The Church of England Pensions Board is leading legal action against VW (OTC:VWAGY), following its refusal to be transparent on its corporate climate lobbying.
- CoE leads lawsuit against VW for failing to disclose details on climate lobbying.
- Investors are increasingly concerned that lack of transparency could reflect potential greenwash.
- Expect to see the legal system used by a wide range of minority investors to drive corporate transparency on a range of ESG and climate issues.
This is the first time investors have started European litigation on a climate-related matter.
The case will test whether VW has the right to refuse to include an item on the company AGM agenda proposed by VW’s shareholders at the 2023 AGM having previously refused investors shareholder resolutions.
The news broke just after the Principles of Responsible Investment (PRI) published a report recommending how investors should address corporate lobbying. There is a risk that investors face being associated with greenwash if their portfolio companies fail to disclose their climate lobbying behaviour.
The concern, which history makes understandable, is a potential disconnect between a company’s public statements and attempts to lobby regulators behind the scenes. UK NGO Influence Map has compiled a database showing the impact of corporate lobbying on climate regulation, which highlights several areas in which corporate lobbying has weakened or delayed legislation.
Pension funds are banding together to request transparency and accountability
The Church of England Pensions Board, together with Swedish public pension funds AP7, AP2, AP3, AP4 and Danish AkademikerPension, filed a case against Volkswagen AG, after it refused repeated attempts to reveal what the CoE called “crucial information on its corporate climate lobbying activities”. The group of investors are represented by German law firm Hausfeld Rechtsanwälte LLP and supported by legal charity ClientEarth.
Adam Matthews Chief Responsible Investment Officer (CRIO), 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.
Refusal to be transparent about climate lobbying hints at something to hide
The concern is that while VW 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.
Matthews also wrote: “A ruling in our favour would significantly 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.
This could prove to be a critical case for ESG in Europe, where key strategic risks to the business are identified and addressed. This is not at its heart a case about climate change per se, but account governance and accountability. It could also prove an important precedent about which issues are to be considered at company AGM’s and how the interests of minority shareholders are addressed by management.
As Matthews points out, 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 question.
