Say on Climate: Climate Protection and Corporate Division of Powers Part I

Abstract: The growth of sustainable shareholder activism finds a voice in the Say on Climate initiative. It aims to promote greater transparency in the disclosure of climate policies and to ensure that, each year, shareholders have an opportunity to have a say on these policies in an advisory capacity. The success of this initiative in the US has been followed by a growing uptake of the model by European companies. However, the Portuguese legal framework makes it difficult to ensure that shareholders have a voice in this area. Climate policy is a company management matter, on which the shareholders should only decide when requested by the management body, and it is hardly conceivable in the climate field - at least in general terms - the existence of unwritten powers of the general meeting. The shareholders are thus dependent on the initiative of the management and their vote will be of a purely consultative nature. Finally, the article discusses the admissibility of shareholders promoting, by alternative means, the discussion of (without resolving on) climate policies at the general meeting, either autonomously or in connection with other items on the agenda.

Keywords: Say on Climate; ESG; sustainability; climate change; advisory vote; powers of the general shareholders' meeting.

1. Sustainable shareholder activism and promoting shareholders' voting rights in climate policies

The notion of sustainability is presently perceived as having three dimensions. The ESG concept - an acronym for ‘Environmental, Social and Governance’ - was first introduced in 2004 in the report entitled ‘Who Cares Wins’,¹ an initiative of former United Nations Secretary-General Kofi Annan. It brings together the environmental, social and corporate governance concerns that increasingly permeate companies' decisions, particularly in the light of the performance and return expected by their stakeholders.

The environmental concerns (the ‘Environmental’ factor) address the impact of society on the natural ecosystem, including, by way of example, mitigating and adapting to climate change, as well as preserving biodiversity, implementing pollution mitigation strategies (especially with regard to greenhouse gas emissions) and the efficient use of natural resources in the production process.²

On the other hand, when it comes to social concerns (the ‘Social’ factor), issues as diverse as addressing inequalities and inclusion, labour relations (particularly in terms of job quality, health and safety, training and development), investment in human capital or even the broader topic of human rights are at stake.³

Finally, in relation to concerns about corporate governance (the ‘Governance’ factor), the company's governance structure comes into play, with a particular focus on management structures, relations between different types of employees, audits, internal controls, safeguarding shareholders' rights and executive remuneration policies⁴ - this dimension plays a fundamental role in ensuring that social and environmental considerations are included in the decision-making process.

In the past, the discussion of incorporating ESG factors into the management of companies was considered a niche topic. At the annual general meetings of listed companies, so-called ‘critical investors’ would sometimes appear, who often simply bought a share to take part in those meetings and raise issues related to corporate governance.⁵ These investors were typically environmental or human rights activists, whose intervention was merely symbolic in nature and, with a few exceptions, did not merit public attention.

However, in recent years the landscape has changed radically with the emergence of what has been dubbed ‘sustainable shareholder activism’.⁶ It consists of traditional activism, now oriented towards promoting social change in the direction of sustainability,⁷ breaking the traditional view that many institutional investors pursue exclusively predatory policies. Institutional investors no longer limit themselves to excluding companies that do not follow ESG standards (‘ESG negative screening’) from their investment portfolio. On the contrary, they invest in these companies to adopt an active stance and use their shareholder influence to promote improvements in ESG policy (‘active ownership’ or ‘stewardship’). A good example is the Engine No. 1 investment fund, which, in a campaign to press for the energy transition of the Exxon Mobil oil company and with the support of institutional investors such as BlackRock, Vanguard and State Street, managed to elect three representatives to the board of directors.⁸

Climate concerns also guide the work of the Institutional Investors Group on Climate Change (IIGCC), which has more than 340 members from 22 different countries and is present in the European market. Together with three other investor associations from other parts of the world - the Investor Group on Climate Change (IGCC) in Australia and New Zealand, the Asia Investor Group on Climate Change (AIGCC) and the American Investor Network on Climate Risk (INCR) - they form the Global Investor Coalition on Climate Change (GIC). There has also been a growing incorporation of ESG parameters into the voting recommendations made by proxy advisors.⁹ We can now speak in general terms of a ‘Global Stewardship Ecosystem’.¹⁰

The rise of sustainable activism is the result of a general trend towards valuing the role of the financial system in sustainability and the transition to a circular economy and, in Europe in particular, regulatory initiatives aimed at aligning companies and investors with more sustainable behaviour. As can be read in the European Commission's ‘Action Plan: Financing sustainable growth’¹¹:

[A]s we increasingly face the catastrophic and unpredictable consequences of climate change and resource depletion, urgent action is needed to adapt public policies to this new reality. (...) Reorienting private capital to more sustainable investments requires a comprehensive shift in how the financial system works.

