We value the constructive dialogues we have with the boards of our investee companies. We believe healthy challenge underpins successful corporate governance. The spectre of corporate litigation against shareholders risks creating a chilling effect, weakening investor oversight of boards.
To this point, we are pleased to share that we have signed a public statement alongside 38 other global investors representing $5.2 trillion in assets. This is in response to Exxon Mobil’s board decision to take legal action against two small shareholders: Follow This and Arjuna Capital.
The investors filed a shareholder resolution asking Exxon to accelerate the pace of greenhouse gas emissions reductions in the medium term, in keeping with global efforts to combat climate change. In response, Exxon is pressing charges against the investors. Despite the resolution being withdrawn, Exxon has decided to proceed with the case against Arjuna (Follow This was removed from the case by an early court decision).
Why this matters for investors
We are not significant shareholders in Exxon, but this action has potentially far-reaching consequences for all investors on two levels. First, it seeks to frame climate change as a narrow campaign issue, rather than a systemic economic threat. This undermines urgently needed action to protect future prosperity. Second, it risks weakening corporate governance standards and, in turn, market efficiency in the world’s largest capital market, with potential reverberations globally.
As long-term stewards of our clients’ assets, we view climate change as a material threat to long-term value creation. Global scientists paint a stark picture of probable and severe consequences for humanity. The transition towards a low-carbon economy will lead to disruption, posing challenges to fossil fuel companies like Exxon, but it also introduces opportunities for those offering cleaner alternatives. Against this backdrop, we believe it is important to press companies to build alignment with a 1.5°C-temperature pathway, thereby ensuring resilience for the company concerned and the broader economy.
This investor statement, however, is not just about the right of shareholders to press for action on global warming. It is, above all, about shareholder rights to raise legitimate concerns with company boards. Critically, Exxon has chosen to bypass the normal avenue for appealing these resolutions to the Securities and Exchange Commission, raising questions over the stability of the existing regulatory regime set up to protect shareholder rights.
Were investors to pull back from their responsibility to hold boards accountable, it could have far-reaching impacts on market efficiency and wealth creation. This should concern board directors and regulators as much as shareholders.
Important information
This document is intended for retail investors and/or private clients in the US only. You should not act or rely on this document but should contact your professional adviser.
This document has been prepared by Sarasin & Partners LLP (“S&P”), a limited liability partnership registered in England and Wales with registered number OC329859, which is authorised and regulated by the UK Financial Conduct Authority with firm reference number 475111 and approved by Sarasin Asset Management Limited (“SAM”), a limited liability company registered in England and Wales with company registration number 01497670, which is authorised and regulated by the UK Financial Conduct Authority with firm reference number 163584 and registered as an Investment Adviser with the US Securities and Exchange Commission (“SEC”) under the Investment Advisers Act of 1940. The information in this document has not been approved or verified by the SEC or by any state securities authority. Registration with the SEC does not imply a certain level of skill or training.
In rendering investment advisory services, SAM may use the resources of its affiliate, S&P, an SEC Exempt Reporting Adviser. S&P is a London-based specialist investment manager. SAM has entered into a Memorandum of Understanding (“MOU”) with S&P to provide advisory resources to clients of SAM. To the extent that S&P provides advisory services in relation to any US clients of SAM pursuant to the MOU, S&P will be subject to the supervision of SAM. S&P and any of its respective employees who provide services to clients of SAM are considered under the MOU to be “associated persons” as defined in the Investment Advisers Act of 1940. S&P manages mutual funds in which SAM may invest its clients’ assets as appropriate. To the extent that SAM is able to exercise proxy voting on behalf of its clients, SAM follows the policy set by S&P. Proxy voting is an operational process dependent upon support from SAM’s clients’ custodians, some of which do not support proxy voting in all or certain markets.
This document has been prepared for marketing and information purposes only and is not a solicitation, or an offer to buy or sell any security. The information on which the material is based has been obtained in good faith, from sources that we believe to be reliable, but we have not independently verified such information and we make no representation or warranty, express or implied, as to its accuracy. All expressions of opinion are subject to change without notice. This document should not be relied on for accounting, legal or tax advice, or investment recommendations. Reliance should not be placed on the views and information in this material when taking individual investment and/or strategic decisions.
The value of investments and any income derived from them can fall as well as rise and investors may not get back the amount originally invested. If investing in foreign currencies, the return in the investor’s reference currency may increase or decrease as a result of currency fluctuations. Past performance is not a reliable indicator of future results and may not be repeated. Forecasts are not a reliable indicator of future performance. Management fees and expenses are described in SAM’s Form ADV, which is available upon request or at the SEC’s public disclosure website, https://www.adviserinfo.sec.gov/Firm/115788.
Neither Sarasin & Partners LLP, Sarasin Asset Management Limited nor any other member of the J. Safra Sarasin Holding Ltd group accepts any liability or responsibility whatsoever for any consequential loss of any kind arising out of the use of this document or any part of its contents. The use of this document should not be regarded as a substitute for the exercise by the recipient of their own judgement. Where the data in this document comes partially from third-party sources the accuracy, completeness or correctness of the information contained in this publication is not guaranteed, and third-party data is provided without any warranties of any kind. Sarasin & Partners LLP shall have no liability in connection with third-party data.
© 2024 Sarasin Asset Management Limited – all rights reserved. This document can only be distributed or reproduced with permission from Sarasin Asset Management Limited. Please contact marketing@sarasin.co.uk.