AGL (ASX:AGL) share price falls amid ASA’s planned push for Paris targets

AGL’s upcoming annual general meeting might have some interesting outcomes

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The AGL Energy Limited (ASX: AGL) share price slumped today. It comes after the Australian Shareholders Association (ASA) announced it plans to vote in favour of the company introducing emissions targets in line with the Paris Agreement.

The ASA will vote in favour of a resolution that demands AGL outline new emissions targets for its businesses post-demerger. The resolution asks the company to create short, medium, and long-term emissions targets in line with the Paris Agreement

AGL has recommended shareholders vote against the resolution. The vote will go ahead at AGL’s annual general meeting next week.

At the final bell on Friday, the AGL share price finished at $5.52, 6.6% lower than its previous closing price.

Let’s take a look at news that might cause drama at Australia’s largest carbon emitter’s upcoming annual general meeting.

Quick refresher

AGL plans to split into 2 companies in the final quarter of this financial year. The two companies will be named Accel Energy and AGL Australia.

AGL has already disclosed the emissions targets of its proposed demerged entities. However, they aren’t specifically in line with the Paris Agreement.

AGL plans for AGL Australia, an energy retailer, to be carbon neutral for scope 1 and 2 emissions. It will also have a clear pathway to carbon neutrality for all its electricity supply.

Whereas, Accel Energy, an energy generation business, will have set targets towards decarbonisation.

The proposed company’s baseline emission reduction targets will include a 23% reduction by 2024 (on those of financial year 2021). Following 2024, Accel will target a 60% reduction by 2036 and a 100% reduction by 2050.

AGL share price slides amid ASA’s support for Paris targets

The AGL share price sunk today amid news the ASA will be voting against the company’s recommendations at its annual general meeting.

The Australasian Centre for Corporate Responsibility (ACCR) put the resolution forward. If passed, it will see AGL forced to set Paris-aligned emissions reduction targets for its demerged entities.

However, the resolution is the second of a 2-part resolution. Therefore, it will only be put to a vote if the ACCR’s first resolution is passed.

ACCR’s first resolution looks to amend AGL’s constitution. If passed, the amendment will allow shareholders to create resolutions to discuss how power vested in AGL’s board is exercised. ASA intends to vote against adding the clause into AGL’s constitution.

Though, if most shareholders are in favour of amendment AGL’s constitution, ASA will vote in favour of introducing Paris-aligned emissions targets.

In a media release, ASA commented:

As shareholders, but also as members of the community, there is a lot of support for speeding up the decarbonisation process. It would be in everyone’s interest that AGL would find real opportunities for the company as it goes about navigating its transition to renewable energy.

On the surface, this resolution is also a reasonable request to make, as it asks for transparency, which will assist in the decision on how to vote on demerging.

AGL recommends shareholders vote against Paris targets

The AGL share price has fallen into the red amid a potential battle between the company and the ASA.

AGL argues against implementing emissions targets in line with the Paris Agreement. The company doesn’t believe it’s in Accel Energy or AGL Australia’s best interests to make Paris-aligned emissions commitments.

According to AGL, coal power is “essential to the affordable and reliable supply of electricity to millions of Australian households and businesses”.

It said to turn off AGL’s coal-fired power stations, multiple billions of dollars would need to be invested into other energy generation methods. That’s capital that it simply doesn’t have. In a statement AGL said:

Australia’s decarbonisation process requires an effective level of coordination between government, regulators and industry to promote an orderly and timely transition from coal-fired power to other forms of reliable and cost-effective supply.

ACCR noted it isn’t pushing for AGL to close its coal-fired power stations immediately. Rather, it’s hoping to force the company to transition the proposed businesses to renewable energy over the next 10 to 15 years.

AGL share price snapshot

Today’s drop included, the AGL share price has fallen 54% since the start of 2021.

It’s also 61% less than it was this time last year.

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Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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