FTQ shareholder resolution calls for GHG targets aligned with the Paris Agreement; corporations respond with a charge of “micromanagement”

As part of its stated Action Plan for Engaging in a Just Energy Transition , the Fonds de Solidarité des Travailleurs du Québec  (FTQ) (an investment fund controlled by Quebec trade unions) put forward the following shareholder’s resolution  at the Cenovus Energy Annual Meeting in Calgary in April.  (The text of the resolution appears on page 51, as Appendix A in the company’s Information Circular):

Resolved: That Cenovus Energy Inc. (“Cenovus”) set and publish science-based greenhouse gas (GHG) emissions reduction targets that are aligned with the goal of the Paris Agreement to limit global average temperature increase to well below 2 degrees Celsius relative to pre-industrial levels. These targets should cover the direct and indirect methane and other GHG emissions of Cenovus’ operations over medium and long-term time horizons. Such targets should be quantitative, subject to regular review, and progress against such targets should be reported to shareholders on an annual basis.

The Board’s written response and recommendation  states “…..Cenovus has always and will continue to assess our approach to climate change risk management with a view to maximizing shareholder value. ….Achieving the level of commitment contemplated by the Paris Agreement requires an integrated plan at a national and global level, with policies to guide the actions of governments, individuals and corporations to collectively work together toward the desired outcome. Our view is that it is an overly demanding request, and contrary to the best interests of shareholder value, to require an individual company to unilaterally set targets….   As such, we recommend voting against the proposal.”  And sure enough, as expected, the FTQ proposal was defeated by an  89% vote against. The news is summarized  and in The Energy Mix  and  by the CBC  .

The  Fonds de Solidarité des Travailleurs du Québec (FTQ), along with the Canadian shareholders’ non-profit  SHARE, was also part of the recent resolution to Exxon . That resolution, filed in the U.S.  by a group of investors led by the New York State Common Retirement Fund and the Church Commissioners for England, proposed that the company develop “short-, medium- and long-term greenhouse gas targets aligned with the goals established by the Paris Climate Agreement to keep the increase in global average temperature to well below 2°C and to pursue efforts to limit the increase to 1.5°C.”  In response,  ExxonMobil   applied for and received permission from the  U.S. Securities Exchange Commission (SEC), allowing it to exclude the resolution from its Proxy Circular.  In retaliation, SHARE states in a blog, Why we’ll vote against Exxon’s entire board of directors, that it is “recommending to our proxy voting clients that they withhold their support for all Exxon directors at the upcoming annual general meeting on May 29th.”

The “Micromanaging” argument:  “Investors Worried About Climate Change Run Into New SEC Roadblocks” from Inside Climate News (May 3), in addition to providing a good overview of shareholder actions, explains: “The term “micromanage” has become the linchpin to objections by companies seeking to block these resolutions. The precedent was set last year when the SEC agreed with EOG Resources, a Texas-based oil and gas exploration company, that a resolution asking the company to adopt emissions goals had sought to “micromanage” the company.”  More in  “Exxon Shareholders want action on climate change: SEC calls it micromanagement”  in the Washington Post (May 8). According to the CBC report about the FTQ resolution at  Cenovus, the corporate CEO called the proposal “overly demanding”, and said  “we had challenges with the prescriptive nature of the proposal”,  echoing the industry’s language and strategy.

To stay up to date: The U.S. non-profit As you Sow  monitors corporate environmental and social responsibility, including climate change and the energy transition  – through  press releases  , reports, and an up-to-date database of resolutions .

Do electric vehicles create good green jobs? An Amnesty International report on Supply Chains says No

Tesla TruckNovember brought  exciting news about electric vehicles:  BYD,  one of China’s leading electric carmakers, announced that it will open an assembly plant in a yet-to-be-announced location in Ontario in 2018, (though according to the Globe and Mail article,   the new plant will only create about 40 jobs to start ).  Also in mid-November, Tesla revealed a concept design for  an  electric truck in an glitzy release by Elon Musk , and the Toronto Transit Commission announced its plan to buy its first electric buses, aiming for an  emissions-free fleet by 2040.    Unnoticed in the enthusiasm for these announcements was a report released by Amnesty International on November 15:    Time to Recharge: Corporate action and inaction to tackle abuses in the cobalt supply chain  which concludes : “ Major electronics and electric vehicle companies are still not doing enough to stop human rights abuses entering their cobalt supply chains, almost two years after an Amnesty International investigation exposed how batteries used in their products could be linked to child labour in the Democratic Republic of Congo (DRC).” (That earlier report was This is what we die for   released in January 2016) .

