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ClientEarth Communications

22nd April 2022

Climate finance

Legal implications are no reason to vote against climate resolution at Credit Suisse

On 29 April shareholders of Credit Suisse will take part in the first ever vote on a climate resolution at the AGM of a Swiss company.

The resolution, co-filed by the Ethos Foundation, ShareAction and 11 institutional investors representing €2.18 trillion, proposes an amendment to the articles of association of Credit Suisse Group AG.

The goal: to add a new requirement for the bank’s annual management report to disclose Credit Suisse’s progress towards aligning its financing with the Paris Agreement goal of limiting global heating to 1.5°C; and the short-, medium- and long-term steps Credit Suisse plans to take to reduce its exposure to fossil fuel assets.

The bank has in response noted its “full support” for the “objectives” of the proposal*. But it also recommended shareholders vote against it, claiming that the disclosures sought should not come about by way of an amendment to the articles of association – a document which Credit Suisse suggests should “not include information about specific disclosures, unless required by law”.

We disagree.

Shareholders’ legal rights

Under Swiss law, which provides for a clear division of powers between a company’s Board and its investors, shareholders have the legal right to amend a company’s articles.

While the Board is granted broad management powers to run a company’s affairs as it sees fit, its control is subject to certain fundamental rights that are reserved to shareholders.

These include the right for a majority of shareholders to amend the company’s articles of association, in order to set the general framework within which the Board must exercise its day to day discretion to achieve the company’s desired goals.

Contrary to management’s recommendation, the proposed amendment to Credit Suisse’s articles is therefore an entirely appropriate use of shareholders’ rights to direct the bank’s approach to climate disclosures.

What’s more, Credit Suisse’s Board has already acknowledged that the objectives of the proposal align with the bank’s own.

And the proposal is deliberately framed at a high level in order to avoid restricting the Board’s day to day decision-making authority. How it approaches and implements the bank’s strategy to align its business with the goals of the Paris Agreement is left to the discretion of Credit Suisse’s management.

A legal obligation to disclose

A company’s articles of association are often regarded as its constitution. Although Credit Suisse’s Board has promised to strengthen climate disclosures in its 2022 Sustainability Report “or TCFD disclosures” – which it used to justify its recommendation to vote against the resolution – that commitment is not binding.

The benefits the resolution offers, as set out in ShareAction’s investor briefing, are over and above Credit Suisse’s newly announced climate disclosure policy. These benefits fall well within the scope of a reasonable and proportionate request that aims to improve corporate governance and transparency at the company – and if shareholders agree that these benefits warrant the imposition of a legal requirement, then they will be entirely justified in voting for the resolution.

Barclays, HSBC and Nestlé

The Credit Suisse resolution is not the first shareholder climate proposal to target a major bank. More prescriptive climate resolutions were proposed at the AGMs of both Barclays and HSBC in the UK in 2020 and 2021 respectively.   

Even in Switzerland, more stringent resolutions have recently been proposed.

In 2021, the Ethos Foundation and seven Swiss pension funds filed a resolution at Nestlé. Although withdrawn before the AGM notice and agenda were finalised, the resolution called for an amendment to the company’s articles of association which would have required the Board to both publish and regularly update a Paris-aligned climate strategy, and also to publish a detailed annual climate alignment report in the implementation of that strategy.

Moreover, the company took the proposal seriously in its engagement with investors – leading to the resolution’s retraction.

Appropriate action

The resolution tabled by the Ethos Foundation, ShareAction and institutional investors is an appropriate means for investors to improve Credit Suisse’s long-term climate disclosures without restricting the discretion of the Board to manage the day to day affairs of the bank. We believe shareholders can – and should – be confident that a vote for the resolution is well within their legal rights under Swiss law.

Nothing in this document constitutes legal advice. The contents of this document are for general information purposes only. Specialist legal advice should be taken in relation to specific circumstances. ClientEarth endeavours to ensure that the information it provides is correct, but no warranty, express or implied, is given as to its accuracy.

*see pages 27-28 of its Letter to Shareholders and Agenda here.