Shareholders urge SEC to re-examine changes made to proxy process by Trump administration that undercut investors’ proposals seeking a corporate response to climate change
Q4 2020 hedge fund letters, conferences and more
TUESDAY, FEBRUARY 2ND, 2021 – Today the Interfaith Center on Corporate Responsibility (ICCR) and the Shareholder Rights Group made public a letter they sent to acting Chair of the SEC Allison Lee on behalf of several investor groups, urging the agency to repeal guidance written under the prior administration that made it easier for companies to block shareholder proposals from appearing on company proxies.
SEC decisions made at the staff level under the direction of Corporation Finance Director William Hinman over the last four years have undercut the ability of shareholders to file proposals seeking corporate emissions and target-setting data to address the climate crisis. These changes in staff policy occurred by the reinterpretation of legal concepts such as “substantial implementation” and “micromanagement” that would allow companies to omit a greater number of shareholder proposals from their proxies.
As the Biden administration affirms its commitment to address climate change through a series of early actions and executive orders, the investors urge the SEC to reverse these erroneous rulings and allow important shareholder proposals on climate change to go to a vote.
The opportunity to reverse these changes will be in the hands of the new director of Corporation Finance, John Coates, whose appointment was announced yesterday.
Increase The Scale And Pace Of Their Responses To Climate Change
According to the letter, “Shareholders concerned with climate risk need the opportunity to ask their portfolio companies to increase the scale and pace of their responses to climate change. Yet we are aware of currently pending no-action requests on climate change shareholder proposals which raise the same kinds of micromanagement and substantial implementation arguments that we believe wrongly led to exclusion of important climate change shareholder proposals in recent years.”
“In his 2021 letter to shareholders, BlackRock’s CEO Larry Fink identified the climate crisis as an existential threat,” said Sanford Lewis of the Shareholder Rights Group. “Fink said ‘net zero demands a transformation of the entire economy’ and vowed to ask its portfolio companies ‘to disclose a plan for how their business model will be compatible with a net-zero economy.’ This ask is entirely in keeping with the asks of smaller shareholders seeking net-zero targets or plans for 2050 through proxy proposals yet the SEC rulings of recent years block such proposals. The SEC should reverse those rulings.”
ICCR and the Shareholder Rights Group presented a briefing to the Biden Transition Securities Regulation Team in December highlighting the need for the redirection of the no-action process and repeal of Staff Legal Bulletins 14I, 14J, and 14K to re-enable shareholders to ask their investee companies to improve disclosure and performance on climate change. The investors say the arguments made in the briefing are consistent with the principles and views expressed in Chair Lee’s November 5, 2020 speech “Playing the Long Game: The Intersection of Climate Change Risk and Financial Regulation”, notably that climate change represents a systemic risk to financial markets.
“The urgency of climate change and the systemic risk it represents to global communities and economies require an all-hands-on-deck approach and shareholders big and small will have an important role to play,” said ICCR CEO Josh Zinner. “The prior administration had a clear political agenda to stifle shareholder action on climate change and other critical issues. We hope the new SEC leadership will take a more forward-looking approach.”
About the Interfaith Center on Corporate Responsibility (ICCR)
Celebrating its 49th year, ICCR is the pioneer coalition of shareholder advocates who view the management of their investments as a catalyst for social change. Its 300-member organizations comprise faith communities, socially responsible asset managers, unions, pensions, NGOs, and other socially responsible investors with combined assets of over $2 trillion. ICCR members engage hundreds of corporations annually in an effort to foster greater corporate accountability. Visit our website www.iccr.org and follow us on Twitter, LinkedIn, and Facebook.
About the Shareholder Rights Group
The Shareholder Rights Group is an association of investors formed in 2016 to defend share owners' rights to engage with public companies on governance and long-term value creation. Visit our website.