Under the heading “The Darker side of Green Technology”, Time to Recharge states: “Renault and Daimler performed particularly badly, failing to meet even minimal international standards for disclosure and due diligence, leaving major blind spots in their supply chains. BMW did the best among the electric vehicle manufacturers surveyed.”   Tesla was also surveyed and ranked for its human rights and supply chain management; Tesla’s policies are described in its response to Amnesty International here.  And further, Tesla has come in for suggestions of  anti-union attitudes  in “Critics Suggest Link to Union Drive After Tesla Fires 700+ Workers” , in  The Energy Mix (Oct. 23), and in an article in Cleantechnica , and for discriminatory policies in “The Blue-Collar Hellscape of the Startup Industry“, published in In these Times and re-posted in Portside.

The Amnesty International report is a result of a survey of 29 companies, including consumer electronics giants Apple, Samsung Electronics, Dell, Lenovo, and Microsoft, as well as electric vehicle manufacturers BMW, Renault and Tesla.  Questions in the survey were based on the five-step due diligence framework set out by the Organization for Economic Co-operation and Development (OECD) in its Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas.  Detailed responses from many of the surveyed companies are here. 

U.N. Working Group makes recommendations to protect human rights, labour rights in Canada

The United Nations Office of the High Commissioner for Human Rights released a  Statement at the end of visit to Canada by the United Nations Working Group on Business and Human Rights on June 1. This is a preliminary document – the official mission report will be presented to the 38th session of the Human Rights Council in June 2018, and should be worth watching for.  The preliminary Statement provides a summary of the results of fact-finding meetings with government officials, business organizations related to Canada’s mining and oil and gas industries, and Indigenous people. Most importantly, it makes a number of recommendations regarding human rights, labour rights, environmental and social impact consultation, and the right to consult for Indigenous people.

Some Highlights:

“Part of the backdrop to our visit were visible protests by indigenous communities to several large-scale development projects, such as the proposed expansion of the Trans Mountain oil pipeline, the construction a large-scale hydroelectric dam (Site C Dam), and continued expansion of development projects of extractives industries. Several of these cases have also been repeatedly raised by UN human rights human rights mechanisms, such as the situation of the Lubicon Cree Nation, whose territories are affected by extensive oil sands extraction. In several indigenous territories, extensive mining and oil and gas extraction are accompanied by significant adverse environmental impacts affecting the right to health.”

Regarding the established “duty to consult” with Indigenous people regarding mining projects, the Working Group encourages the Canadian government to ratify the ILO Convention No. 169 and for provincial and the federal government to promote more inclusive consultation regarding development projects.

The Working Group also urges the federal government to “follow up” on the April 2017 recommendations by the Expert Panel regarding Environmental Assessment in Building Common Ground: A New Vision for Impact Assessment in Canada  “to include indigenous peoples in decision-making at all stages through a collaborative process that is developed in partnership with impacted indigenous communities.”

Regarding the dam breach and tailings spill at the Mount Polley mine, the Working Group states: “We encourage the British Columbia government to complete expeditiously the impact study, continue to monitor closely the short-term and long-terms impacts of the tailings discharge, and communicate more widely their findings and proposed actions. Moreover, the provincial government should consult more broadly with indigenous communities who may have concerns about the breach and its impact on their lives. We also recommend the British Columbia government to consider establishing an independent body to assume compliance and monitoring of mining regulations, as recommended in the Auditor General’s report”.

Regarding the Westray Law, the Working Group states: “We heard concerns that the Westray law is not being properly implemented and enforced. We heard that there was a lack of coordination between key government parties, to secure sites of industrial accidents, for further investigation and inspection. We note that the Government of Alberta recently signed a new memorandum of understanding with ten police forces and Alberta Justice,  that defines protocols for notification, investigation and communication between departments when there is a serious workplace incident. Other provinces should follow Alberta’s lead”.

Regarding the need to protect the right to peaceful protest: “During our visit, we were told of the criminalization of peaceful protests and the use of security personnel and police to break up and arrest activists who were exercising their democratic right to protest against extractive projects both within and outside Canada. The government should work all relevant stakeholders to ensure more space for peaceful dissent and protest at home and abroad.”  And also: referring to Ontario and Quebec,  “we would encourage other provincial governments to develop similar Anti-SLAPP legislation. “

In conclusion: The Working Group revives a 2006 proposal for an Ombudsperson with a mandate to investigate allegations of business-related human rights abuse, and “we encourage the federal government to work together with provincial governments to develop a comprehensive national action plan on business and human rights. ”

For Oxfam Canada’s summary of the Working Group, see the Huffington Post article here , and here for the reaction of the Canadian Network on Corporate Accountability .

The Working Group Statement was also concerned with human rights abuses overseas by Canadian mining companies: see the analysis of the Working Group statement by Human Rights Watch here, or see “The ‘Canada Brand’: Violence and Canadian Mining Companies in Latin America“,  an extensive report in the Osgoode Law  Research Paper Series (December 2016).

