestation, and insurer Chubb, which is being asked to let shareholders vote on whether it should consider pursuing entities responsible for climate-related losses.

Legal clashes like this used to be rare. 

The surge in the US is partly fuelled by the Securities & Exchange Commission’s recent decision to play a less active role in deciding which proposals are acceptable.  

The financial regulator has been open about its desire to curb shareholder influence, and embolden company management to push back against environmental and social demands.  

Stewart sees a potential link between developments in the US, and BP’s move to block a climate proposal in London.  

“Companies were looking left and right at what everyone else was doing when there was more enthusiasm for sustainability and climate considerations,” he says, referring to the spike in ESG proposals between 2019 and 2023.  

“And the same is happening on the way down.” 

Firms will now be watching to see how things unfold at BP.  

“I think companies will certainly be following what’s happening here, and thinking about what it means for their relationships with shareholders,” predicts Stewart.

Regardless of the outcome, he expects BP’s initial resistance to prompt a broader “chilling effect”, which may discourage institutional investors from co-filing proposals in the future. 

“The threat of litigation certainly isn’t going to help,” he tells Real Economy Progress. 

“Institutional investors will tend to only want to be involved [in shareholder proposals] where there’s an ordinary dialogue going on.”

BP’s annual general meeting takes place on the 23rd April.