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Does TD have a (climate) governance problem?

Shareholder resolutions are a pillar of corporate accountability. They are a key way that shareholders can express their concerns regarding management. 

Because not all shareholders are actively involved in corporate governance – and many of those that do, tend to defer to management – the general consensus is that when a shareholder resolution receives 20% or more support, corporate directors should stand up and take notice. This includes advice from international proxy advisor Glass Lewis, the UK Investment Association, and the International Corporate Governance Network. Shareholders expect a formal response well ahead of the next year’s resolution filing deadline.

For two years now, Investors for Paris Compliance and institutional investor co-filers (originally, Vancity Investment Management, now also Green Century Capital Management, Nomura Asset Management UK, and AP Pension) have filed the same resolution at TD Bank: asking the Board for more details regarding how it is going to change the way it does business to meet its own 2030 portfolio decarbonization targets (a.k.a. a transition plan disclosure resolution). 

And, tens of billions of dollars worth of shareholders have been using their voting rights to show their support, or nearly 30% of shares, for two years in a row.

The most recent resolution was voted on this past April, and more than two months on, shareholders have still not received any response – even following a full year of nonresponse from last year’s proposal. 

If the previous year is instructive, not only will TD not specifically respond to the vote, but it will not even put out any new climate disclosure until after the withdrawal deadline for next season’s proposals, thereby ensuring another potential vote and black mark from investors.

This is not how some of the other major Canadian banks choose to communicate with their shareholders. For example, this year RBC disclosed well ahead of its AGM a stand alone announcement of their engagement strategy with their energy clients – something shareholders had been pushing them for. There is nothing limiting TD or other banks from disclosing climate policy throughout the year.

TD shareholders want to hear what the company is going to do to address the company’s growing reliance on carbon-intensive revenues that the bank acknowledges represents a significant risk. Will the Board respond to shareholder concerns in a timely fashion and disclose how they are going to change?

We note that we are not the only ones flagging governance issues at TD. The bank is facing money laundering probes in the US and received a “negative” credit rating assessment from Fitch. A year ago it had to abandon its attempted takeover of First Horizon Corp, and there are questions swirling regarding CEO succession.

Whether TD’s climate woes are symptomatic of broader governance issues remains to be seen, but something needs to change if the bank is to live up to its green logo.

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