Backs of heads of people viewing presentation in a boardroom

TCI Fund Management Limited (TCI) recently successfully submitted a climate change-related shareholder proposal (the Proposal) to Canadian Pacific Railway Limited (CP) to be voted on at CP’s upcoming 2021 annual general meeting of shareholders.  As stated in its circular for the meeting, CP supports TCI’s Proposal and recommends shareholders vote in favour of it.  Of particular note is that the Proposal, if passed, requires CP to hold a non-binding shareholder advisory vote on an annual basis regarding its climate action plan.


The Proposal, which is the latest in a growing trend of shareholder proposals related to ESG (environmental, social and governance) matters generally, and sustainability matters specifically, is a reminder of the increasing importance of climate-related considerations and disclosure for public issuers.  Public companies should be prepared for shareholders to advance ESG-related initiatives through a variety of means, including working directly with the company’s board and management, submitting shareholder proposals, or requisitioning meetings to replace directors who do not adequately focus on such matters.

We also believe that the Proposal signals a coming trend in ESG matters whereby shareholders are given the ability to pass judgment on a company’s stated approach to climate change, akin to the ‘say-on-pay’ vote that developed out of shareholder concerns around excessive executive compensation arrangements.

The Proposal

The Proposal, if approved by CP’s shareholders, would require CP to present to its shareholders by the end of this year a climate action plan disclosing CP’s greenhouse gas emission levels in a manner consistent with the recommendations of the Task Force on Climate-related Financial Disclosures, as well as CP’s strategy to reduce such emissions in the future (including any progress made year over year).  If approved, the Proposal would also require CP’s board of directors to report at each annual general meeting, starting in 2022, CP’s progress towards its action plan, as well as any updates or changes (made or anticipated) to the plan.  Finally, according to the Proposal, starting next year CP would also ask its shareholders at each annual general meeting to vote upon, on a non-binding advisory basis, approval of the plan and any changes thereto.

As mentioned above, CP is recommending that its shareholders vote to approve the Proposal, which is inline with its sustainability principles and practices.

ESG Proposals on the Rise

The Proposal highlights a rising trend in shareholder proposals regarding ESG matters, particularly regarding environmental sustainability.  Investors are increasingly viewing climate and sustainability risks as real investment risks, and are thus heightening their expectations for their managements’ and boards’ approach to such risks, and the associated disclosures.  During the 2020 proxy season, for example, issuers listed on the S&P/TSX60 Index received 40 shareholder proposals related to ESG matters (as of November, 2020), with some companies having multiple ESG-related shareholder proposals on the ballot at the same meeting – 15% of such proposals were related to environmental matters, and that number is expected to increase.

Similarly, voting statistics among Russell 3000 companies reveal that not only has there been increased support for climate-focused shareholder proposals, but climate-related concerns are also influencing the degree of support in director elections.

As such, issuers who can clearly demonstrate their commitment to developing and implementing ESG policies will more easily get shareholders’ endorsement, and otherwise be more prepared for shareholder proposals requesting such compliance and disclosure, than issuers who only rely on boilerplate statements regarding applicable ESG matters.