Shareholders at Caterpillar’s AGM last week almost nudged a proposal on climate change into the ‘approved’ column of this year’s proxy season scorecard.
According to an SEC filing, around 48 percent of votes cast supported the proposal, which requested that Caterpillar’s board issue a report ‘disclosing the company’s climate policies, performance and improvement targets, if any, responsive to each of the indicators set forth in the Net Zero [Company] Benchmark, or any rationale for failure to adopt such metrics.’
The proponent, As You Sow, suggests the report should include:
- Any net-zero by 2050 greenhouse gas (GHG) emissions reduction targets covering all relevant emissions scopes
- Any other medium or long-term GHG reduction goals
- Any climate performance elements incorporated into executive remuneration.
In a supporting statement, As You Sow notes that the Climate Action 100+ initiative (CA100) has issued the Net Zero Company Benchmark urging carbon-emitting companies to work toward reducing GHG emissions to net-zero, improving climate governance and providing specific climate-related financial disclosures.
The CA100 initiative, which is backed by more than 540 investors managing a total of around $52 tn in assets, engages with the 100 biggest GHG emitters and a further 60 companies it views as key to tackling climate change, seeking greater climate ambition and action from boards and executives.
‘Caterpillar’s climate-related targets were set through the current year of 2020 and only address the [company’s] scope 1 and 2 emissions,’ As You Sow states. ‘This leaves significant emissions unaddressed and the company’s long-term decarbonization ambition unclear. In contrast, 15 peers in the construction materials sector have set, or committed to validate, their GHG targets through the science-based targets initiative.’
Scope 1 emissions are direct GHG emissions from sources controlled or owned by a company. Scope 2 emissions are indirect GHG emissions arising from the purchase of electricity, steam, heat or cooling. Scope 3 emissions are all indirect emissions – not included in scope 2 – that arise from a company’s value chain, including both upstream and downstream emissions.
Caterpillar’s board urged shareholders to vote against the proposal. Writing in the company’s proxy statement, the board states: ‘Caterpillar has a long-standing commitment to sustainability and we already disclose our improvement targets and performance progress toward achieving climate-related objectives in our annual sustainability report.’
It adds: ‘We have demonstrated our commitment to set ambitious [ESG] goals, measure and report progress and help customers achieve their climate objectives. We announced our first set of goals in 2006, and in 2013 refined the long-term goals with new targets, including [GHG] reduction goals that concluded in 2020. We continue working on ESG objectives – including climate – and will publish new goals to enhance our performance and impact beyond 2020. We will continue to be transparent about our goals and progress, as reflected in our comprehensive sustainability report.
‘We are committed to reducing Caterpillar’s [GHG] emissions and helping our customers meet their climate-related objectives. We have significantly reduced Caterpillar’s emissions and have committed to new emissions reduction targets.’
A company spokesperson did not respond immediately to a request for comment.
‘[This] vote underscores shareholder frustration with Caterpillar’s inaction on climate,’ As You Sow president Danielle Fugere says in a statement. ‘As the economy transitions rapidly toward net-zero emissions, lagging companies like Caterpillar put themselves and their investors at risk. Business as usual is increasingly out of step with the norm, leaving opportunities on the table while increasing the risk of stranded business lines and assets.’
A number of US companies have faced similar proposals this year as investors seek specific disclosures about companies’ efforts to meet the goals of the Paris climate agreement. For example, around 98 percent of votes cast by General Electric (GE) shareholders – with the support of the company’s board – backed a proposal from As You Sow requesting that GE’s board issue a report ‘evaluating and disclosing if and how the company has met the criteria of the net-zero indicator, or whether it intends to revise its policies to be fully responsive to such an indicator.’
In a supporting statement, the group writes that a key indicator of a company’s alignment with the Paris climate change agreement is indicator 1, which seeks disclosure on whether the company has set an ambition to reach net-zero GHG emissions by 2050 or sooner and whether any such emissions ambition statement explicitly includes Scopes 1, 2 and – when applicable – the most relevant Scope 3 emissions. This is known as the net-zero indicator.
Ben Maiden
Ben Maiden is the editor-at-large of Governance Intelligence, an IR Media publication, having joined the company in December 2016. He is based in New York. Ben was previously managing editor of Compliance Reporter, covering regulatory and compliance...
