Warren Buffett becomes litmus test for ESG investors

Asset managers plan to vote against boards of companies that lack a climate strategy

  • Buffett’s Berkshire Hathaway is the only major Western company to publish neither a climate change strategy nor a breakdown of its exposure to climate risk.
  • At Berkshire’s AGM on May 1, shareholders will vote on a proposal that would force the company to set emissions targets and publish an annual assessment of its progress towards meeting them.  
  • At least 10 large companies, including Barclays, ExxonMobil and General Motors, face similar votes.
  • Amundi and Aviva say they are prepared to vote against the boards of companies that refuse to make climate disclosures. The intentions of other firms, such as BlackRock and Vanguard, are less clear.  
  • The AGM votes will shape the climate strategies of large investors. Aviva says it will divest from companies that refuse to engage with it, while others will continue pressuring companies to change their behaviour.

Warren Buffett is feted as the world’s most successful investor. Yet on one measure, Berkshire Hathaway is the worst-performing public company in Europe and North America.

The conglomerate that Buffett has run for 50 years is the only US or European stock on a list of 159 major polluters that has no strategy to combat climate change. It is also the only company on the list compiled by Climate Action 100+, the biggest investor network focused on climate change, that does not make any public disclosures about its exposure to climate risks.

When Berkshire’s shareholders meet on May 1, they can vote to change that. A proposal from the California Public Employees Retirement System (Calpers), Federated Hermes and Caisse et Placement du Quebec would require the board to publish an annual assessment of how it manages climate risk. The three investors also want Buffett and his fellow directors to set targets to reduce greenhouse gas emissions that are consistent with limiting the rise in global temperatures to less than two degrees Celsius.

Berkshire’s board unanimously rejects the proposal. In a written statement, they say it is not “necessary” for the company to disclose its climate-related risks, adding that individual “Berkshire businesses may determine it is advantageous to publicly commit to reducing their emissions”.

Warren Buffett
Photo: Flickr/Fortune Live Media
Warren Buffett: The world’s most successful investor, yet regards climate change planning as unnecessary

That response puts the company at odds with investors who increasingly see climate change as a systemic problem for humanity, rather than a marketing opportunity for certain brands. The upcoming shareholder meeting will be a litmus test for their willingness to cast their vote accordingly. 

Some big investors say they are ready to do just that. “In 2021, we are starting to vote against the renewal of some board members of some companies that are heavily exposed to the energy transition and have no strategy,” says Caroline Le Meaux, head of ESG analysis at Amundi, Europe’s largest asset manager.

Amundi is a member of Climate Action 100+, which has flagged the Berkshire Hathaway shareholder vote as the most important climate-related proposal of this year’s AGM season. Other members express similar convictions.

“We do own Berkshire Hathaway stock,” says Mirza Baig, head of ESG corporate research and stewardship at Aviva Investors. “We will be voting our shares. Philosophically we are aligned with Climate Action 100+. We have a very strong track record of voting.”

The intentions of Berkshire’s biggest institutional shareholders, however, are less clear. Vanguard and BlackRock, which own respectively 10% and 8.1% of Berkshire’s B shares, declined to comment on the shareholder proposal.

Our goal is to be aligned with the Paris target and to reach net zero by 2050. We do not know fully how to do it
Caroline Le Meaux, Amundi

A spokeswoman for Vanguard said: “We have made clear our expectations of companies to have a climate-competent board, set metrics and targets that demonstrate appropriate risk-mitigation practices, and to effectively disclose those metrics, targets and practices with respect to climate change risk.”

A spokesman for BlackRock pointed to the firm’s most recent stewardship report and chief executive Larry Fink’s last letter to clients. In January, Fink wrote: “Where we agree with the intent of a shareholder proposal addressing a material business risk (such as climate-related risk) and if we determine that management could do better in managing and disclosing that risk, we will support the proposal.”

Fidelity Investments, the largest owner of Berkshire’s A shares at 5.9%, also declined to comment. The A shares are pricier than the B shares and convey greater voting rights.

BlackRock is a member of Climate Action 100+, while Vanguard and Fidelity are not.

Berkshire Hathaway’s AGM will be just one of the highlights of a shareholder meetings season that will for the first time see asset managers systematically vote against the reappointment of directors at companies that fail to outline a climate strategy.

On May 5, Barclays’ shareholders will vote on a proposal for the bank to set short-, medium- and long-term targets to stop financing fossil fuels. Barclays is the fifth-biggest lender to the coal industry, according to Urgewald, a German environmental non-government organisation.

Shareholders of ExxonMobil, General Motors and Phillips66 will also vote on proposals that would force the companies to reveal whether they are lobbying against climate change regulations.

The outcome of these votes will reveal whether engaging with the boards of climate change-denying companies leads to an improvement in their behaviour. The alternative is for asset managers to sell their stakes.

Aviva Investors, which manages £365 billion ($501.7 billion), has already told 30 unnamed companies that it labels as “systemically important carbon emitters” that it will sell their securities within three years if they fail to plan for net-zero emissions by 2050.

A plan to save the world

Asset managers say they want the firms they invest in to do their bit to limit the rise in global temperatures to “well below” two degrees Celsius – the target set by the Paris Agreement in 2015.

“Our goal is to be aligned with the Paris target and to reach net zero by 2050,” Le Meaux says. “We do not know fully how to do it.”

