The last month saw climate proposals at some of the biggest emitters excluded as the US Securities and Exchange Commission (SEC) begins to give its verdict on companies’ ‘no action’ requests.
Filers will now be watching closely to divine which way the regulator will go on pending proposals in an environment at the SEC perceived by many as less hospitable to investor engagement.
Shareholder legal bid fails but it was “close”
A novel legal attempt to bypass the SEC’s ‘no action’ process has ended in defeat. Late last month, the US District Court in Montana ruled against shareholder and lawyer, Tom Tosdal, who was attempting to force NorthWestern Energy to put his coal phase out proposal to the vote at the South Dakota based energy firm’s annual meeting in April. Chief Judge Dana Christensen described the case as “close” but ultimately ruled that the company had made the “stronger case” and denied “Tosdal's prayer for injunctive relief”.
US financial giants respond to ESG proposals
Both Blackrock and JP Morgan Chase were this month spared a resolution on their poor ESG proxy voting record.
US SRI firms Boston Trust Walden and Mercy Investments opted to withdraw proposals at the financial heavyweights in light of recent commitments made by the duo, particularly their decision to sign up to Climate Action 100+, the multi-trillion-dollar investor engagement movement targeting the world’s dirtiest firms.
A similar proposal still stands at Vanguard and T. Rowe Price, however. Last week, the latter’s attempt to exclude the resolution was denied by the SEC after the regulator disagreed with the company that the proposal, filed by Boston based SRI firm Zevin Asset Management, breached the rule on micromanagement.
JP Morgan – reported to be the largest financier of fossil fuels in the world – has, however, been unsuccessful in its attempts to avoid two other climate resolutions.
One is on reducing greenhouse gas emissions associated with the bank’s lending activities in line with the Paris climate agreement, filed by US non-profit, As You Sow.
The other, filed by Boston based SRI firm Trillium Asset Management, is on the “reputational risks” associated with JP Morgan’s involvement in “Canadian oil sands production, oil sands pipeline companies, and Arctic oil and gas exploration and production.”
Neither proposal breaches the micromanagement rule, the SEC has said.
As You Sow already has already withdrawn a similar proposal at Wells Fargo, Goldman Sachs, Morgan Stanley, and Bank of America following commitments from the US banks.
Last month, JP Morgan made several sustainability commitments, including “expanding” restrictions around coal mining and power and “prohibiting project financing” for new oil and gas development in the Arctic.
But Danielle Fugere, President of As You Sow said that while the commitments are “an important first step”, they do not “outweigh its other fossil fuel financing activities”.
JP Morgan is, however, the only bank to successfully excluded a proposal on the Business Roundtable Commitments (BRT) its CEO and then BRT Chairman, Jamie Dimon put his name to in August. Blackrock, Bank of America, Citigroup and Bank of America were all unsuccessful in their attempts to elude similar proposals on the statement, which appeared to herald a shift away from shareholder-centric capitalism. [see RI’s coverage].
Another interesting development at JP Morgan is the ‘vote no’ campaign against the bank’s independent lead director — and former Chair and CEO of ExxonMobil — Lee Raymond.
US non-profit, Majority Action are calling on investors to vote ‘against’ Raymond – should he be “re-nominated for a 34th year on the board” – and ‘for’ the proposal calling for a split of the chair and CEO roles currently held by Jamie Dimon.
In the SEC filing they point to Raymond’s role as “architect and public face of ExxonMobil’s efforts to promote denial of the risks and likelihood of climate change”.
On a technicality, oil giants avoid climate proposals but more are pending
US oil giants ExxonMobil, Chevron and ConocoPhillips have all successfully excluded a proposal on aligning with the Paris climate agreement on a technicality.
The proposals, filed by Follow This, were deemed to have been submitted after the deadline in the case of ConocoPhillips and for Exxon and Chevron the Dutch NGO failed to show ownership in sufficient time.
But Follow This has stated that it will appeal the SEC’s staff decision.
In its rebuttal letter to the SEC, the non-profit argued that it is also within the SEC’s criteria to “forgo an overly technical reading of ownership requirements”.
Last month, New York State Comptroller Thomas DiNapoli told RI that it is “very likely” that the state’s $210bn public pension fund will vote against Exxon’s directors again this year, if the US oil giant continues to ignore shareholders’ concerns on climate risks.
New York State has since filed an ‘exempt solicitation’ at the oil company calling on it to separate the chair and CEO roles held by Darren Woods. In the SEC filing the fund cites the “inadequate response to climate change risks and the transition to a low-carbon economy” by Exxon’s board as “a serious failure of corporate governance”.
Exxon has also successfully excluded proposals on chartering a board committee on climate risk filed by US activist investor, Arjuna Capital and another on climate lobbying filed by BNP Paribas. The former was deemed to fall afoul of the micromanagement rule and the latter was excluded as it “substantially duplicates another proposal”.
United Steelworkers of America have also filed a proposal at Exxon on lobbying.
A decision, however, on the exclusion of a resolution filed by As You Sow at Exxon and Chevron asking how the companies plan to align their business with the Paris Accord has not yet been made by the SEC.
