VW faces possible legal action over climate change lobbying activities

Volkswagen faces possible legal action by a coalition of institutional investors that accuse the German carmaker of having refused requests to answer questions about its lobbying activities related to climate change.

Five Swedish and Danish public pension funds and the Church of England Pensions Board said they were concerned that while VW was “publicly championing the green transition”, it may be lobbying against stricter climate rules.

Such a contradiction would expose the company to reputational and operational damage, they added.

It is one of the first times institutional investors have contemplated litigation on a climate-related matter in Europe. The investors attempted to include climate lobbying as an agenda item at VW’s 2022 shareholder meeting but this was vetoed by the company’s management.

VW’s stance on the environment has been a sensitive issue since the Dieselgate scandal broke in 2015 when several of VW’s brands, including Audi and Porsche, were found to have used software that deceived regulators over harmful emissions.

The carmaker is in the middle of a transition to electric vehicles — a costly process that is expected to have significant ramifications for the companies in its supply chain.

Adam Matthews, chief responsible investment officer at the Church of England Pensions Board, said it was “extremely disappointing to have to turn to the courts to get VW to do the right thing”.

“VW is failing to demonstrate that the lobbying undertaken and funded by the company through its industry association memberships is aligned to its own climate goals,” said Matthews.

VW said that while it shared the shareholders’ view that “aspects relevant to climate protection deserve an even higher priority in reporting”, it disputed claims the company had been legally wrong to dismiss their request to add items to its annual meeting agenda.

The German automaker, which sells roughly 10mn cars a year, said the “distinction between the legal and substantive assessment is important”.

It added that it was “currently considering” ways to strengthen the “extensive transparency measures that we have already implemented”. 

The shareholders pressing action collectively own roughly 0.1 per cent of VW’s shares, equivalent to a market value of around €62.3mn. But a court’s decision would be legally binding and would set a precedent.

Emma Henningsson, head of responsible ownership at the Swedish pension fund AP7, said the court case would clarify whether shareholders had a right to put an item on the agenda of an annual meeting, a grey area in German corporate law.

Other corporate governance issues such as diversity and inclusion, discrimination or conflicts of interest could then also be put forward for shareholder votes if the court case succeeded, according to AP7.

“Success would mean that more shareholders could contribute to improving the governance of the company. A ruling in favour of investors would improve corporate accountability and transparency for shareholders in other German companies,” said Henningsson.

Additional reporting by Camilla Hodgson in London