In this Plan, the Commission established three constituent elements of the sustainable finance framework: (i) a taxonomy for sustainable activities; (ii) a disclosure framework for financial and non-financial companies; and (iii) investment instruments, including benchmarks, standards and labels. In July 2021, the New Sustainable Finance Strategy¹² strengthened the objectives related to sustainable finance, reaffirming that:

[A]s the scale of investment required is well beyond the capacity of the public sector, the main objective of the sustainable finance framework is to channel private financial flows into relevant economic activities.

In this context, company law and capital market law have become instruments in climate policy¹³, following the realisation that the demanding targets set out in the Paris Agreement on Climate Change¹⁴ and the UN's 2030 Agenda for Sustainable Development cannot be achieved without the support of the financial system.¹⁵ For this reason, the European Commission has been developing strategies to direct capital flows towards a more sustainable system. The various initiatives taken at European level in recent years have helped all market players, from companies to investors, to rethink the way they position themselves with regard to ESG standards. Among the various European instruments that have contributed to this change in behaviour, the following stand out:¹⁶

• The introduction of transparency obligations to ensure that companies disclose meaningful sustainability information, that intermediaries, such as institutional investors, can use in their investment decisions and that, due to the new disclosure obligations for non-financial information (CSRD¹⁷ and SFRD, especially aimed at financial market players¹⁸), the EU benchmarks for the climate transition¹⁹ and the Taxonomy Regulation²⁰, allow retail investors and the ultimate beneficiaries of investment funds to have adequate information for making sustainable investment decisions.
• Proposal for a Directive on corporate sustainability due diligence²¹ with the aim of improving governance strategies by considering and mitigating risks related to human rights and the environment, particularly those arising from value chains.
• The Shareholder Rights Directive II²² which, among other things, requires institutional investors and asset managers to draw up and publicise an investment policy describing how they integrate shareholder involvement into their investment strategy (Article 3g).
• It has been considered in various legal systems to follow the path adopted in France in the PACTE Law (Le pland'acion pour la croissance et la transformation des entreprises), which redesigns the duties of directors to consider social and environmental factors in business management.

The European framework is a reflection of a global movement of concern for sustainability, which is echoed in the climate field, namely in the Say on Climateinitiative. This initiative was designed by British billionaire Sir Christopher Hohn, who made a name for himself as a philanthropist in 2003 with the founding of the hedge fund‘The Children's Investment Fund’ (hereinafter, ‘TCI’), which annually donates part of its profits to a foundation supporting children in developing countries. According to the initiative, the net zerotransition implies (i) annual disclosure of all net greenhouse gas emissions; (ii) the development of a transition plan to reduce these emissions; and (iii) that the plan, as well as the status of its implementation, be submitted annually to the general assembly for a non-binding vote.²³ The initiative fulfils a long-standing trend in the US of using shareholder proposals as a primary means of activism and makes available on its website a shareholder resolution model specially designed for the American legal system and which ensures compliance with US SEC 14a-8 Rules. The first success story can be found in the adoption by Aena, S.M.E., S.A. of a shareholder proposal, submitted by TCI, according to which the company should start drawing up and publishing a climate transition plan, voted on annually by the shareholders, in an advisory capacity. In addition, TCI wanted to amend the company's articles of association to make it compulsory for the general meeting to hold an annual advisory vote on climate policy.²⁴

This initiative is particularly interesting. If, on the one hand, it allows shareholders to have a voice in the general meeting in systems where they enjoy limited powers in determining the management of the company, on the other hand, it is important to consider whether it is in line with the distribution of competences that results from the corporate law framework. The question is to what extent the shareholders can impose their view of the company's climate policy on the board of directors. The debate is not only social, but also legal.

2. Climate transition plans: a case of unwritten competence of the general meeting?

Under the Portuguese legal framework, the competence to define the company's climate policy, especially energy transition plans, does not, as a general rule, lie with the shareholders. In public limited companies (sociedades anónimas), the board of directors is responsible for managing the company's activities and must only subordinate itself to shareholder resolutions in cases where the law or the articles of association so determine (article 405 of the Portuguese Companies Code). In principle, resolving on the company's sustainability policies do not fall within any of the cases of shareholders' competences listed by law. Additionally, ‘on matters of company management, shareholders can only resolve at the request of the management body’ (article 373, paragraph 3, of the PCC, which must be read together with article 405 of the PCC). Given the medium and long-term impact typically associated with the company's climate policy, decisions to approve or modify this policy tend to fall within the remit of the board of directors.