The first step for many has been to divest from the owners of coal mines and coal-fired power plants. Coal emits about twice the carbon dioxide of natural gas for every megawatt-hour of electricity generated. Countries in the Organisation for Economic Co-operation and Development need to eliminate coal from their electricity grids by 2030 if the Paris Agreement is to be met. Amundi and many of its peers already blacklist issuers that make more than 25% of their revenues from coal.

The next step for asset managers is to work out the amount of warming the companies in their portfolios are likely to produce. That will require firms such as Berkshire Hathaway and Barclays to make detailed climate risk disclosures. Getting them to comply will not be easy – not least because asset managers are divided on how it should be done.

The proposal from Calpers, Federated Hermes and CDPQ suggests that Berkshire Hathaway adopts the Science-Based Targets Initiative (SBTi) methodology to report its emissions. There are two problems with this. The SBTi is just one of seven methodologies recognised by the Task Force on Climate-Related Financial Disclosures – which is backed by the Financial Stability Board – for calculating the carbon footprint of investments. Listed companies and issuers of debt could legitimately opt for a different methodology. The second problem is that companies have to do a lot of work before they can say that SBTi has verified their plans to lower emissions.

If companies are not able to demonstrate action now, we believe it would be irresponsible of us to allocate capital to those businesses that are destroying the future of our clients
Mirza Baig, Aviva Investors

Amundi also wants companies to set science-based targets for their emissions. Last year, it approached 243 of the companies that it invests in, asking them to say how they will reduce emissions over time. Just 60 responded, and none has yet published targets under the SBTi methodology. “It’s two years to validate your target when you sign up to SBTi,” Le Meaux says. “This is a medium-term target.”

DWS Group, which manages €793 billion ($945.1 billion), is having similar conversations with companies. “What’s in our minds is how we engage with companies to make sure the companies put in place a framework to ensure they are aligned with the Paris climate goals,” says Francesco Curto, the German asset manager’s global head of research.

Unlike Amundi, DWS does not require companies to use a particular methodology. But it does want them to use a methodology, so that they can set targets to reduce carbon emissions over time. “You have to disclose where you are on the path,” Curto says. “This is what in the end will make the difference. They may have a very high temperature to begin with. If they have a credible path, you want to work with those companies. We will de-risk the business and our investors will get an upside to their portfolio.”

Once asset managers know how much damage their investments are doing, they can set targets for individual companies to reduce their emissions. That requires them to engage with boards of directors to change their behaviour. This third step will become evident during AGM season, the period between April and June when most public companies in Europe and North America convene their yearly gatherings of shareholders.


If companies ignore asset managers, the action will move to the AGM where the number of investors willing to vote against management becomes paramount. “Collaborative engagements like Climate Action 100+ are very efficient,” says Le Meaux.

Climate Action 100+ counts 545 institutional investors as members. Collectively, they manage $52 trillion of assets.

Berkshire Hathaway is not a signatory to the investor network even though it is exposed to the physical risks created by climate change through its insurance businesses, Berkshire Hathaway Primary Group and Berkshire Hathaway Reinsurance Group.

Big institutional investors tend not to disclose their voting intentions before an AGM, unless they are sponsoring a proposal. Amundi, Aviva and DWS declined to reveal which companies they would vote against in this year’s AGM season. “The only thing you will be able to see are our voting records,” Le Meaux says. Aviva will reveal how it voted one month after each AGM, while BlackRock publishes a quarterly review of its voting.

The story is very straightforward: some companies appear very risky, but they have a plan in place
Francesco Curto, DWS Group

Buffet could still win the May 1 vote. What will the asset managers do then? Berkshire Hathaway is an extreme example, but there are plenty of other companies in high-emitting industries that are trying to avoid or delay committing to a climate strategy. Investors could sell their stakes in unrepentant polluters, leaving themselves with portfolios full of renewable energy and technology firms. Most are reluctant to do so. 

“There’s a risk that the only decisions people will take will be to divest out of certain sectors and companies,” Curto adds. “This is the worst decision that you can take. Because you do not have a proper understanding of where a company will go. Ultimately the path to net zero does not go through just a risk management approach.”

Le Meaux also rejects divestment as a blanket approach to climate-hesitant firms. “When you divest, you manage your portfolio risk, but you do not manage the global risk,” she says.

Baig wants companies to change their behaviour in response to shareholder pressure, but he is prepared to divest if they don’t take climate change seriously. Aviva is the only major asset manager to commit itself to sell the securities of companies that fail to engage with it. “While we fundamentally believe in engagement, we are aware of a finite carbon budget,” Baig says. “If companies are not able to demonstrate action now, we believe it would be irresponsible of us to allocate capital to those businesses that are destroying the future of our clients.”

Aviva launched its Climate Engagement Escalation Programme at the beginning of February. The earliest date that it can divest from one of the 30 major polluters is February 2022.

The three asset managers would sooner pressure boards by voting against individual directors in the hope that they eventually change their ways. The best possible outcome for the biggest investors is not a portfolio of companies with low emissions today. They would rather have a portfolio of companies that plan to halt their most harmful operations over the coming years.

“The story is very straightforward: some companies appear very risky, but they have a plan in place,” Curto says. “If these dirty assets are coming to the end of their lives and they are going to get rid of those assets, should I keep the stock or sell it?”

  • LinkedIn  
  • Save this article
  • Print this page  

Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.

To access these options, along with all other subscription benefits, please contact [email protected] or view our subscription options here: http://subscriptions.risk.net/subscribe

You are currently unable to copy this content. Please contact [email protected] to find out more.

You need to sign in to use this feature. If you don’t have a Risk.net account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here: