Corporations are seeing an influx of climate-related shareholder proposals thanks to a shift at the SEC intended to boost investors' sustainability agendas.
Top banks and insurance companies are among the recipients of a record number of petitions to consider the climate impacts of their financial activities after the Security and Exchange Commission's decision in November to broaden the types of issues that it allows shareholders to raise at annual meetings.
The move was intended to make it harder for companies to block shareholder bids around climate targets, paid sick leave and other social issues. It appears to be working: There have been 576 shareholder proposals filed this year on environmental and social issues, up from 499 in 2021, according to the groups As You Sow and the Sustainable Investments Institute. And more of them are making it onto ballots: The SEC has only approved about 16 percent of companies’ bids to remove proposals, compared with about 50 percent last year.
Shareholder groups credit the new SEC policy with spurring more — and more-detailed — investor proposals on climate in particular, like one at Berkshire Hathaway to set companywide emissions targets across its sprawling network of insurance, rail and utility subsidiaries.
Investor groups are calling for the first time on Bank of America Corp., Citigroup Inc., Goldman Sachs Group Inc., JPMorgan Chase & Co., Wells Fargo & Co. and Morgan Stanley to stop financing new fossil fuel projects in alignment with their membership in the Net-Zero Banking Alliance, which commits them to reaching net-zero emissions by 2050.
Similar proposals are pending at Chubb, Travelers and The Hartford asking that they disclose emissions generated from underwriting and investment activity and align their decisions with net-zero targets.
“We felt empowered to file more direct asks around climate change,” said Andrea Ranger, a shareholder advocate with Green Century Capital Management, which filed at several insurance firms.
“Before the new SEC guidance, if investors asked for something specific — like adopting a policy — that was considered micromanagement,” she said. “But if the ask was too general, the company could successfully argue it was too vague."
It’s unclear how much support the climate resolutions will get from shareholders, which will vote next week at major banks and next month at insurance companies. The influential proxy advisory firms Institutional Shareholder Services and Glass Lewis are recommending investors vote against proposals at some of the big banks.
“The current proxy advisory firm views on a lot of these proposals are not that far out of the norm from what the institutional investors are doing,” said David Lynn, a former SEC official who now co-chairs Morrison & Foerster’s Corporate Finance Capital Markets practice. “A lot of these institutional investors are very focused on these issues and don’t want to be perceived as being out of step with the others.”
But the resolutions have increasingly powerful allies. New York state Comptroller Tom DiNapoli — who oversees the country’s third-largest public pension fund — launched a get-out-the-vote campaign last week in support of proposals for the six largest banks to end new fossil fuel financing. His spokesperson, Matthew Sweeney, told POLITICO that the state’s pension fund will also support the proposals at insurance companies.
And the California Public Employees’ Retirement System, the nation's largest public pension fund, is supporting the climate-focused proposal at Berkshire Hathaway, Inc.
Companies are also increasingly moving toward activist shareholders. Just over a week after the SEC rejected The Hartford’s request to block a shareholder proposal, the insurer promised to achieve net-zero emissions across its own operations and balance sheet. A company spokesperson said the move was planned before the shareholder proposal was filed. AIG in March announced a similar goal, prompting Presbyterian Church USA to withdraw its proposal.
Most companies are still fighting the resolutions, arguing that shifting their lending and investment practices could pose other economic risks. The SEC last month rejected attempts by Citigroup, JP Morgan, Morgan Stanley, Chubb, Travelers and The Hartford to strike requests from their proxy statements.
Citigroup, for instance, wrote that cutting off clients’ access to lending immediately could have “significant negative consequences” and “may not result in reduced greenhouse gas emissions, as these client relationships could shift to other financial institutions that are not committed to helping companies transition.”
Other factors are also playing into the increase in shareholder activism, including a dearth of policy movement in other spheres.
“There is a sense of urgency on climate change and a sympathetic ear in the White House,” said Heidi Welsh, executive director of the Sustainable Investments Institute. “Also, the big enchilada — the Build Back Better agenda — is dead. So what else is going to cause action in the private sector to address climate change?’”
But Lynn said it’s “undeniable” the new guidance had an impact.
“A lot of issues around sustainability, climate change, human capital management — those are issues that it’s very difficult for the staff at SEC to somehow say that’s not a significant social policy issue right now. And they’re not inclined to say that,” he said.
