Investors turn to courts after VW withholds climate lobbying details
Swedish public pension funds AP7, AP2, AP3, AP4, Danish AkademikerPension and the Church of England Pensions Board are concerned that while the auto giant is publicly championing the green transition, it may be undertaking lobbying activities that run counter to its stated climate ambitions, via its membership to a number of automotive and business associations. This potential contradiction, the investors say, exposes the company to reputational and operational damage and puts the security of their investments in question.
After repeated attempts to access information on potential misalignments stalled, the investors resorted to tabling an agenda item at Volkswagen’s 2022 AGM, but the company vetoed this too – so they are taking the matter to court.
The case will test whether VW has the right to refuse to include the AGM agenda item, which proposes a change to the Articles of Association, on the agenda of the 2023 AGM. The investors are represented by German law firm Hausfeld Rechtsanwälte LLP and supported by legal charity ClientEarth.
Emma Henningsson from AP7 said: “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. It is worrying that our shareholder right to contribute to the annual meeting agenda has been refused. As a result, we felt the need to go to court to clarify this grey area for corporate law in Germany.”
The case will clarify whether shareholders have the right to put an item on the agenda of the AGM. A ruling in the investors’ favour would improve corporate accountability and transparency for shareholders in German companies. The impact would also apply to other topics, such as diversity and inclusion, discrimination or conflicts of interest. Success would mean that more shareholders could actively contribute to improving the governance of the companies they own in an active way, as they do in many other jurisdictions around the world.
The legal claim is based on the German Stock Corporation Act but could have implications for other civil law systems in Europe, including France, where the scope of minority shareholder rights are also in doubt.
Adam Matthews from the Church of England Pensions Board said: “VW is failing to demonstrate that the lobbying undertaken and funded by the company through their industry association memberships is aligned to their own 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.
“VW’s intransigence raises serious questions as to what they are scared good governance will reveal. We are shareholders that want to see the company succeed in the climate transition and in order to protect our rights and those of shareholders we are challenging VWs refusal in the courts.”
Pia Axelsson from AP4 said: “We were hopeful that VW would change its stance on climate lobbying but it is now clear they have no ambition to do that. 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.”
CIO Anders Schelde from AkademikerPension said: "As an investor, we require full transparency on companies' lobbying activities, because in our experience far too many of the world's largest companies talk green but try to stall and water down climate policies behind the scenes. The best way for companies to address these concerns from investors and citizens is to publicly disclose lobbying activities, thereby also protecting their brand and social licence to operate. We are disappointed that Volkswagen has chosen to fight this transparency, which is why we have now taken legal action."