However, it cannot be ruled out, depending on the specific content of the sustainability policy, that it represents a structural change to the company or has a material impact on the company's identity or investment profile to such an extent that the board of directors cannot reasonably expect to decide on its own. That being the case, it is possible to discover an unwritten competence of the general meeting, with the company's board of directors being obliged, by virtue of the duties of good faith to which it is bound, to convene a general meeting. The doctrine has stated that ‘operational or practical centrality belongs to the management body, but structural or fundamental centrality continues to belong to the general meeting’,²⁵ which is why fundamental issues affecting the identity or structure of the company continue to have to be decided by the shareholders. When this is the case, the competence lies with the shareholders in their own right, and not merely by delegation from the board of directors, which is why this body is bound by the meaning of the resolution passed.

The doctrine of the general meeting's unwritten powers is now well-established in the Portuguese legal system²⁶, as it is in other legal systems. In this regard, the German Holzmüller decision²⁷ of the BGH, as well as the other decisions that followed it, should be remembered. In essence, the Holzmüller case law establishes the obligation to convene a general meeting when a set of qualitative requirements - which have been labelled Mediatisierungseffekt, Satzungsnähe and Verwässerungseffekt²⁸ - and a quantitative requirement are met. The first ("mediatisation effect") relates to the internal imbalance of powers between the general meeting and the board of directors that results from the measure taken. For example, in the case of a spin-off, such as that seen in the Holzmüller case, although the general meeting did not formally lose rights, there was a material change in the internal balance of powers between the directors and the general meeting of the parent company. The shareholders, who had direct influence over the company's affairs, now had merely indirect control over the daughter company.²⁹ However, it should only be considered verified when the measure in question centres on the core of the business activity.³⁰ The second qualitative requirement came from the Gelatine case and is a novelty compared to the Holzmüller doctrine: even if the measure proposed by the board of directors is not legally an amendment to the articles of association, it should be treated as such if it is analogous to an amendment to the articles of association. There is a "proximity to the articles of association" (Satzungsnähe) which justifies the need for the measure to be approved by the general meeting.³¹ Finally, the "dilution effect" (Verwässerungseffekt), as described by the BGH,³² determines that in cases where there is interference in the economic interests of shareholders, such as the right to dividends or liquidation profit, it must be mandatory to convene a general meeting. However, part of the doctrine believes that the decrease in the value of shareholdings should not be considered as a criterion for discovering the unwritten powers of the general meeting, since this decrease in value should be seen as a potentially compensable damage, and never as a condition for calling a general meeting. On the contrary, this requirement would add nothing to the Mediatisierungseffekt, which is the direct consequence of the structural measures taken.³³

In addition to these qualitative requirements, the case law, accompanied by the doctrine, has also demanded a quantitative threshold to allow unwritten powers of the general meeting to be invoked: the measure in question must have a significant impact on the corporate structure, but the meaning of this requirement remains open. The issue has been discussed by legal scholars, which have come to different conclusions. According to one school of thought, the need for a resolution by the general meeting arises when the spin-off or other equivalent structural measure reaches 25 per cent. of the share capital, a limit that results from the Revised Model Business Corporation Act³⁴; various other positions oscillate between considering the relevant threshold to be the allocation of 10 per cent.³⁵ or 75 per cent.³⁶ of the share capital, and in the Gelatine decision, the BGH decided that a general meeting would only be justified if the measure reached 80 per cent. of the share capital.³⁷ The uncertainty in the matter is clear.

Certainly, not all cases of approval or modification of climate policies can be included in the assumptions listed above,³⁸ namely because it is difficult to identify a ‘mediatisation effect’ on the rights of shareholders when climate issues are at stake.³⁹ The general admissibility of the need to convene a general meeting whenever climate options are at stake would lead to a subversion of the corporate distribution of competences, disproportionately restricting the actions of the management body and jeopardising the appropriate distribution of responsibilities between bodies.⁴⁰

However, the hypothesis cannot be ruled out: if the conditions are met, a general meeting will have to be called. It is possible to discover an implicit competence on the part of the shareholders to deliberate on matters that interfere decisively with the corporate structure, status socii, material identity of the company, material profile and risk of the investment, direct or indirect continuity of the company.⁴¹ Only a careful analysis of the specific climate policy can dictate the allocation of competences.

