Major listed companies are grappling with the question of whether they should put their climate plans to a shareholder vote. For some years now, there has been a clear international trend, driven by investors, to get shareholders on board with this issue. But this development has not really taken hold in Germany, where there has been something of a wait-and-see approach.

Chemicals company Alzchem did step up with its climate roadmap via a Say on Climate shareholder resolution in 2023, though this seemed to have gone largely unnoticed by the general public. In April mechanical engineering company Gea held a vote on its Climate Transition Plan 2040, which attracted more attention. The resolution was passed by an overwhelming majority at the Annual General Meeting of the MDax company. The markets are waiting to see who is the next to break cover, though no large wave seems to be in sight. At least Bayer has recently announced that it will hold a vote next year.

The fact that companies are reluctant to involve their shareholders in a climate vote, despite their commitment to ESG, can be explained by the fact that they are still struggling with the implementation of the Corporate Sustainability Reporting Directive (CSRD), and the generally excessive rules for sustainability reporting. It is understandable that companies only want to put climate plans to the vote when they consider them to be robust. This is also in the interests of investors. A resolution at an AGM requires a sound presentation by the company, and a thorough assessment by investors. Pseudo-votes will not motivate anyone in favour of climate change.

The fact that the EU Supply Chain Directive now obliges companies to draw up concrete climate plans should help shape opinion. Companies must set out in detail how they intend to contribute to achieving the 1.5-degree target. The directive does not require a Say on Climate. However, the document required for a resolution must be drawn up, so companies might take the path towards the next AGM.

The debate is also gaining momentum outside the corporate world. At the end of September, the German Jurists' Conference in the Business Law Section will be looking at the question of whether changes to company law are recommended in the fight against climate change. It will also discuss whether the AGM should decide on the climate transformation plan. Legislation would not necessarily have to come into play here; an amendment to the Corporate Governance Code could also be favoured in order to avoid forcing companies into a rigid corset.

With a view to possible regulation, it is expected that a Say on Climate would remain a consultative vote comparable to the remuneration resolution, i.e. legally non-binding and not contestable. Experience with the Say on Pay has shown that even a non-binding vote can develop enormous clout.

From the company's point of view, there are reasons for and against a climate vote. Many wonder why they should present the climate plan to the AGM if they do not do so with the financial plan. On the other hand, it could make sense to allow investors to have their say, if only because the climate transformation may require high investments, and affect profitability and dividends.

Companies might not be able to avoid Say on Climate. The pressure from investors remains high. The appeal from the fund industry is clearly articulated. Those who do not take the plunge will lose long-term investors. And even without a climate vote, the capital markets can express their opinion on the transformation plan via other resolutions – such as the ratification of the actions of the Executive Board and Supervisory Board.