Engie commits to improvements on climate disclosure

PGGM, together with fifteen other investors, co-filed a shareholder resolution at the AGM of Engie, asking for a ‘Say on Climate’. Although the resolution did not meet the required threshold to be adopted, it gained significant support (24%). Moreover, the company has committed to several of the key asks in the process.

PGGM has been engaging with Engie as part of its Climate Active Ownership program, which focuses on the demand and supply side of fossil fuels. Engie, one of Europe’s major electric utilities, strongly relies on natural gas for its electricity production. PGGM engages with Engie in collaboration with multiple investors under the umbrella of the Climate Action 100+, the world’s largest shareholder coalition on climate.

Engie has strong GHG emissions reduction targets, which have been certified by the Science-Based Targets Initiative (SBTi)¹ as ‘well-below 2 degrees’. Also, the company has demonstrated progress by reducing its GHG emissions in recent years, as well as reducing its coal-fired generation capacity.

However, there are gaps in Engie’s climate strategy and PGGM and like-minded investors have engaged with the company to ask for more detailed disclosures. For PGGM it is crucial to thoroughly understand a company’s plans to transition its business model in line with a net zero future. For example, currently it is unclear how Engie’s targets compare to a Paris-aligned 1.5 degree scenario, how its electricity generation mix will develop, and how it aligns its capital expenditures with its climate targets.

With these types of disclosures lacking, PGGM and fellow shareholders (including Dutch peers MN and APG) filed a resolution asking for a ‘Say on Climate’. This entails a consultative vote on the company’s climate strategy once every three years, as well as a consultative vote on the annual progress on several key indicators, such as the ones mentioned above. Such a ‘Say on Climate’ vote gives investors the opportunity to express their views on a company’s climate transition strategy.

In the build-up to the Annual General Meeting on April 26th, where the resolution went to a vote, the shareholder coalition held intensive talks with the Engie’s board. These discussions were constructive and the board showed willingness to provide more insight and already address some of investor asks. For example, the company committed to adding an addendum to its climate report and to disclosing the breakdown of their electricity generation mix up until 2030, which was one of the indicators we requested. The board also committed to consulting its shareholders on the company’s climate strategy every three years through a ‘Say on Climate’ vote, though did not agree to an annual vote on the company’s progress report.

Ultimately, the resolution gained 24% of votes in favour, which does not meet the required 66% threshold to pass. However, with almost a quarter of investors supporting the resolution, shareholders have sent the company a strong signal. We consider this to be a success, especially given that the company committed to improvements in our engagements leading up to the AGM. The voting outcome provides a solid basis for further dialogue with Engie on the key asks as set out in PGGM’s Climate Active Ownership program. With the current commitments by the company in place, we look forward to continuing our positive engagement on Engie’s road to net zero.

1. The Science Based Targets initiative (SBTi) is an independent organisation that defines and promotes best practice in emissions reductions and net-zero targets in line with climate science.