A group of Northern European pension funds have clubbed together to take German auto giant Volkswagen (VW) to court on its home turf over a lack of transparency regarding its lobbying activities – saying they’re worried its political influencing work could go against the climate ambitions that VW professes.
Sweden’s SEK970bn (€91.4bn) premium-pension default fund AP7 – along with fellow national pension funds AP2, AP3, AP4, Danish labour-market fund AkademikerPension and Church of England Pensions – said that after VW refused to table an item they proposed at the annual general meeting (AGM) in May, they were now taking the matter to the Local Court of Brunswick (Braunschweig) in Lower Saxony.
The investors, who are being represented by German law firm Hausfeld Rechtsanwälte and backed by legal charity ClientEarth, said in the announcement that this was the first time investors had started European litigation on a climate-related matter. The case was filed this week.
Volkswagen has responded saying it believes the investors’ request lodged with the court for an addition to the AGM agenda is inadmissible, but that it shares the view “aspects relevant to climate protection” should have a higher priority in reporting.
Emma Henningsson, AP7’s head of responsible ownership, 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,” she said.
Henningsson said it was worrying that the investor group’s shareholder right to contribute to the AGM agenda had been refused.
“As a result, we felt the need to go to court to clarify this grey area for corporate law in Germany,” she said.
The pension funds said in the statement that they were concerned that while publicly championing the green transition, VW might be undertaking lobbying activities that ran counter to its stated climate ambitions, via its membership to a number of automotive and business associations.
They said that potential contradiction exposed the company to reputational and operational damage and put the security of their investments in question.
Pia Axelsson, AP4’s manager of corporate governance, said that by blocking the investors’ proposal to put the topic of corporate lobbying on the AGM agenda, VW had made this a matter of principle regarding minority shareholders’ rights in Germany.
“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,” she said.
The parties taking the legal action against VW said the case would clarify whether shareholders had the right to put an item on the agenda of the AGM, and that a ruling in their 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,” they said.
Success in the Brunswick court, which is around 30km from VW’s headquarters in Wolfsburg, would mean more shareholders could actively contribute to improving the governance of the companies they owned, as in many other jurisdictions around the world, they said.
The investors said they were 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.
Volkswagen Group issued a statement in response to the legal action, saying that the distinction between the legal and substantive assessment was important.
“In legal terms, Volkswagen is of the opinion that the applicants’ request for an addition to the agenda, which has now been asserted before the District Court of Braunschweig, is inadmissible.
“This is because the petitioners are attempting to amend the articles of association to include a provision that would inadmissibly interfere with the management authority of the board of management and could therefore not be validly adopted by the annual general meeting,” the German company said.
However, in terms of content, the firm said it shared the assessment that aspects relevant to climate protection deserved an even higher priority in reporting.
“We are currently considering various approaches to this,” it said, adding that the company could build on the “extensive transparency measures” that it had already implemented.
“The Volkswagen Group already reports publicly on its public affairs activities on a voluntary basis,” said VW.
All public affairs activities served to support the strategic goals of Volkswagen AG, it said, adding that a key part of those objectives was its support for the Paris Climate Agreement and the European Green Deal.
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