3. Shareholder’s intervention in the company's climate policy

3.1. Advisory vote of the general meeting

As shown above, in public limited companies, apart from the identified cases of unwrittencompetence of the general meeting, shareholders can only pass resolutions on management matters at the request of the management body. This regime is diametrically different from that designed for private limited companies, in which it is established that managers, in their activity, must ‘respect the shareholders' resolutions’ (article 259 of the PCC). In public limited companies, therefore, there is a principle of management independence, which excludes shareholders from making management decisions, with a consequent increase in the risk of misalignment between the interests of management and shareholders.⁴² Notwithstanding the fact that it is enshrined in law, the principle of board independence is not always mirrored in practice. The board is often exposed to the de facto influence of large shareholders or institutional investors. Even so, the legal system of division of competences does not lose its significance, insofar as it prevents minority groups from requesting the introduction of management issues on the agenda and thus managing to promote a resolution on them.⁴³

Even when the management body promotes the shareholder vote, according to the widely accepted understanding, the vote will be merely advisory⁴⁴, without prejudice to divergent⁴⁵ or mitigated⁴⁶ positions. In practice, this means that the board of directors is not obliged to follow what has been decided by the shareholders.

However, it is not forbidden for the articles of association to rule out the merely advisory nature of the resolution. The articles of association may stipulate that if the management body asks the shareholders for a resolution on management matters, the resolution is binding.⁴⁷ This position is backed by the wording of the PCC: article 405/1 of the PCC states that the board of directors must abide by the shareholders' resolutions in cases where the articles of association so determine.

In Germany, the legal framework on the distribution of competences between the general meeting and the board of directors is similar to that in Portugal, but the conclusions reached in this regard are different. German corporate law only allows shareholders to decide on management matters by delegation of the board of directors (§ 119 (2) AktG). However, contrary to what happens in Portuguese law, the general understanding of German doctrine is that such a resolution is binding on the board of directors.⁴⁸ However, there is discussion about the admissibility of the board requesting the intervention of the shareholders in a purely advisory capacity, which is generally accepted,⁴⁹ although there are some voices against this hypothesis.⁵⁰ In other words, contrary to what happens in the national legal system, in Germany the shareholders' resolution only takes on an advisory nature when it is framed in this way by the board of directors. It is a system that recognises the management body's full authority to determine the extent of the powers delegated to the shareholders. In other words, the board of directors is free to determine whether it only wants a binary decision from the general meeting, in the sense of approval or rejection, whether it wants to allow the shareholders to formulate other proposals for a resolution on the delegated matter, or whether the vote is merely advisory. Even if the board has submitted a binding proposal for a resolution, the shareholders can choose to issue a mere recommendation or opinion on climate policy, which by definition has no binding effect.

However, the non-binding nature of the vote determined by the Portuguese framework does not mean that it is irrelevant. On the one hand, it assumes the role of promoting an active dialogue between management and shareholders. The initiative is therefore in line with the Shareholders' Directive II, which provides for in Article 3g(1)(a):

[I]nstitutional investors and asset managers shall develop and publicly disclose an engagement policy that describes how they integrate shareholder engagement in their investment strategy. The policy shall describe how they monitor investee companies on relevant matters, including strategy, financial and non-financial performance and risk, capital structure, social and environmental impact and corporate governance, conduct dialogues with investee companies, exercise voting rights and other rights attached to shares, cooperate with other shareholders, communicate with relevant stakeholders of the investee companies and manage actual and potential conflicts of interests in relation to their engagement.

On the other hand, the fact that the resolution does not bind the board to act in accordance with the shareholders' wishes does not mean that it should not be taken into account by the board. A shareholders' resolution in a certain direction will certainly be relevant when it comes to assessing guilt in a possible civil liability action against directors. The board of directors is not bound by the shareholders' vote, but it is not authorised to ignore the resolution or to fail to duly consider the shareholders' will and the reasons for it. We are in the area of assessing the reprehensibility of the directors' behaviour.

It is important not to ignore the fact that the shareholders' vote could be negative,⁵¹ in which case the board will have to consider whether to continue with the climate policy, even taking into account the wishes of the shareholders, or whether to adapt it to this vote. In either scenario, the management's public image could be damaged. Therefore, when deciding whether to submit the climate policy to the shareholders for voting, all outcomes must be properly considered by the members of the management body.

