Critical shareholding as a tool to hold Italian corporations accountable
Nobody wants their party to be ruined, and corporations are no exception to this. Annual Shareholders Meetings (AGMs) are for them an opportunity to showcase their financial and economic performances and portray their integrity and sustainability.
In recent years, however, Italian corporations have been hearing more than a dissonant note in their self-congratulatory symphony. A few NGOs and one ethical investor (Fondazione Finanza Etica) have begun to show up at the AGMs of major Italian companies – including Enel, Eni and Generali - and to raise thorny questions about their responsibilities in various business-related negative impacts, including on climate change and environmental destruction. That was the start of shareholder activism in Italy.
Generali is the third largest insurance group in Europe, and Italy’s major financial institution, holding assets worth over $600 billion. Research conducted by the Italian NGO Re:Common and the Unfriend Coal network revealed that Generali was also one of the main coal insurer in Europe.
In particular, Generali was insuring some of the most polluting coal plants, such as Bełchatów and Turów in Poland, and Ledvice in Czech Republic. The plants are owned by PGE and CEZ respectively, two of the largest coal utilities in Europe.
Coal is one of the greatest threats to our climate, contributing more to global warming than any other fossil fuel. Burning coal poses huge risks to people’s health, and it is estimated that the Polish coal sector alone causes around 5,000 premature deaths every year.
Since 2016, together with Polish and Czech activists, we have participated to Generali’s AGMs to call on the company to stop providing insurance coverage to coal plants and mines; and to divest its assets from the coal industry. In 2016, along with our action within the AGM, Greenpeace activitists were staging visible protests in order to put further pression upon Generali.
After three years of campaigning, in November 2018, Generali adopted its first climate change policy, divesting about EUR 2 billion from coal and ruling out insurance for new coal plants and mines, becoming the first Italian financial institution to move away from coal.
In some cases, however, results are harder to achieve and require a much longer-term strategy. One example is Enel, the largest Italian utility, operating in 34 countries, managing a total capacity of about 90 GW. The company operates six coal-fired power plants in Italy, including two of the most polluting in Europe (Brindisi Sud and Torrevaldaliga Nord). Enel also holds a controlling share of Endesa, the major electric utility in Spain, which is strongly dependent on coal.
Re:Common has been Enel's critical shareholder for 12 years. The continued pressure has led to some important results in the past, such as pushing the company to pull out from a highly controversial hydroelectric project in Chilean Patagonia. In 2017, after years of campaigning by Re:Common and the Dutch NGO Pax, Enel's CEO, Francesco Starace, announced at the company’s AGM that Enel had ceased its coal imports from the Cesar region in Colombia, where the coal industry is linked to severe human rights violations.
Re:Common is also playing a major role in the company's coal phase-out process. Even though Enel recently announced that it will close its entire Italian coal-fleet by 2025, its subsidiary Endesa had expressed the intention to keep operating its coal plants in Spain beyond 2030. In order to push for addressing this contradiction, we teamed up with the Spanish organisation IIDMA (International Institute for Law and the Environment) and participated together in the last three AGMs. Finally, in 2019, Enel confirmed that also Endesa’s plants in Spain will be closed by 2030, and three of them much earlier.
Re:Common continues to push Enel and its subsidiary Endesa to abandon coal outside Europe, for example in Chile, and is monitoring its coal sourcing from sensitive region, such as Russia and La Guajira (Colombia).
Contrarily to the United States, critical shareholding has only recently emerged in the Italian context as a tactic to hold corporations accountable and push for change in the way they operate.
Over the years the number of organisations and activists engaging with this approach has considerably increased, and so has the level of coordination among them. The Italian experience shows that critical shareholding can have impacts beyond that of shaming a handful of managers. For this to happen, two factors are key: carrying out a continuous, rather than on the spot activity, and placing critical shareholding within a broader campaigning strategy. In many instances, critical shareholding can become a crucial tool to achieve economic justice by questioning corporations’ social license to operate, in active solidarity with those ultimately suffering the impacts of corporate abuses.