Shifting our engagement focus to fossil fuel consumers

Reaching the goals of the Paris Agreement requires a transition to renewable sources of energy, like solar and wind. Both the producers of energy and their consumers need to change for this transition to be successful. Until recently, PGGM’s climate engagement efforts have primarily focused on fossil fuel producers. However, with the recent completion of our two-year oil and gas engagement program, the focus has now shifted to the demand side —specifically, towards the largest consumers of fossil fuels.

Our demand-side engagement focusses on the sectors with the largest contribution to our financed emissions: utilities, materials, and transportation. Our goal is to encourage the largest emitters in our portfolio to align their 2030 targets and strategy with the Paris Agreement. If successful, our portfolio’s financed emissions will further decline over time. This decline contributes to PFZWs goal of reducing financed emissions by 50% between 2019 and 2030.

Example of a demand side program: Transportation
Transportation is a major contributor to global warming, representing about a quarter of global greenhouse gas emissions. This largely stems from the combustion of fuels in automobiles, aircraft, and ships, but also includes the energy required to manufacture and transport the underlying components. Demand for transportation is expected to strongly increase in the next decades. Therefore, decarbonizing the sector is vital to reach the goals of the Paris Agreement.

PGGM’s transportation engagement program includes companies across the transportation value chain. It includes 14 companies from four industries: machinery, raw material suppliers, original equipment manufacturers, and transportation services & logistics.

Scope of the “Transportation” program

Examples of companies in the program include Caterpillar, which produces machines that mining companies use to produce the commodities required for the electrification of vehicles. The company, therefore, plays a role in the value chain of automobile producers likeSuzuki. In the same way, General Electric produces aircraft engines that are part of the airplanes that Lufthansa operates.

Our objective
The overall engagement objective remains the same across all our climate change programs: Alignment with the Paris Agreement. But how each industry does so will differ, depending on the specifics of their situation. For example, for automobile manufacturers, the pivot to electric vehicles is key. For materials companies, contributing to the circular economy is one of the focus areas of engagement.

If a company does not progress on their key engagement ask on time, we will select an escalation option commensurate with the stage of engagement.

What is next?
During the first quarter of 2024, we had a meeting with most companies in scope of the demand side engagement programs. During the next couple of months, many companies will hold their annual general meeting. Our active ownership team will be busy evaluating how we should vote on each environmental and social shareholder proposal. We will soon share updates around the voting season, including a resolution we filed at McDonald’s.