Obtain the data you need to make the most informed decisions by accessing our extensive portfolio of information, analytics, and expertise. Sign in to the product or service center of your choice.
Shareholders may now have a say on how companies announce their
net-zero goals to limit GHG emissions across their supply
chains.
The US Securities and Exchange Commission (SEC) issued a legal bulletin 3 November that
said its staff will no longer use the "ordinary business" or
"economic" relevance" exceptions to its Rule 14a-8 to exclude
proposed resolutions that bring up issues of social
significance.
Rule 14a-8 lists criteria for submitting and including votes on
shareholder resolutions. The rule until this summer allowed major
companies to exclude votes on shareholder resolutions that sought
greater transparency on carbon reduction plans on the grounds that
they were already included in "ordinary business plans."
The SEC bulletin, which has the backing of SEC Chairman Gary
Gensler, said it would rescind its earlier sets of non-binding
bulletins, where the staff took "a company-specific approach in
evaluating significance, rather than recognizing particular issues
or categories of issues as universally 'significant.'"
"Going forward," the SEC said, "the staff will realign its
approach for determining whether a proposal relates to "ordinary
business" with the standard the Commission initially articulated in
1976, which provided an exception for certain proposals that raise
significant social policy issues, and which the Commission
subsequently reaffirmed in the 1998 Release."
Gensler said the bulletin will provide
greater clarity to companies and shareholders on these matters, "so
they can better understand when exclusions may or may not
apply."
Flavor-of-the-day regulatory approach
Unlike Gensler, SEC Commissioners Elad Roisman and Hester Pierce
in a joint statement called the
action a "flavor-of-the-day regulatory approach."
They said the bulletin does not say "What criteria, timeframe,
or proof support a finding that a topic is socially significant or
has a broad societal impact? The new bulletin does not say."
The SEC action follows several months of reviewing the revisions
to shareholder resolution rule and related legal bulletins that the
commission issued during President Donald Trump's administration.
Acting SEC Chair Allison Herren Lee had announced the review in
March.
President Joe Biden has made it a priority of his entire
administration to tackle climate change, and part of that effort
involves encouraging more companies to disclose their climate risks
and reporting their GHG releases.
At the UN COP 26 meeting on 3 November, US Treasury Secretary
Janet Yellen emphasized the need for
transparency and enhanced "climate-related data and disclosures to
improve the information available to investors, market
participants, and regulators."
Clarifying stance on socially significant issues
The SEC bulletin clarifies the commission's stance on social
significant issues like climate change as it becomes an increasing
focus of shareholder proposals, with resolutions seeking greater
transparency on climate-related actions and emissions
disclosures.
During the proxy voting season in June, at least eight votes
cast for climate or broader environment, social, and governance
(ESG) issues included adding climate-savvy directors to ExxonMobil's board of directors
to requiring the oil corporation to report on its GHG
emissions.
California-based Shareholder Rights Group, an association of
investors formed in 2016, welcomed the SEC action, saying it will
empower shareholders to pursue ESG proposals at their companies, as
ESG issues affect long-term value as well as posing externalities
that may otherwise affect portfolio values.
"The shareholder voice plays a critical role in ensuring
companies are addressing issues that create risk and opportunity
and can affect shareholder value, including greenhouse gas emissions targets
and actions, addressing social justice, demonstrating success
in diversifying workplaces and
boardrooms, reducing the harmful impact of social forums like
Facebook, and reducing plastic waste," As You
Sow President Danielle Fugere, wrote in a 3 November statement.
US Congresswoman Maxine Waters (Democrat-California), who chairs
the House Financial Services Committee that oversees the agency,
said on 4 November the SEC's action "begins
restoring shareholders' rights by making it a little bit easier for
shareholders' proposals to qualify for inclusion in a company's
proxy voting materials."
Repeal restrictive rules
However, she said, the SEC needs to do more to empower
shareholders to better guide and course-correct the management of
the companies they own. "The SEC must repeal the restrictive
changes it implemented at the end of the Trump administration
because shareholders need better access to the proxy," Waters
said.
The SEC is facing a lawsuit from some of these
shareholder groups—Interfaith Center for Corporate
Responsibility (ICCR), As you Sow, and individual investor James
McRitchie—over changes that President Donald Trump's
administration made in September 2020 to the rule.
