Putting your money where your mouth is
Share Action, a small but highly effective disruptor organisation, is leading the call for investors to apply pressure on companies to play their part in decarbonisation.
Started 15 years ago after a successful campaign on the ethics of university pension fund investment, the group has been headed by CEO Catherine Howarth since 2008. Catherine spoke to Safia Minney about taking the war on climate change into the boardroom.
The Power of our pension pots
As pension savers, most of us are investors in UK plc whether we realise it or not. Most of us also don’t realise that our pension pots are one of the most powerful positive agents of change we can utilise.
Big brand names are traded companies whose shares are largely owned by pension funds. But pension fund investments are often seen as inaccessible and to many of us (if we’re honest) a little tedious.
However, Share Action has been on a mission to make us realise that we all need to take more responsibility for where our pensions are invested.
Catherine Howarth points out that if investors are happy to take profits, they must have an oversight of the environmental and social practices companies are using to generate those profits.
“At Share Action, our aim is to make the investment industry responsible for taking a look and satisfying itself that it’s not profiteering from companies who fall short in these areas”.
Shining a light on the investment industry
Catherine describes the investment world as a ‘big black box’ designed not to give access to the information we need to have our say.
But she is confident this is changing and through a combination of research and public engagement initiatives, Share Action has pocketed some serious wins.
One of its early successes was a long overdue requirement for pension funds to reveal exactly where they invest our money. Until then, very few of us even knew where our pension savings were going.
It publishes several indexes, ranking asset managers on measures of responsible investment. Companies tune in to the language of league tables, allowing Share Action to punch well above its weight.
Notably, Share Action was behind a move to get large corporates to pay the living wage. Asking awkward questions in public isn’t, it seems, just for small children.
“It’s very powerful for people to ask about the living wage on the floor of an AGM where the attending board members are extremely well paid,” Catherine points out.
But there is much more to be done and Share Action is digging in.
“Transparency on Environmental, Social and Governance (ESG) issues is the thing that keeps me up at night. We’re heading in the right direction but we’re in a climate emergency and companies are not acting at the pace required to radically decarbonise the economy over the next 10 years,” Catherine says.
Mind the knowledge gap
Speaking the language of investors is key. Share Action exposes the financial risk of investing in companies or sectors with poor sustainability performances. While consumers increasingly think about the provenance of what they buy, the investment sector is still playing catch-up.
Catherine describes some investors as guilty of ‘willful ignorance’, but acknowledges a growing appetite for change. Unfortunately, investors usually lack the expertise to understand and interrogate the ESG credentials of the companies and sectors they are dealing with.
Share Action plays a critical role in filling this knowledge gap. It brings investors together, arming them with the data needed to have what Catherine calls “quite forceful dialogues with corporate boards.”
The team recently took on the world of cement; which emits a hefty 8% of the world’s carbon. Investors used a Share Action briefing to ask tougher and more pertinent questions of the sector; beginning the process of exerting pressure where it is badly needed. The statistics speak for themselves – without radical de-carbonisation of the cement industry, we’ve lost the fight on climate change.
Taking on the big corporates
Catherine’s team has sometimes taken the fight straight to the big brands.
Share Action tabled an AGM question asking the Tesco CEO to move to a renewable energy supply. Tesco responded positively, joining the ranks of the RE 100 Coalition of Companies committed to renewable energy.
It happened so quickly, because as well as being the right thing to do, Catherine says, it made good business sense. Happily, this is often the case, but not always – at least not in the short term. Sometimes harder conversations need to be had.
High on Share Action’s hit list is the banking sector’s lending to high carbon industries. It identified Barclays as one of the worst offenders. Barclays ranks top in Europe and 6th in the world for lending to the fossil fuel sector, handing out a whopping £85 billion since the Paris Climate Agreement was signed in 2015.
Share Action brought together over 100 shareholders – including 11 pension funds jointly managing a cool £130 billion – to file the first resolution of its kind in Europe. The motion called for Barclays to phase out its financing of the energy and power sector where companies did not have a plan to transition in line with the Paris Agreement.
Barclays found itself in the middle of a media storm and has since come to the table, giving Catherine hope for the direction of travel: “Large powerful investors could have dismissed it, but they haven’t.”
While Share Action’s initiatives continue to nudge investors and companies in the right direction, Catherine concedes the hoped-for revolution in finance will need regulatory muscle as well.
Share Action’s Responsible Investment Bill would require pension funds to undertake scrutiny and positively satisfy themselves that there aren’t any environment or human rights violations taking place in their portfolio, or in the supply chains of the companies they’re dealing with: “It’s not OK for large investors to say ‘We didn’t know’, if they didn’t even look”.
Catherine also supports the EU Taxonomy system, a policy initiative recognising that it will only be possible to decarbonise the economy with extensive reforms to the investment industry. Catherine is pushing for more ambition but sees it as a good start.
Since the interview, COP26 – due to take place in Glasgow in November – has been postponed. But Share Action is clear the next climate conference must see governments and industry agree to an ambitious deal to decarbonise the investment sector.
While the road is long, Catherine sees a turning point. “I am hopeful that with the spirit and anger people feel with the status quo – including the role of finance – things will explode over the next couple of years.”
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