Shareholders of alstria office REIT have backed what is thought to be the first ‘green dividend’, where a small portion of the payout is directed to decarbonization projects that contribute little to shareholder value.
At the property investor’s AGM this week, 85.2 percent of votes were cast in favor of the proposal that will see €1.78 mn ($2.15 mn) directed toward two initiatives focused on renewable energy and carbon capture.
The company says it would not make these investments based on financial criteria but wants to offer shareholders the chance to back action that would support the Paris Agreement climate goals.
The vote ‘is not about the amount that has been approved by our shareholders,’ says Olivier Elamine, CEO of alstria, in a statement following the annual meeting. ‘We are aware that the €1.78 mn... is a drop in the ocean. It is about the signal this gives.
‘Management alone cannot relax financial discipline, and neither should it. [But] it can be done in agreement with the shareholders, as we have seen today.’
While governments and businesses are increasingly taking measures to combat climate change, there is skepticism that the current action will be sufficient to meet the Paris goals, which call for global warming to be limited to 1.5°C this century.
In February, the UN warned that nations ‘must redouble their climate efforts’ if they want to meet this objective.
Alstria first proposed a green dividend last year, asking shareholders whether they would like to receive a payout or see the funds invested in environmental projects. The vast majority of investors – 95.1 percent – voted to receive the cash. This year, the question was phrased slightly differently. The company said that if the green investments were approved, it would reduce the overall dividend by €0.01.
So what led to the change in result? In emailed comments to IR Magazine, Elamine puts it down to three factors. First, and most importantly, he says the question last year asked people to refuse the dividend. This year they were asked to approve the projects – a positive question where they needed to agree on something.
‘Perhaps it does not sound like much, but I believe it changed the dynamic,’ he says. ‘This change was based on the feedback we received from shareholders last year.’
Second, investors have had the chance to think about the green dividend since last year, giving them more time to come round to the idea, says Elamine. And third, ESG is today even higher on the agenda, a fact that is ‘likely to have moved some votes from no to yes’.
The funds generated by the dividend will be allocated to new solar power generation and an R&D project looking into carbon-capture technology for the real estate industry.
The amount of the green dividend roughly reflects the value of ‘unpaid carbon’ produced by alstria’s operations during 2020. Unpaid carbon refers to emissions the company would theoretically have to pay for if carbon had a price.
‘If these expenses were to rise in the future, we could accordingly propose an increase in the green dividend,’ says Elamine. ‘The decision will be made on an annual basis, and therefore shareholders will be able to adjust their views annually.’
Alstria approached key shareholders ahead of the vote to explain the thinking behind the green dividend. ‘Our intention was not to convince shareholders to vote in one way or another but to explain why we were making the proposal and what the rationale behind it was,’ says Elamine.
‘We have always been clear to them that in our opinion there was no wrong or right answer, as it depends on the specific position and view of each shareholder. The main feedback we got is that the initiative has triggered discussions internally about how to address the question of fiduciary duty.’