Opioids and beyond
The re-named Investors for Opioid and Pharmaceutical Accountability (IOPA), which changed from the Investors for Opioid Accountability (IOA) last year to indicate a broadening of its focus, is filing resolutions at pharma giants again this year.
Backed by a coalition of investors representing $4.4trn, the initiative is led by Mercy Investment Services.
In the two years since it was set up it has engaged with 20 manufacturers, distributors and retail pharmacies on the US opioid crisis.
That engagement heralded: 12 opioid oversight reports from corporates; two board level committees dedicated to opioids; three companies agreeing to separate the chair and CEO positions; and three companies agreeing to factor legal costs in compensation incentives.
This year IOPA has filed separation of Chair and CEO proposals at seven US pharmaceutical firms: Eli Lilly, Gilead, Amgen, Bristol Myers Squibb, Johnson & Johnson, Pfizer and AbbVie – the last three unsuccessfully sought to exclude the resolutions via the SEC.
Resolutions on greater transparency on what financial factors are considered – or more importantly excluded – when working out compensation packages at pharma firms, such as legal and compliance costs, have been put to Mallinckrodt and McKesson.
Opioid risk reports by boards are being asked for in proposals at Johnson & Johnson and Walmart.
But the latter has avoided a proposal asking it to develop a deferral mechanism for bonuses based on financial metrics of less than a year. The SEC agreed with the company that the proposal constituted micromanagement.
The resolution filed at Sturm, Ruger & Co asking the US gun manufacturer to publish a human rights impact assessment has been withdrawn by a group of US faith based investors led by Catholic Health Initiatives.
Californian tech giant Alphabet will not now face a resolution on adding an employee representative to its board after it was withdrawn by the filers, the UK’s Greater Manchester Pension Fund and Washington-based union-affiliated manager CtW.
But a proposal filed by Trillium on Alphabet’s whistleblowing policies is still pending.
The Boston based manager also filed a resolution at Facebook calling for a separation of the Mark Zuckerberg’s dual CEO and chair roles at the social media company.
Though the success of the resolution is severely hampered by the company’s dual-class structure, which gives Zuckerberg, who owns around 13% of Facebook, approximately 58% of the company’s voting shares, according to the proposal.
According to Trillium, at Facebook’s 2019 annual meeting the same proposal received the support of 68% of the votes cast when excluding the shares of 13 executives and board members.
Another proposal at Apple on linking executive pay to sustainability metrics like human rights, diversity and labor standards got 12% of the vote at the company’s annual meeting on the 26 February. It was filed by Zevin Asset Management.
Plastics and packaging
As You Sow has today (March 19) published its proxy preview for 2020, revealing that over 400 proposals relating to ESG have been filed at companies this season. 322 remain pending following SEC endorsed omissions and a growing number of withdraws. Resolutions on political activity (18%) and climate change (15%) dominate, so far.
JP Morgan has again been found to be the largest financier of fossil fuels in the latest Banking on Climate Change report by the Rainforest Alliance Network (RAN) – providing $271bn in financing since the Paris climate accord was signed in 2015.
JP Morgan, Citi, Wells Fargo and Bank of America, according to the report, account for 30% of all fossil fuel financing by the 35 major global banks, which have provided $2.7trn to the sector since Paris, with financing rising each year.
Earlier this month, US SRI firm Green Century Capital Management announced it had withdrawn its proposal at Tyson Foods, the second largest meat processor in the world, after the company made public plans to develop and implement a no-deforestation policy.
A resolution at Royal Bank of Canada (RBC) on how it is “identifying and addressing human rights risks” in firms linked to the “US immigration enforcement policy”, such as GEO Group and CoreCivic has been withdrawn.
British Columbia Government and Service Employees’ Union dropped the proposal following commitments made by the Canadian financial group, which “currently” does not “provide lending or financing services to the private prison industry in the United States”.
Moving to Australia:
Influential shareholder advocacy non-profit the Australian Centre for Corporate Responsibility (ACCR) has withdrawn its climate lobbying proposal at Rio Tinto after the Anglo-Australian miner agreed to improve “the oversight and nature of the advocacy by its industry associations” around climate change. The miner is expected to publish its latest industry review ahead of its annual meeting on 7 May.
The ACCR has also filed resolutions at two of Australia’s oil and gas giants Woodside Petroleum and Santos.
At Santos’ annual meeting (3 April) shareholders will vote on a climate lobbying proposal and another on disclosure of Paris aligned targets covering Scope one, two and three emissions.
Woodside looks set to face the same proposals with the addition of another on the company’s advertising.
According to the ACCR’s website Woodside is currently “assessing the validity of the requisitioned resolutions”.
Last year, both companies denied votes on climate proposals filed by the ACCR on a technicality.
Australian insurer QBE by contrast has ‘welcomed’ a resolution calling on it to align its underwriting and investment activities with the Paris climate agreement.
The proposal was put forward by Australian non-profit Market Forces and A$4bn (€2.3bn) superfund, Australian Ethical ahead of the company’s annual meeting on 7 May.
In a ASX filing, QBE states that its board “welcomes this dialogue on these important matters”.