Press release: 19 October 2022
Investors turn to courts after VW withholds climate lobbying details
Volkswagen AG is facing a legal action by institutional shareholders after it refused repeated attempts to reveal crucial information on its corporate climate lobbying.
This is the first time investors have started European litigation on a climate-related matter. The case was filed this week.
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."
Notes to editors:
The investors are part of the Institutional Investor Group on Climate Change (IIGCC) and the Climate Action 100+ Initiative, which have engaged with Volkswagen for several years, specifically requesting the company clarify its lobbying position.
When progress in the dialogue stalled, they tried a new avenue. Earlier this year, the investors, also supported by EOS at Federated Hermes and others, tabled an item for inclusion at the company’s AGM in May, seeking the publication of a report that set out how the company’s lobbying of policymakers was aligned with its stated ambition to support the Paris Agreement goals by becoming a net zero company. Volkswagen refused to table the item.
The investors are now taking the matter to the Local Court of Braunschweig.
Volkswagen’s record on climate
Volkswagen is a member of a number of industry associations, including those that have positioned themselves against progressive climate policy – including the German Association of the Automotive Industry (VDA), the European Automobile Manufacturers Assocation (ACEA) and the Society of Motor Manufacturers and Traders (SMMT). However, the company did reportedly threaten to withdraw from the VDA in 2019 due to its regressive stance on electric vehicles.
Access InfluenceMap’s profile of Volkswagen’s lobbying performance here: LobbyMap Volkswagen Group
See the Climate Action 100+ rating for Volkswagen: Volkswagen AG | Climate Action 100+
Whilst Volkswagen does disclose its trade association memberships, the company lacks a comprehensive disclosure of its role within each organisation’s governing body, and how those associations’ lobbying goals and activities align with its own climate goals. Without that assessment, the company risks impeding progress on its climate transition strategy.
AP7 (Sjunde AP-Fonden) is the default alternative within the Swedish Premium Pension system with five million savers and more than 800 billion SEK AUM in global equities and fixed income. With a diversified equity portfolio of more than 3,000 companies, AP7 has an ESG-strategy that focuses on active universal ownership complemented with impact investments.
AkademikerPension is a Danish pension fund owned by its more than 150,000 members, who are mainly employed in the public sector, at academic institutions and upper secondary schools. AkademikerPension has €17 billion under management and actively uses its influence to push for positive change in companies it is invested in.
About The Church of England Pensions Board
The Church of England Pensions Board provides retirement services for people who have worked or ministered for the Church of England. Our pension schemes have over 40,000 members, made up of around 25,000 stipendiary clergy, and over 15,000 others. Our pensions investments total more than £3 billion across all schemes. We serve over 2,500 people through our housing and charitable services.
AP4’s mission is to contribute to the financial security of current and future pensioners in Sweden by managing part of the national pension system’s buffer capital. AP4’s long-term investment perspective, responsibility as owner and commitment to sustainability create opportunities for high returns at a low cost. In this way AP4 works for more secure pensions. As of June 2022, AP4 managed a portfolio of SEK 459 Billion. For more information please visit www.ap4.se
Hausfeld is a global litigation law firm with a track record in climate-related matters. For instance, in November 2021, Hausfeld assisted Greta Thunberg and 13 other youth climate activists from around the world in submitting a petition to UN Secretary-General António Guterres asking that he and the leaders of all UN agencies declare a systemwide UN emergency on the climate crisis, This petition followed a human rights case filed by the same youth petitioners in September 2019, Sacchi et al. v. Argentina, Brazil, France, Germany, and Turkey (the “Children v. Climate Crisis Case”), in which Hausfeld also advised the claimants.
ClientEarth is a non-profit organisation that uses the law to create systemic change that protects the Earth for – and with – its inhabitants. We are tackling climate change, protecting nature and stopping pollution, with partners and citizens around the globe. We hold industry and governments to account, and defend everyone’s right to a healthy world. From our offices in Europe, Asia and the USA we shape, implement and enforce the law, to build a future for our planet in which people and nature can thrive together.