We are working on applying our recently agreed climate change methodology to our fossil fuel company shareholdings. Our first task is to critically examine the data and analysis available for each of the five criteria we are using to assess companies. Our intention is to complete preliminary assessments of four companies (BP, Equinor, Royal Dutch Shell, Total) by the turn of the year. These will be subjected to a lengthy review process and we will also engage with the companies. At the same time, we expect further climate change scenarios to be published, which we will need to factor into our work.
Climate change remains at the forefront of our work and we are active in several initiatives, including attending an IIGCC meeting where we heard from Patricia Espinosa, the Executive Secretary to the UNFCCC (UN Framework Convention on Climate Change) ; We have signed an IIGCC Investor Statement to the G7 and a supporting letter published in the Financial Times. We continue to play an active part in the Transition Pathway Initiative (TPI).
We voted to support the shareholder resolution at Royal Dutch Shell brought by ‘Follow This’, a Dutch NGO. The resolution called on Shell to set and publish targets for reducing GHG emissions aligned with the Paris Agreement, with such targets including Scope I, II & III emissions. The resolution attracted around 5.5% support, with Shell arguing its published Scope III emissions ambitions represented sufficient progress.
Concern about the impact of plastic waste on the environment and in the oceans is concentrating investor attention. We have joined a collaborative initiative called the ‘Plastic Solutions Investor Alliance’ which intends to engage actively on plastic pollution and on the design and sustainability of plastic packaging. The Alliance is planning focused engagement in the UK with food retailers and consumer staples groups on reducing exposure to plastic waste and making waste streams more environmentally sustainable. It is encouraging that over 40 companies, including Tesco, Unilever and Nestlé have signed up to the UK Plastic Pact initiated by WRAP (Waste & Resources Action Programme) which has four ambitious targets including 100% plastic packaging to be reusable, recyclable or compostable by 2025.
On behalf of the Church Investors Group (CIG) we have now completed our initial engagement work on water stewardship. Using the CDP water survey, we engaged with nineteen UK and European companies to encourage greater governance, disclosure and oversight of systemic water risk. Sixteen companies responded with positive outcomes, four expect to contribute to the CDP survey in future, and a further four are actively reviewing participation. Five companies provided detailed responses on their own water management programmes. We will now review the results with CIG.
We received responses from Unilever and Associated British Foods to our concerns around labour conditions on tea plantations. These remain an acutely complex socio-cultural challenge, and one in which we have engaged in the past. Unilever’s priorities are housing and sanitation in Assam and it assured us that it is ‘driving the industry to make time-bound improvements’. AB Foods (via its subsidiary Twinings) is also leading a step-change by ‘introducing a new framework to evaluate human rights risk’. We are encouraged that parts of the industry is showing commitment to improving the lives of estate workers, and we will continue to engage pro-actively for change, albeit this remains one of the more intractable challenges for investors.
We remain actively committed to the ecumenical process known as the Mining and Faith Reflections Initiative. The churches have led fruitful conversations with mining executives over time, and are now reflecting on potential next steps that support mutually beneficial dialogue between the churches and the mining sector, and which will include shared theological principles for engagement.
During the quarter we formally joined a new partnership with FAIRR (Farm Animal Investment Risk & Return). FAIRR has led investor efforts that draw attention to the overuse of antibiotics in the farm animal supply chain, and which we have supported. FAIRR is also leading new research and engagement into the effects of protein and animal husbandry on climate change. We expect to work with FAIRR as they develop collaborative efforts around other relevant farm animal issues.
The June quarter traditionally marks the peak of the voting season in the UK and Europe. 2018 has been relatively quiet with few major pay revolts. However, the Investment Association has noted a sharp increase in shareholder protest more generally and in particular against the re-election of directors incurring 20% or more opposition. In the second quarter we opposed the re-election of 228 UK directors or 19% of the total.
We remain focused on opposing excessive executive pay but we have also strengthened our approach towards workplace fairness, boardroom diversity and climate change. Where boards have insufficient gender diversity we routinely vote against Nomination Committee chairs. Instances this quarter included Rio Tinto, BP, Smith & Nephew, WPP, Anglo American, Standard Chartered, Centrica and London Stock Exchange Group.
During the quarter we voted at 62 UK meetings, opposing or abstaining 16% of resolutions. We opposed over 60% of votes on remuneration policies and reports. In Europe, we voted at 187 meetings, and took action in 21% of cases, where re-election of directors and executive pay were the main issues of contention.