In the last couple of years, one of the most common arguments against fossil fuel divestment has become ‘we can have more influence if we engage with companies.’

 The engagement argument can be a tricky one to combat – however, we believe there is concrete evidence that engagement is not an effective tactic for tackling the climate crisis and that divestment should be pursued instead.

Here are some talking points to help you take on the engagement argument…


1. The timeline for engagement is too slow

Although shareholder engagement has achieved successes in other industries, there is no evidence that engagement strategies have developed an ask or a timeline that matches the size or urgency of the climate challenge.

  • Even at most optimistic estimates, we have less than 35 years until the carbon budget for 2 degrees of warming is blown. If we want to meet the objectives set at the COP21 to keep warming to 1.5 degrees, optimistic estimates give us 16 years.
  • A groundbreaking recent report showed that the potential emissions from the oil, gas, and coal in the world’s currently operating fields and mines would take us beyond 2°C of warming – this means that we can’t afford to dig any new coal mines, drill any new fields, or build any more pipelines if we want to prevent catastrophic warming.

However, in more than two decades of shareholder engagement with the fossil fuel industry on climate change, we’ve seen almost no progress – with the only significant ‘wins’ coming in increased transparencyor reporting at a few companies. If this is the intended pace and ferocity of engagement,  it is too slow to prevent catastrophic warming.


2. Engagement isn’t working

Fundamentally, engagement isn’t (and won’t) bring about the changes in these companies required to address the climate crisis. Tackling climate change requires radically overhauling the core business model of the fossil fuel industry – this is something shareholder action is not made to address. This goes a long way to explain why, despite a huge amount of (admirable) effort, very little change has been brought about through engagement.

  • Research from Fossil Free Indexes has shown that, while the quantity of shareholder resolutions on climate are on the rise, the influence of these has flatlined.  
    • It also appears that support for these shareholder efforts is flatlining; climate resolutions seeking reporting, carbon reduction targets and more received nearly identical levels of (all less than the 50% needed to pass a resolution) support in 2016 as in 2015.
    • Shareholder support for 25 resolutions requesting that management adopt emission reduction targets scarcely changed over five years, averaging 27%, 28%, 28%, and 20.5% respectively from 2012 to 2015.
    • 42% of motions filed in 2016 were identical to those filed in 2015 – showing a total lack of progress.
  • In the most recent ExxonMobil AGM, for example, none of the shareholder motions concerning climate risk were successfully passed.
  • Even when motions pass at AGMs, they aren’t necessarily enacted fully by companiesBP’s attempts at disclosure of carbon risk, for example, (as mandated by the 2015 AGM) have been shoddy.
    • A recent United Nations report on emissions disclosure from the ‘Principles for a Responsible Investment Academic Network’ also found that “pressure from the state, NGOs and the public impact a corporation’s decision to report GHG emissions data, but pressure from equity investors and debt lenders does not.”

3. Engagement makes no sense without the threat of divestment

‘True engagement needs the pressure created by divestment. Engagement without divestment is like a criminal legal system without a police force.’ Carbon Tracker

Responsible investment policies would deliver stronger results if funds made explicit a willingness to exclude individual companies and industries from its portfolio should they fail to meet minimum standards. Companies must know that exclusion is an option if engagement is to have a major effect – this was reflected in Aviva’s recent policy on climate change in which they pledged to divest from companies not making ‘sufficient progress’.

If funds do use engagement an an argument against divesting, push them to adopt or demonstrate a concrete timeline for their efforts.


4. Engagement is outsourced – which means it isn’t getting done

A recent report on the 2016 ExxonMobil AGM showed that some of the biggest fund managers, including Vanguard and BlackRock (whom asset owners rely on to do engagement and proxy voting on their behalf), are not supporting efforts to address climate change.

This is despite the apparently pro-engagement attitudes of these managers: CEO of Vanguard, Bill McNab, has openly criticised divestment, citing engagement as a better option, and Blackrock CEO Larry Fink warned in a letter to CEOs that climate change had “real and quantifiable financial impacts.”

Furthermore, 45% of the largest shareholders that voted against the climate resolution at the AGM are signatories to the UN Principles of Responsible Investment (UNPRI), supposedly a standard-bearer for positive shareholder action. All this demonstrates that, while many asset managers are willing to ‘talk the talk’ on engagement, they don’t actually ‘walk the walk.’


5. Engagement is a form of ‘greenwashing’

While the majority of fossil fuel companies have stopped openly denying the science of climate change, all of them are still engaged in a different form of denialism – denying their own culpability in the climate crisis. The vast sums of money going into political lobbying and further extraction and stated commitment to burning all of their reserves shows the fossil fuel industry is not willing to change their stripes. Engagement efforts are allowing these companies to look responsible and benign, while continuing with their business-as-usual plan to wreck the planet.

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