Investors Lose Patience with VW’s Lobbying

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    Stockholm (NordSIP) – For several years now, a group of institutional investors, including the Swedish public pension funds AP7, AP2, AP3, AP4, Danish AkademikerPension and the Church of England Pensions Board, has been prodding into Volkswagen’s position on lobbying. The investors’ concern is that while the auto giant is publicly championing the green transition, it may be undertaking lobbying activities that counter its stated climate ambitions through its membership in several automotive and business associations. As part of the Institutional Investor Group on Climate Change (IIGCC) and the Climate Action 100+ Initiative, the institutions have been engaging with the company requesting that it clarify its lobbying stance.

    When these engagement efforts failed earlier this year, the same group of investors, supported by EOS at Federated Hermes and several others, attempted a new way to get some answers from VW. At the company’s AGM in May, they tried to include an item on the agenda seeking the publication of a report that set out how the company’s lobbying of policymakers was aligned with its stated ambition to support the Paris Agreement goals by becoming a net zero company. However, VW did not heed the concerned investors and refused to table the item.

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    Left with few engagement options, on 19 October, the investor group, in collaboration with non-profit ClientEarth, announced that they have decided to take the matter to the Local Court of Braunschweig. By filing the case, they are creating a precedent; for the first time, investors are initiating a European litigation on a climate-related matter. The legal claim is based on the German Stock Corporation Act but could have implications for other civil law systems in Europe.

    “It is worrying that our shareholder right to contribute to the annual meeting agenda has been refused,” comments Emma Henningsson, responsible for Active Ownership at AP7. “As a result, we felt the need to go to court to clarify this grey area for corporate law in Germany.”

    “We were hopeful that VW would change its stance on climate lobbying, but it is now clear they have no ambition to do that,” adds Pia Axelsson, Manager Corporate Governance & Information at AP4. “We are disappointed that the company has taken such a clear stance of opaqueness regarding their possible affiliation with negative climate lobbying, something which could counteract the necessary transition to a net zero economy. By blocking investors’ proposal to put this topic on the AGM agenda, VW has also made this a matter of principle regarding minority shareholders’ rights in Germany.”

    According to Adam Matthews, Chief Responsible Investment Officer at the Church of England Pensions Board, VW fails to demonstrate that the lobbying undertaken and funded by the company through their industry association memberships aligns with their climate goals. “Despite repeated efforts to engage the company to adopt industry best practice, it is extremely disappointing to have to turn to the courts to get VW to do the right thing. This is not an unreasonable request and a step many of their peers in the auto sector and in German listed companies have already taken and found beneficial,” says Matthews.

    Earlier this year, a coalition of leading international investor groups officially unveiled a comprehensive Global Standard on Responsible Climate Lobbying, an initiative spearheaded by AP7 and the Church of England Pensions Board, among others. All investors supporting the standard firmly commit to championing responsible lobbying activity. They also pledge to actively engage with companies whose lobbying practices do not align with the standard by filing shareholder resolutions, for instance.

    “The success of the Paris Agreement is dependent on responsible corporate lobbying. As a long-term owner, we encourage Volkswagen to keep up with its peers and ensure there is no misalignment between its stated climate ambition and its lobbying activities,” concludes AP7’s Henningsson.

    Image courtesy of John R Perry from Pixabay
    Julia Axelsson, CAIA
    Julia Axelsson, CAIA
    Julia has accumulated experience in asset management for more than 20 years in Stockholm and Beijing, in portfolio management, asset allocation, fund selection and risk management. In December 2020, she completed a program in Sustainability Studies at the University of Linköping. Julia speaks Mandarin, Bulgarian, Hindi, Russian, Swedish, Urdu and English. She holds a Master in Indology from Sofia University and has completed studies in Economics at both Stockholm University and Stockholm School of Economics.
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