Investors seek SEC probe of Chevron’s disclosures on Ecuador judgment

SRI and faith investors write to Securities and Exchange Commission

The Securities and Exchange Commission, the US regulator, has been asked to investigate oil major Chevron’s disclosures about the contentious $19bn (€14.6bn) Ecuador environmental damage judgment.

At issue is a judgment against the company handed down by an Ecuadorian court in February 2011; the case dates back to 2003 when 30,000 Ecuadorian aboriginal people filed suit over the company’s alleged pollution of the Amazonian rainforest by predecessor company Texaco.

The issue has become a major bone of contention between responsible investment groups and the company. Chevron last year subpoenaed SRI firm Trillium Asset Management and SRI consultant Simon Billenness (see separate story) and sought all of New York State Comptroller Thomas DiNapoli’s documents relating to a series of shareholder resolutions on the matter going back to 2005.

Now a group of leading socially responsible and faith investors have asked written to SEC Chairman Mary Jo White asking her to investigate evidence that the company is “violating securities laws by repeatedly making misrepresentations and material omissions” about the impact of the judgment.

The investors point to a report by securities lawyer Graham Erion which they say suggests Chevron has “breached its disclosure obligations as relates to this liability”. They add this failure “is potentially harmful to investors and the integrity of the financial markets”.

For its part, Chevron, in its proxy materials ahead of its annual meeting on May 29, says shareholder proposals relating to the case contain assertions or suggestions that are “misleading or contrary to the facts”. It says it provides “substantial” information in its required and voluntary disclosures and via its website.

Investor groups made a similar request to the SEC last year, though the number of signatories (see below) has swelled to 14 from three in 2012.The latest request also follows on from a letter in May last year when investors urged Chevron to fully disclose the Ecuador litigation risk to shareholders. Signatories to that letter included di Napoli, Storebrand, Danske Capital, MN Services, Newground Social Investment, NorthStar Asset Management and PaxWorld, as well as numerous faith investors.

The latest development comes ahead of the AGM at which investors will be able to vote on a range of environmental and social issues raised by investors.

The resolutions include one on quantitative risk management of hydraulic fracturing (fracking) proposed by Sister Nora Nash of the Sisters of Philadelphia.

It’s emerged that CalSTRS, the California State Teachers Retirement System, has voted against the Nash proposal, according to advance voting data. The $167.2bn fund is also opposing shareholder motions on offshore drilling, climate change reporting, prohibiting political spending and board environmental expertise. The Nash resolution is being supported by fellow California fund CalPERS, which says the additional disclosure “would be a benefit to shareowners”. CalPERS is also voting for climate change reporting, though it is opposing the request to prohibit political contributions saying it is “unnecessary at this time”. It is also not backing the environmental expertise proposal. Both CalPERS and CalSTRS are voting for the AFSCME request on lobbying payments.

Signatories to SEC letter:
Boston Common Asset Management
Zevin Asset Management
Newground social investment
Storebrand Kapitalforvaltning
JSA Financial Group
Spring Water Asset Management
The Needmor Fund
Effective Assets
Unitarian Universalist Association
Congregation of the Passion
Unitarian Universalist Service Committee
Missionary Oblates of Mary Immaculate
Region VI Coalition for Responsible Investment
Sisters of Charity of Cincinnati