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After initially proposing to make Say on Climate votes compulsory for French corporate issuers, French legislators have ultimately backed away from the requirement. However, the advisory votes on corporate climate strategy remain relatively popular in France and will likely continue appearing on a voluntary basis.

This post provides an overview of the now-removed provisions in the pending green industry bill, and the current state of French market practice regarding Say on Climate.

Say on Climate Legislation

In July 2023, an amendment regarding the compulsory introduction in the AGM agenda of Say on Climate resolutions was approved by the French national assembly. The amendment, which was part of the French bill on green industry, included the introduction of an advisory vote on corporate climate and sustainability strategies every three years (or when a significant change is made to a company’s strategy), as well as an annual advisory vote on the yearly report of on the progress of the objectives related to companies’ climate and sustainability strategies. These votes would be compulsory for all publicly listed companies in France.

Earlier this month, the Say on Climate vote requirement was withdrawn from the bill on green industry just hours before a committee of French deputies and senators was set to discuss the final version of the text. There will be no legal requirement for French public companies to put up for shareholder approval a Say on Climate resolution at their general meetings.

French Market Views on Mandatory Say on Climate

Different French corporate governance organizations have different views on the matter of making Say on Climate votes compulsory. The French government did not support the amendment when it was introduced back in July. The AFEP, the French Association of Large Companies, has a similar view; the AFEP-MEDEF code, updated in December 2022, recommends that French companies present their climate strategy at their annual general meeting at least once every three years to ensure that investors are informed on climate strategy, but does not include a requirement to hold a vote on it. Most companies following the AFEP-MEDEF code did just that in 2023, presenting their climate strategy at their AGMs without voting on it.

But some organisations were firmly in favour. Among others, FIR (Forum pour l’Investissement responsible), a French association representing multiple stakeholders whose common aim is to promote and develop socially responsible investment, had praised the introduction of the Say on Climate requirement in the bill. After the withdrawal of the Say on Climate, FIR described it as a “missed opportunity”, blaming the outcome on political lobbying and companies’ reluctance to open a dialogue on the topic.

Say on Climate: Current Market Practice in France

Despite the withdrawal of the amendment of the Say on Climate from the bill, French companies can continue to voluntarily present climate resolutions at their general meetings. During the 2023 AGM season, there was an overall decline in the number of Say on Climate resolutions presented in European companies compared to 2022: France became the market with the highest number of management-proposed climate resolutions in 2023 globally, after the number of UK companies holding a vote dropped nearly in half compared to the previous year.

Despite topping the table, the number of Say on Climate resolutions slightly decreased in France as well; in 2023, nine say on climate resolutions and one non-voting item were proposed by management at French AGMs versus 12 in 2022. This 17% decline occurred despite broad stakeholder support for the incorporation of climate strategy within corporate strategy: the AFEP-MEDEF, the High Legal Committee of the Paris Financial Marketplace, the French Climate and Sustainable Finance Commission and the French Financial Market Authority published statements between December 2022 and March 2023 on the growing relevance of the topic.

Although there were fewer Say on Climate votes in 2023, shareholders remained active in engaging companies on climate-related issues. Within the last year, two shareholder proposals and two non-voting items were included at French AGMs, a stark contrast to the previous year, when no shareholder resolution on climate made it to the AGM agenda of any French company.

Say on Climate resolutions started appearing in the general meeting agendas of French publicly listed companies in 2021, with Vinci, Atos and TotalEnergies SE presenting the first management-sponsored proposals on this topic. Generally speaking, shareholders overwhelmingly supported these proposals. However, when abstentions are factored in there is a fairly significant gap in shareholder support between the proposal at Vinci (which received 96.6% support) and those at Atos and TotalEnergies SE, each of which received approximately 84% support but a significant number of abstentions (support levels discounting abstentions rose to 97% for Atos and 92% for TotalEnergies SE).

In 2022, the number of companies that presented an advisory Say on Climate quadrupled compared to the previous year. While shareholder support for these proposals remained high, the range of support widened, with a Say on Climate proposal at Mercialys receiving less than 80% support, and a proposal at Electricité de France, 89% owned by the French state, receiving 99.6% of votes in favour.

Four French companies decided to present Say on Climate resolutions for multiple years in a row; Amundi SA, Carrefour SA and Icade SA included a Say on Climate proposal in both 2022 and 2023, while TotalEnergies SE was the only French company to present this resolution in each of the last three years. The support for these repeated Say on Climate proposals remained generally stable year over year, with a minor increase or decrease of 1% or 2%.

Glass Lewis Say on Climate Voting Recommendations

Glass Lewis support for Say on Climate resolutions also increased in 2023; in 2022, Glass Lewis recommended in favour of 67% of these proposals, abstaining on approximately 17% and opposing the remaining 17%. In 2023, however, we have recommended support for 77% of these proposals, and recommended an abstention on the remaining 23% of proposals where companies had not provided an explanation on how the board intended to interpret the vote results and their impact on its shareholder engagement efforts.

See here for more on our approach to Say on Climate.

Other Climate-Related Proposals

There were also several other climate-related proposals on the ballots of French companies during the first half of 2023. For example, at Engie, shareholders presented a discussion non-voting item as well as a shareholder proposal requesting that Engie amend its bylaws to ensure it provides shareholders with an annual Say on Climate vote. In addition, at Carrefour, shareholders proposed a non-voting item on the company’s climate strategy, which was quickly followed by the company’s inclusion of a management-sponsored Say on Climate resolution. Finally, at TotalEnergies, a management-sponsored Say on Climate proposal was presented alongside a shareholder resolution requesting that the company align its 2030 Scope 3 emissions reduction targets for the use of its energy products with the goals of the Paris Agreement. Although the shareholder proposals were not approved in either case, both received fairly notable support (21.3% at Engie and 28.6% at TotalEnergies).

Looking Ahead

Investor interest in climate-related issues remains strong, but the withdrawal of a mandatory voting provision from pending legislation, along with the declining number of advisory votes on climate strategy across Europe and evolving approaches to investor engagement on the topic within France, leaves the future of Say on Climate in the market uncertain. Although we would not expect a large influx of advisory votes during the 2024 proxy season, the topic is likely to remain on the AGM agenda in one form or another.