Forceful stewardship: the reason for being
The Forceful Stewardship initiative was established to elevate climate action from ESG departments to the level of CEOs, CIOs, and trustees. The report argues that climate change is a material systemic risk threatening portfolio value, thus creating a fiduciary duty for institutional investors to act. Current “ESG business as usual” is criticised for focusing on individual company business cases and alpha, which fails to produce emission reductions at the required pace. The initiative seeks to use proxy voting as a vehicle for system change, turning dispersed ownership into a strength. The goal is to have a positive external impact on corporate strategy within a 5-10 year timeframe by asking corporations for low-carbon business plans and monitoring investor voting behaviour.

Forceful stewardship: the investment beliefs and the guidelines
This approach is founded on the observation that climate change poses an increasing systemic risk to the global economy and the security of beneficiaries. Diversified investors have a fiduciary obligation to control this risk. Key supporting beliefs include the necessity of a rapid transition to a low-carbon economy, which could be structured to be cost-neutral or positive over the long term. The guidelines recommend eight specific actions, including declaring intentions to vote for resolutions that reduce climate risk, instructing voting advisers to vote automatically in favour of such resolutions, and demanding business plans that adapt to a carbon price rising to $100 per tonne by 2030 and a 2°C warming target (or 450 ppm of CO2).

Our global strategy
The global strategy consists of four pillars: Leadership & Communication, Collaboration & Mutual Challenge, Strategic Choices, and Contingency Planning for Success. It involves pilot programmes focusing on information intermediaries and specific national markets including Canada, the Netherlands, and the USA. The initiative will hold itself accountable through key performance indicators (KPIs) related to ThinkTank outputs, positive discourse among key stakeholders, and consistent actions taken by influential market participants.

Shifting the risk management culture
There is an urgent need for a new risk management culture, with 85% of ThinkTank participants agreeing that fiduciary capitalism requires a fundamentally different strategy for systemic risks. Fiduciary capitalism focuses on intergenerational equity and the minimisation of negative externalities. The report emphasises that roughly 90% of an investor’s return is beta, meaning the traditional view that “the market” is an independent variable must be challenged. Investors are encouraged to be “future makers” who educate companies and catalyse adaptive action to avoid the unmanageable financial consequences of climate disruption.

Options for corporate resolutions
Investors are encouraged to frame resolutions around 2°C-compliant business plans, carbon price resilience, and capital distribution to shareholders where profitability is decreasing due to stranded asset risks. The “Aiming for A” coalition in Europe is cited as a major advance, where 98% of shareholders supported climate resolutions at BP and Shell. The report also highlights the potential of engaging “citizen investors”—ordinary savers who can lobby their pension funds to take an active stance on carbon risk.

Sector priorities
Forceful Stewards should focus on heavy users of fossil fuels, such as utilities, transportation, and materials, as well as the energy sector itself. Utilities are identified as the most carbon-intensive class of companies. The finance and insurance sectors are also key targets; insurers globally manage approximately $25 trillion in assets and are exposed on both sides of their balance sheets. Other priorities include the automotive industry, which is responsible for 14% of human-produced GHG emissions, and the agriculture sector, with industrial livestock production contributing 14.5% of total global emissions.

Why information intermediaries matter
Investment consultants, proxy voting agencies, and sell-side analysts wield significant influence but have been slow to integrate climate risk. Consultants are at risk of “group think” and often define the views of the pension industry. The report recommends that investment managers instruct analysts to include carbon risks in their analysis. Furthermore, 90% of survey participants agree that passive managers should promote funds managed against climate-mitigation benchmarks, as they are “universal owners” who will be exposed indefinitely to the real economy.

Canada: an opportunity for action
Canadian pension funds have a reputation for good governance but are among the most carbon-intensive globally. This “paradox” is attributed to a national context where fossil fuel companies account for 24% of the S&P/TSX60 index. Priorities for Canada include developing a vision for a low-carbon economy and challenging the five largest chartered banks on their lending portfolios.

The Dutch could set the bar for global investors
The Netherlands is identified as an ideal pilot for Forceful Stewardship due to its “poldermodel” of cooperation and strong public demand for action. Large funds like ABP and PFZW are already measuring carbon footprints and investing in sustainable solutions. The report suggests Dutch investors should use their global influence to shift norms at the SEC and within sector-specific peer networks.

The USA
In the USA, the investment landscape is polarised, with many investors discounting climate risk as primarily regulatory and dependent on congressional action. However, major firms like BlackRock and the pension funds of New York have begun calling for enhanced disclosures. The report advocates for more test-case litigation and the use of “books and records” requests to improve company transparency and accountability.

Conclusions and next steps
The 2016 AGM season is identified as a critical test for the investment industry to ratchet up the agreements from international negotiations. Preventable Surprises will continue to host quarterly global ThinkTanks and investigate stakeholder-specific dialogues. The report concludes that a rapid transition to a low-carbon economy is the only way to prevent the destruction of portfolio value.