The option for the board of directors to submit a management issue to a shareholders' vote at a general meeting is not discretionary. Considering the costs associated with such a request, the board must clarify in the resolution proposal why it believes that obtaining the opinion of the shareholders is the best option in terms of company management.⁵² Market expectations will certainly have to be considered in this judgement. In a system with the growing impact of sustainable shareholder activism and in view of the European regulatory framework, in which an investor may consider selling their shares if the company does not comply with the CSRD and the Taxonomy Regulation, it may be more efficient to discuss issues related to climate policy at a general meeting than to have an informal dialogue with shareholders.

3.2. Indirect voting on climate issues: right to information and annual appraisal of company management

Although shareholders are not free to propose a Say on Climate resolution, they do have the option of exercising their right to request information at the general meeting to enable them to form an informed opinion on matters subject to resolution.⁵³ Thus, although the general meeting is not competent in climate matters, it is possible for shareholders to indirectly express an opinion on these matters. In fact, the general meeting is not prevented from discussing matters related to the management of the company within the scope of other items on the agenda. In particular, it is possible to envisage the exercise of the right to information in relation to the item on the agenda dedicated to the appraisal of the company's management, which, according to the Portuguese corporate framework, the general meeting must carry out annually. This assessment culminates in a resolution of confidence in the body and its members or their dismissal (article 455 of the PCC). Since climate policy is part of the company's management, it would be admissible for shareholders

to intervene in the general meeting, in relation to this item on the agenda, to question the company's options in relation to climate policy. Similar intervention should be allowed under the item dedicated to the appraisal of the management report, which includes the sustainability report.⁵⁴ This allows shareholders to ask for clarification and issue statements when the sustainability report is too superficial or does not meet the shareholders' expectations.

It should be remembered, however, that requests for information at general meetings are limited to what is necessary for members to form an opinion on the issues to be decided. It can therefore be questioned whether the chairman of the general meeting should accept all speeches and questions relating to the company's climate policy.

Analysing the need for information for the resolution in question should be based on its material importance for the item under discussion.⁵⁵ In the case of the assessment of the company's management, not all information related to management decisions taken in the past should be considered necessary.⁵⁶ Insofar as this assessment depends, on the one hand, on whether the management's actions comply with the law and the articles of association and, on the other hand, on whether they are appropriate, requests for information relating to "events of some importance" that are relevant to assessing the likelihood of maintaining confidence in the company's management should be admitted.⁵⁷ Thus, all information that affects the company's public image or has a significant impact on the company's financial position should be considered relevant: this certainly includes information on the company's climate policy. However, the chairman of the general meeting will have the delicate task of distinguishing between what should still be considered essential to form a position on the issues to be decided and what already constitutes undue interference by shareholders in the management of the company.⁵⁸

In any case, the shareholders' right to information at a general meeting is an instrument of limited value. On the one hand, it does not allow for the representation of the entire shareholder universe that would be achieved through a vote.⁵⁹ On the other hand, insofar as climate protection is only one of several aspects of the management report or corporate governance, the board of directors will be able to answer the questions in little detail.⁶⁰

It is therefore important to consider whether the legal division of competences gives members the possibility, on their own initiative, to raise debate on this topic, autonomously and not just in relation to other items on the agenda.

3.3. Legitimacy to request the convening of the general meeting and the inclusion of climate-related matters on the agenda of the general meeting

In public limited companies, shareholders holding shares corresponding to at least 5 per cent of the share capital can request that a general meeting be called, as well as the inclusion of certain matters on the agenda of a general meeting that has been called or is to be called (articles 375 and 378 of the PCC). In the case of listed companies, the threshold for active legitimacy is reduced to 2 per cent of the share capital held (article 23-A of the Portuguese Securities Code, hereinafter the ‘PSC’). The request to include items on the agenda must be addressed in writing to the chairman of the board of the general meeting within five days of the last publication of the notice.

Within this legal framework, the question arises as to whether shareholders can, on the one hand, ask for a meeting to be convened or introduce an item on the agenda with a view to resolving on the company's climate policy and, on the other hand, whether they can take this initiative in order to discussthis policy, without intending to adopt any resolution.

Either hypothesis seems ‘problematic’⁶¹ given the legal distribution of competences. Under Portuguese company law, regarding management matters, shareholders can only pass resolutions at the request of the management body. The first hypothesis must therefore be rejected out of hand, as it is clearly contrary to national law.⁶² If the shareholders wish to decide on climate policy, they are absolutely dependent on delegation from the board of directors.