These groups, which welcomed the 3 November bulletin, claimed
the revisions "severely" impaired their ability to file resolutions
that would change how companies are governed. The SEC is bound by a
court-imposed timeline to respond to a motion seeking summary
judgment from a federal district court by 10 November.
ICCR CEO Josh Zinner told Net-Zero Business Daily 4
November that the latest SEC bulletin "doesn't impact the
litigation, but this is a very important legal bulletin that we're
very pleased to see from the SEC."
Zimmer said this bulletin essentially rescinds legal bulletins
14 I, J, and K, and guidance from the Trump-era SEC that had
significantly expanded the ability of companies to exclude
shareholder proposals from their proxies through the no-action
process. "This bulletin could potentially ease the path for more
shareholder proposals related to climate risk to appear on company
proxies," he added.
The Shareholder Rights Group, which includes As you Sow and
Ritchie among its members, said the SEC's staff rulings and legal
bulletins, 14 I, J, and K, had laid down "numerous problematic new
interpretive hurdles to successfully filing proposals."
The SEC for its part said it will no longer interpret the
concept of "micromanagement" to preclude advisory proposals that
might be asking a company to adopt a particular strategy such as
establishing GHG reduction targets aligned with net-zero or the
2015 Paris Agreement that seeks to limit global warming to 1.5
degrees Celsius.
As an example, SEC cited its decision in March to deny requests
by ConocoPhillips to omit a vote on proposed shareholder resolution
to set specific interim GHG reduction targets in its quest for
net-zero carbon emissions. At the time, the SEC took a similar
stance with Occidental.
"The proposal requested that the company set emission reduction
targets and it did not impose a specific method for doing so. The
staff concluded this proposal did not micromanage to such a degree
to justify exclusion," the SEC said.
Sanford Lewis, who heads the Shareholder Rights Group, said the
SEC's new guidance essentially "resets" the 14a-8 standards that
existed prior to changes by the last administration that
significantly undercut shareholder rights.
Posted 04 November 2021 by Amena Saiyid, Senior Climate and Energy Research Analyst
RT @SPGlobal: June marks the start of Pride Month, where we commemorate and celebrate the LGBTQ+ community in countries across the globe. S…
Jun 01
{"items" : [
{"name":"share","enabled":true,"desc":"<strong>Share</strong>","mobdesc":"Share","options":[ {"name":"facebook","url":"https://www.facebook.com/sharer.php?u=http%3a%2f%2fcleanenergynews.ihsmarkit.com%2fresearch-analysis%2fsec-will-not-object-to-shareholder-proposals-with-social-signi.html","enabled":true},{"name":"twitter","url":"https://twitter.com/intent/tweet?url=http%3a%2f%2fcleanenergynews.ihsmarkit.com%2fresearch-analysis%2fsec-will-not-object-to-shareholder-proposals-with-social-signi.html&text=SEC+will+not+object+to+shareholder+proposals+with+social+significance+such+as+climate+change+%7c+IHS+Markit+","enabled":true},{"name":"linkedin","url":"https://www.linkedin.com/sharing/share-offsite/?url=http%3a%2f%2fcleanenergynews.ihsmarkit.com%2fresearch-analysis%2fsec-will-not-object-to-shareholder-proposals-with-social-signi.html","enabled":true},{"name":"email","url":"?subject=SEC will not object to shareholder proposals with social significance such as climate change | IHS Markit &body=http%3a%2f%2fcleanenergynews.ihsmarkit.com%2fresearch-analysis%2fsec-will-not-object-to-shareholder-proposals-with-social-signi.html","enabled":true},{"name":"whatsapp","url":"https://api.whatsapp.com/send?text=SEC+will+not+object+to+shareholder+proposals+with+social+significance+such+as+climate+change+%7c+IHS+Markit+ http%3a%2f%2fcleanenergynews.ihsmarkit.com%2fresearch-analysis%2fsec-will-not-object-to-shareholder-proposals-with-social-signi.html","enabled":true}]}, {"name":"rtt","enabled":true,"mobdesc":"Top"}
]}