Environmental Shareholder Proposals On Pace For Record High This Season by James R. Copland and Margaret M. O’Keefe – Proxy Monitor

Introduction

Environmental activists last year stepped up efforts to target companies in the energy sector in a coordinated campaign,[3] assisted by legal attacks against Exxon Mobil launched by state attorneys general and the attorney general of the U.S. Virgin Islands.[4] In addition, as has been the case for many years, shareholder activists who are focused on social and environmental concerns have targeted publicly traded companies with shareholder proposals placed on company proxy ballots under rules promulgated by the Securities and Exchange Commission (SEC).[5] Under such rules, shareholders may place items on ballots to be voted on in corporate annual meetings if they have owned $2,000 or more company shares for at least one year.[6]

As in 2015, a plurality of shareholder proposals in 2016 have involved environmental concerns (Figure 1).[7] These proposals addressed issues including climate change, greenhouse gas emissions, “sustainability,” recycling, water quality, genetically modified organisms (GMO), fossil fuels, nuclear power, and methane emissions. Some of these proposals ask the board of directors to produce a report—including on general environmental concerns—and others seek specific actions such as lowering greenhouse gas emissions or labeling GMO products.

Environmental Shareholder Proposals

Environmental Shareholder Proposals

*228 of 250 companies with annual meetings scheduled through the end of June
Source: ProxyMonitor.org database

The number of environment-related proposals has been rising in recent years, and 2016—with 228 of 250 Fortune 250 companies having filed proxy statements to date—is on pace to set a record (Figure 2). For all years covered in the Proxy Monitor database, not a single environmental shareholder proposal has received majority shareholder support over board opposition; however, the average shareholder vote for such proposals is up in 2016 (Figure 3).[8] In addition, five environmental shareholder proposals received at least 40 percent shareholder support (a record number); four of these five proposals involved climate change or greenhouse gas emissions. Overall, the 23 shareholder proposals related to climate change or greenhouse gas emissions voted on to date at Fortune 250 companies in 2016 received the support of 26 percent of shareholders, up from 16 percent support in 2015 and 14 percent during 2006–15. This finding explores the recent push by certain shareholders in light of overall climate-change activism and examines the 2016 proxy-access proposals and voting results in historical context.

Environmental Shareholder Proposals

*In 2016, for 228 of 250 companies with annual meetings scheduled through the end of June
Source: ProxyMonitor.org database

Environmental Shareholder Proposals

*In 2016, for 219 of 250 companies holding annual meetings by June 10
Source: ProxyMonitor.org database

Focus: Environment-Related Shareholder Activism

Background

Responding to pressure from certain shareholder activists, the SEC in 2010 adopted guidelines requiring publicly traded corporations to make new disclosures related to “climate risks.”[9] Since then, however, shareholder activists who are focused on environmental concerns have continued applying pressure on corporations through shareholder proposals. In November 2015, New York attorney general Eric Schneiderman announced an investigation of Exxon Mobil over its funding of research related to climate change. On January 8, 2016, various environmental activists and members of the Rockefeller family attended a closed-door meeting in Manhattan with the stated goal of “establish[ing] in the public’s mind that Exxon is a corrupt institution,” “delegitimize[ing] [Exxon] as a political actor,” and “driv[ing] Exxon & climate into [the] center of [the] 2016 election.”[10]

Shortly thereafter, California attorney general Kamala Harris, who is seeking election to the U.S. Senate in November, announced her own climate-change investigation parallel to Schneiderman’s. Other state attorneys general followed suit, as well as Virgin Islands attorney general Claude E. Walker.[11] Some of these attorneys general also sought documents from various nonprofit groups that had published research and opinion on climate change. Thus, although proposals relating to climate change, global warming, and greenhouse gas emissions have long been the subject of shareholder-proposal activism, the 2016 proxy season began with a very different backdrop.

Environmental Shareholder Proposals-Activism: 2006–16

Since 2006, the first year covered in the Proxy Monitor database, the vast majority of shareholder proposals involving the environment (74 percent) have been sponsored by shareholders with a social, religious, or environmental purpose (Figure 4). Social-investing funds—which focus on “socially responsible investing,” with an express purpose beyond maximizing share value[12]—have sponsored 38 percent of environmental shareholder proposals over the period (Figure 5). Religious-affiliated investors—typically, the pension funds of Catholic orders of nuns or other church-based institutions[13]—have sponsored 22 percent of shareholder proposals in that time; and investment vehicles affiliated with public-policy organizations have sponsored 9 percent. The most active sponsors among these social-oriented investors have been the umbrella social-investment nonprofit As You Sow, which explicitly focuses on shareholder-proposal activism;[14] the social-investing funds Green Century Capital Management and Trillium Asset Management; the Catholic order Sisters of St. Dominic; and the Free Enterprise Action Fund, a policy-oriented investment vehicle organized by free-market advocate Tom Borelli (Figure 6). Other investors particularly active in sponsoring environmental shareholder proposals include John Harrington, a “corporate gadfly” individual investor who also has a social-investing fund; and the New York State Common Retirement Fund, which holds assets in trust for the New York State & Local Retirement System.

Environmental Shareholder Proposals

*In 2016, for 228 of 250 companies with annual meetings scheduled through the end of June
Source: ProxyMonitor.org database

Environmental Shareholder Proposals

*In 2016, for 228 of 250 companies with annual meetings scheduled through the end of June
Source: ProxyMonitor.org database

Environmental Shareholder Proposals

*In 2016, for 228 of 250 companies with annual meetings scheduled through the end of June
Source: ProxyMonitor.org database

During 2006–16, a plurality of all environment-related shareholder proposals have concerned climate change, global warming, or greenhouse gas emissions (Figure 7). Typically, these proposals have called on the board of directors to promulgate a report on global warming or climate change, including related financial risks to the company; or to set targets for reducing greenhouse gas emissions. The second-most introduced class of environmental proposal has looked more generally at “sustainability,” a vague environmental concept described as “creat[ing] and maintain[ing] the conditions under which humans and nature can exist in productive harmony to support present and future generations.”[15] These types of reports have most often called on the board to issue a report on sustainability or to set up a board committee governing the subject. Taken together, climate change and sustainability have been the focus of 47 percent of all shareholder proposals related to the environment (Figure 8).

Environmental Shareholder Proposals

*In 2016, for 228 of 250 companies with annual meetings scheduled through the end of June
Source: ProxyMonitor.org database

Environmental Shareholder Proposals

*In 2016, for 228 of 250 companies with annual meetings scheduled through the end of June
Source: ProxyMonitor.org database

In 2016, 75 percent of all environmental shareholder proposals were sponsored by

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