The second hypothesis - the admissibility of requesting the convening of a general meeting or the inclusion of the subject on the agenda solely to discussclimate policy - is based on the question of the admissibility of a subject on the agenda that is not accompanied by any proposal for a resolution. In Germany, the issue is implicitly discussed with regard to the possibility of the board of directors calling a general meeting for information and discussion purposes only, without the intention of adopting any resolutions. Currently, the prevailing doctrine accepts this hypothesis, provided that the benefits of discussion at the general meeting outweigh its costs.⁶³ In this legal system, the position is supported by the letter of the law. Paragraph 124a AktG stipulates that, immediately after the general meeting is convened, listed companies must publish on their website an explanation for cases in which an item on the agenda is not accompanied by a proposal for a resolution. However, when the doctrine looks at the admissibility of the shareholders' initiative outside their sphere of competence, it almost unanimously answers negatively, even if the shareholders' proposal is limited to discussing the issue and not voting on it.⁶⁴ In other words, the possibility of shareholders expressing their opinion on aspects of company management should only be allowed in relation toother resolutions on the agenda. The possibility of autonomousdiscussion of management issues at the initiative of the shareholders should, under this system, be considered excluded. However, Harnos and Holle⁶⁵ seem to lean in the direction of its admissibility, emphasising that the proposal for discussion without a resolution is one level below a consultative resolution and that, in any case, the shareholders will always be able to discuss the issue in relation to other items on the agenda, as explained above.

In Portugal, the issue is more delicate. According to the PSC, the request to include items on the agenda must be accompanied by ‘a proposed resolution for each item whose inclusion is requested’ [article 23-A/2, b)] and ‘the items included on the agenda, as well as the accompanying proposed resolutions, shall be disclosed to the shareholders (...)’. [article 23-A/2, c)]. In the case of non-listed companies, article 378 of the PCC does not make a similar mention, referring only to the inclusion of ‘matters’ on the agenda, without any reference - express or implied - to the need for a resolution to be submitted. The additional requirements resulting from the securities framework assume a ‘specific protective intent’⁶⁶ of investors, which should not be interpreted as limiting their rights to introduce matters for discussion at the general meeting. Therefore, when faced with a request to put an item on the agenda solely for the purpose of encouraging debate and without a deliberative nature, the chairman of the general meeting should accept the request and all the information accompanying the request should be publicised.

On the other hand, the admissibility of a request from shareholders to put on the agenda the discussion of an issue that falls within the remit of the management body (such as climate policy) could be questioned. However, it is important to consider that the discussion of these issues at a general meeting promotes dialogue at the time of the meeting, accessible to all shareholders, avoiding behind-the-scenes politics⁶⁷ and is in line with the favouring of shareholder involvement resulting from the SRD II. We therefore believe that this possibility should be accepted.⁶⁸

4. Final thoughts: need for Say on Climate regulation?

Under Portuguese law, shareholders cannot, on their own initiative, pass resolutions on the company's climate policy. Discussion and resolution on these issues depends on a request from the management body, which chooses to submit the climate policy to a shareholder vote. Even in this case, the resolution is merely advisory in nature and does not bind the board of directors. This solution has historical foundations in the legal distribution of competences, the contours of which have been challenged by ESG issues.

In terms of discussing climate policy (without a resolution), shareholders can promote it in connection with other items on the agenda of the general meeting, such as the annual appraisal of the board of directors or the management report. However, not all aspects of climate policy will be considered relevant to the issues in question, which is why it will be possible to restrict shareholder intervention. It will be difficult for shareholders, without delegation from the board, to promote discussion of the company's climate policy independently.

When considering the compatibility of the Say on Climateinitiative with Portuguese company law, it is important to take into account the risks of uncontrolled shareholder interference in company management. Whether it is a Say on Climatevote, Say on Human Rightsor, in more general terms, Say on ESG, or a shareholder vote or discussion on any other management issue, the dangers are obvious. We are at the heart of commercial company management. Any solution that alters the legal distribution of competences will have to be duly considered.

In terms of soft law, policies of increasing shareholder involvement should be encouraged,⁶⁹ such as those resulting from the IPCG (Instituto Português de Corporate Governance) Governance Code, applicable only to listed companies, in a comply or explainmodel. Principle III.A. identifies this involvement as a ‘positive factor for the efficient functioning of the company and the fulfilment of its corporate purpose’. Although this principle is not intended to shape the actions of the board of directors, it can serve as a starting point for companies to consider introducing into their articles of association the obligation to consult the general meeting on climate policy on an annual basis and in an advisory capacity, thus achieving greater shareholder involvement.