Case studies of Community and human rights impacts of Renewable energy companies, and a ranking of multinationals in Ag/Food, Apparel and Mining

renewable energy investor briefing coverAn April 2017 report from the London-based advocacy group,  Business and Human Rights Resource Centre asks,  “What adverse impacts can renewable energy projects have on communities around the world?”   Renewable Energy investor briefing: Managing risks & responsibilities for impacts on local communities  (April 2017) is directed at financial and investment professionals who are considering investment in renewable energy projects- in this report, comprised of wind and small-to-medium hydro, but excluding solar .  It starts from the premise that Just Transition principles are essential, then explains the international human rights responsibilities of companies.  The report also provides examples of the kinds of questions that should be asked in shareholder meetings and before investment decisions are made, and gives examples of best practice policies – for example, inclusion of community benefits agreements.  One of the main issues it discusses is the right to free, prior and informed consent of Indigenous peoples, which is an ongoing topic monitored by the BHRC.

The report provides case studies, including  six positive examples, including: the Ixtepec community-owned wind project in Mexico; the Jeffreys Bay Wind Farm in South Africa; and  a cluster of wind projects in Jämtland, Sweden, for which OECD guidelines are being used in negotiations between the company and affected Indigenous people.  The full suite of case studies is presented in a searchable database which allows searching by company name, issue, country, and more.  There are no Canadian projects included in the 2017 report, although a profile of Ontario Power Generation  is available as part of the Centre’s ongoing database  of human rights in the energy sector  .

In March 2017, the Centre also launched an updated and expanded  Corporate Human Rights Benchmark website , which ranked 98 of the world’s largest publicly traded companies, from the  Agriculture, Apparel, and Extractive industries. The Benchmark is intended to drive a “race to the top” and is directed at business, government, and “ to empower civil society, workers, communities, customers, and the media with better public information to reward, encourage, and promote human rights advances by companies and make well-informed choices about which companies to engage with.”  A 50 page summary report is here .  There are six thematic measurement categories, including “ Company Performance: Human Rights Practices”  which  includes rankings related to living wage, freedom of association and right to bargain collectively, health and safety, amongst others.

Public sector pension administrators are recognizing climate risk, protecting pensions of public employees in Ontario and New York City

OPTrust administers the Ontario Public Service Employees Union (OPSEU ) Pension Plan, with almost 87,000 members and retirees.  On January 31, it became a leader in Canadian pension plan administration by releasing two documents:   Climate Change: Delivering on Disclosure, a position paper, and OPTrust: Portfolio Climate Risk Assessment, a report by Mercer consultants, which provides an assessment and analysis of the fund’s climate risk exposure .  The  OPTrust  press release  states: “For pension funds, climate change presents a number of complex and long-term risks. In Canada alone, pension funds manage well over $1.5 trillion in assets, which brings a real responsibility to collectively seek innovative approaches to modeling carbon exposure and its impact across portfolios.”   The position paper, Delivering on Disclosure, includes a call for collaboration amongst other financial actors to develop standardized measures for carbon disclosure.  It is noteworthy that OPTrust is governed by a 10-member Board of Trustees, five of whom are appointed by the union,  OPSEU,  and five by the employer, the Government of Ontario.

In a February 2 press release  affecting  the pension plans of New York’s public employees, teachers, firefighters and police,  the Office of the Controller of New York City announced:  “the Trustees of the New York City Pension Funds … will conduct the first-ever carbon footprint analysis of their portfolios and determine how to best manage their investments with an eye toward climate change. In the 21st century, companies must transition to a low-carbon economy, and a failure to adapt to the realities of global warming could present potential investment risks.”  The  New York City pension system  has been a leader in addressing climate change risks, including an initiative called the Boardroom Accountability Project  , which began in 2014 to give investors the ability to ensure boards are diverse and “climate-competent”.

On this point, a January 2017 report from Vancouver-based Shareholder Association for Research and Education (SHARE) found that   “… companies in Canada’s most carbon-intensive sectors are not demonstrating ‘climate competency’ in the boardroom.”   The report, Taking Climate on Board: Are Canadian energy and utilities company boards equipped to address climate change? urges greater transparency from boards at publicly-traded corporations, stating “Investors need boards to demonstrate that they are “climate-competent” – that they understand and prioritize climate change risks to long-term value, including the physical, legal, reputational, stranded asset and regulatory risks related to climate change.”   The report is based on a  review of the public disclosures from 52 companies across Canada’s energy and utilities sectors,  using 3 measures: board skills and experience, oversight, and risk disclosure. It concludes that “more companies are starting to talk about climate change in their reporting, but only three boards disclosed any expertise amongst their members on the issue, and no board included climate change knowledge in its board competency matrix.” The full report is here.  (On another note, SHARE has walked the walk by filing shareholder resolutions with Enbridge Inc., and met with TD Bank regarding their environmental and social aspects of their investments  in  the Dakota Access Pipeline. See “The Dakota Access Pipeline and Indigenous Rights.” )