Gina Pappano is the Executive Director of InvestNow.While shareholder proposals were originally designed as a tool for investors to safeguard and enhance the long-term value of their holdings, a well-funded network of activist non-governmental organizations (NGOs) and climate-focused groups has increasingly repurposed them to advance environmental and ideological agendas. In Canada, this campaign has zeroed in on the oil and gas sector and the financial institutions that support it. Yet, despite years of persistent pressure, these efforts appear to be hitting a wall — suggesting that the era of well-funded ideological environmentalism may be entering a less profitable phase.The relationship between corporations and shareholders used to be pretty straightforward — a shareholder bought a share in a corporation, and in turn, the corporation would work to generate returns on that investment and to maximize shareholder value. This is known as “shareholder primacy.” Over time, an adjacent system developed, enabling anyone who holds shares in a corporation to present a proposal to its board with an eye towards protecting or increasing the value of the company. This has become a central mechanism for good corporate governance.In the last decade, however, some groups have weaponized shareholder proposals to prioritize and push environmental, social, and ideological goals over maximizing financial returns to shareholders. Well-funded activist NGOs and even charities have led the charge with a slew of prosperity-assaulting campaigns. These groups have repurposed shareholder proposals to pressure companies to adopt policies informed by the group’s ideological concerns.No sector in Canada has been targeted by these ideologically driven agendas more than the oil and gas industry, a pillar of the Canadian economy which includes hundreds of producers, pipeline companies, refinery operators, and service companies, many of which are publicly traded..Stand.earth, Investors for Paris Compliance (I4PC), the BC General Employees’ Union, Environmental Defence Canada, the Shareholder Association for Research and Education, and MÉDAC are just a few of the activist groups that, over the past few years, have presented anti-fossil-fuel shareholder proposals to Canada’s banks, insurers, and to oil and gas companies. In 2023, for example, Stand.earth demanded that the Royal Bank of Canada’s (RBC) “Board of Directors adopt a policy for a time-bound phase-out of the RBC’s lending and underwriting to projects and companies engaging in new fossil fuel exploration, development, and transportation.” In other words, they were asking Canada’s biggest bank to stop supporting an industry that has been described as our “Golden Goose,” because of the role it plays in supporting Canadian jobs and underwriting our prosperity. Since 2022, InvestNow, the organization I lead, has countered this movement by submitting our own annual shareholder proposals to the Big Five Canadian banks, calling on them to resist campaigns aimed at shutting down Canada’s resource sector. We’ve asked them to recommit to Canadian oil and gas, rethink “Net-Zero by 2050,” study and report on net-zero’s costs, and withdraw from Mark Carney and Michael Bloomberg’s pet project, the Glasgow Financial Alliance for Net Zero (GFANZ). This year, our formal “ask” was that the banks return to viewpoint neutrality in their business practices and place fiduciary duty to shareholders first. Our consistent goal has been to prevent our banks from becoming complicit in schemes that undermine Canada’s energy sector and, by extension, the broader Canadian economy. .At every Annual General Meeting (AGM) since we started, we have had the opportunity to view the work of one particular activist group up close, namely Investors for Paris Compliance (I4PC), who are dedicated to using shareholder activism to pressure companies to comply with their own net-zero pledges.But interestingly, I4PC recently announced plans to shut down its operations. They say that their mission cannot be completed as conceived and that they are passing the torch to governments and regulators. In their own words, “After five years, multiple approaches, and consistent engagement, we’re left with one conclusion: Investor accountability, in the absence of regulatory change or legal consequences, is not sufficient to deliver net zero outcomes or manage climate risk at the system level.”I wonder if they are shutting down because they are reading the room. The fact is that the world is very different from when I4PC started five years ago. Economic realities are taking precedence over environmentalist fantasies. Canadians are worried about jobs, the rising cost of living, and affordability issues. The mood at the recent bank AGMs was realistic about the economic struggles of everyday Canadians, while remaining hopeful that we can unleash Canada’s prosperity potential if our government is willing to enact the right policies and corporate Canada acts on them.Of course, unleashing Canada’s prosperity is diametrically opposed to what the I4PC and other NGOs have stood for over the years. These groups have asked banks, insurers, corporations, asset managers, public pension plans, and university endowment funds to place ideological priorities such as decarbonization, electrification, and net-zero above economic priorities, while seeking to diminish and eventually eliminate our oil and gas industry. With Scotiabank dropping its net-zero by 2050 pledge and RBC dropping its net-zero by 2030 pledge and hopefully other banks soon to follow suit, perhaps I4PC and other activist groups — not to mention their funders — are realizing that Canada’s precarious economic situation is leaving little room for the ideologies at the heart of their project, especially in hard, recessionary times. In the famous words of James Carville, “It’s the economy, stupid.” Hopefully, our regulatory bodies and the current government get that message soon. Gina Pappano is the Executive Director of InvestNow.
