Emmanuel Faber’s second act | Financial Times

The holiday season marks the start of a yearly power struggle ahead of companies’ annual general meetings season in North America. Though shareholder votes often take place in the spring, environmentalists and other campaigners are now filing shareholder proposals they hope to get on companies’ ballots in the weeks ahead. Amazon already faces 15 proposals for its 2022 meeting, while the largest US banks face at least nine climate-related shareholder proposals, according to the Interfaith Center on Corporate Responsibility.

This week, investors filed proposals asking big technology groups to publish more information about their non-disclosure agreements and other concealment clauses in employment contracts. Goldman Sachs is facing a shareholder proposal concerning forced arbitration.

Though companies are likely to challenge some of these proposals at the Securities and Exchange Commission, the agency has signalled more willingness to see climate petitions go to a vote.

Gone are the days when boards could shrug off shareholder proposals. With the large asset managers showing more support for these proposals in recent years, boards risk investor wrath if they do not at least show up to bargain with campaigners. Patrick Temple-West

Yoghurt chief wins big stage for Act 2

At COP26, the IFRS Foundation announced the start of a new standards-setting board — the International Sustainability Standards Board (ISSB). The organisation’s ambitious goal is to set common, global standards for sustainability disclosures.

Countries quickly applauded the effort. The EU has already said the ISSB standards should be prioritised globally “to avoid unnecessary regulatory fragmentation that may have negative consequences”.

Needless to say, the ISSB goal is a major undertaking — well-suited for an individual accustomed to handling global, logistics challenges.

On Thursday, the ISSB announced it had tapped French businessman Emmanuel Faber for the job. Faber left yoghurt giant Danone this year after a fight with shareholders. In an interview with Moral Money, Faber talked about his goals for ISSB in the year ahead.

The ISSB will propose climate disclosure standards in the first quarter of 2022 with the first new standards to be issued by the end of next year.

“It is high, high time to start with climate [disclosures] as soon as possible,” Faber said. “There is a clear lack of data that investors can use to make informed decisions.”

Faber’s credibility on the belief in sustainable business practices precedes him — and almost to a fault.

Danone’s performance slumped in 2020 during the Covid-19 pandemic, and activist investors pounced on the company. The boardroom struggle cost Faber his job, and prompted some observers to question whether Faber over-emphasised sustainability at Danone while neglecting brute profiteering. He rejected that notion in the interview with MM. His sustainability focus “was [just] the excuse that people found to play this game”.

Now, as ISSB chief, Faber has another opportunity to run a high-stakes, global project. The world will be watching to see if he can deliver the goods. (Patrick Temple-West)

Auditors’ green credentials come under fire

How much can you trust corporate financial statements where climate risks are concerned? The answer depends in large part on the world’s major auditing groups — which have come under growing pressure to take that side of their work more seriously.

Lawyers at non-profit group ClientEarth are calling for UK regulators to take a far more forceful stance on how auditors assess climate risks.

In a letter to the UK’s Financial Reporting Council, seen by MM, ClientEarth accused the accounting regulator of “failing to effectively intervene” in what it said was a persistent dereliction of duty by auditors on climate issues.

It urged the FRC to set up an annual assessment of climate-related company reporting and audits, with the findings to be made public. It also asked the FRC to open investigations into specific instances of inadequate practices by big firms — and again, to make the findings public.

The focus on public disclosure reflected a concern about regulators’ preference for “softly-softly” private conversation — and the urgent need for higher standards in this area, said Joanne Etherton, a lawyer who heads ClientEarth’s climate finance team. “We’re talking here about confidence in the financial markets, confidence in the financial profession,” she said. “It’s concerning when people don’t feel they can trust the numbers from these big companies.”

The ClientEarth letter referred to a recent high-profile report from the think-tank Carbon Tracker, which studied financial statements from 107 global companies in carbon-intensive sectors. In 80 per cent of cases, their auditors showed no evidence of having assessed climate-related financial risks, the report said.

Auditing companies have been coming under pressure from investors, too. In November, investors with $4.5tn under management warned that they would vote against the reappointment of auditors who failed to integrate climate considerations into their work.

“We want clarity,” said Etherton. For example, she said, auditors should disclose the assumptions they made for future oil and gas prices, when assessing the accounts of energy companies. “At the moment, it’s a black box.” Simon Mundy

Chart of the day

Improving brand image and reputation among customers is the top reason companies are adopting environmental goals that go beyond legal requirements, according to a report by law firm Crowell & Moring LLP.

Despite activist investors’ growing power (as Patrick noted above), respondents ranked investor and shareholder pressure in third place. Thirty-three per cent of the 225 legal and sustainability professionals polled across a variety of industries such as financial services, banking, healthcare and manufacturing cited this as a reason to ramp up green efforts.

Several businesses have told MM that job candidates regularly inquire about corporate environmental and social efforts — pushing for action even in the interview process. Yet only 17 per cent of the respondents list attracting and retaining employees as a motivating factor for adopting environmental goals. Kristen Talman

Smart reads

• In 2018, an academic paper titled Deep Adaptation advised readers to consider radical career changes in response to a looming “societal collapse” due to climate change. It helped to galvanise a trend of high-powered workers quitting well-paid jobs to focus on tackling the climate crisis, Pilita Clark writes.

• Supermarket chains including J Sainsbury and Carrefour have promised to stop selling certain Brazilian meat products amid concerns about the beef industry’s impact on Amazon deforestation. Their decision follows a report from non-profit groups Mighty Earth and Repórter Brasil, which claimed that cattle from illegally deforested land were finding their way into the slaughterhouses of major Brazilian meat companies. Read Emiko Terazono’s report for the FT here.