May 16, 2021

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Shareholders push SEC to tougher climate regime on US oil

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Activist groups are calling on the U.S. Securities and Exchange Commission to make it easier for shareholders to table climate resolutions at annual meetings of oil producers as part of another early test of the country’s efforts. Biden administration to tackle climate change.

During Donald Trump’s presidency, activists say, the SEC made it easier for companies to reject shareholder proposals on spurious grounds rather than subject them to investor votes.

“Over the past four years there have been a lot of surprising developments and I think it’s fair to say that many shareholders felt it was an unfavorable decision-making environment for shareholder proposals,” said Sanford Lewis, lawyer and director of the shareholder. Rights group.

“It was generally seen as a business-friendly environment under the last administration.”

The number of shareholder resolutions SECOND ruled out of order jumped under the presidency of Jay Clayton, whom Trump appointed in 2017.

Companies were allowed to reject around 15% of environmental and social proposals in 2018, up from 9% in 2016, according to Institutional Shareholder Services, an independent advisory group for investors. This jump could have been higher if there had not been a sharp increase in the number of shareholders withdrawing resolutions.

Joe Biden has vowed to make the fight against climate change a central pillar of his presidency. But a slim majority in Congress will leave him depending on regulatory bodies like the SEC, the Environmental Protection Agency, and the Federal Energy Regulatory Commission to advance its agenda.

The SEC is independent from government, but the president appoints its president and commissioners, who determine its direction.

The biggest criticism from activists is the broadening of the definition of “micromanagement” during Clayton’s presidency. Previously, this rule allowed companies to reject proposals that went too far in the day-to-day running of a business, but the expanded definition meant that any proposal prescribing particular outcomes could be excluded.

In a letter to the SEC last month, SRG – alongside other investor advocacy groups Ceres, the Forum for Sustainable and Responsible Investment and the Interfaith Center on Corporate Responsibility – asked the SEC to repeal the new interpretations “to allow shareholders to re-ask their beneficiary companies to improve disclosure and performance on climate change”.

Shareholder proposals have sparked a change in attitude among European oil groups in recent years, said Mark van Baal, director of Dutch shareholder group Follow This, which has submitted resolutions calling on the groups Chevron, ConocoPhillips, Occidental and Phillips 66 tankers to set goals. to reduce the carbon emitted by the combustion of their products (so-called Scope 3 emissions).

“The oil majors only promised to cut emissions from their products after investors voted for shareholder proposals,” van Baal said. “We saw it first at Shell, then at BP and Equinor.”

Gary Gensler, the former Goldman Sachs banker Biden chose for his SEC chairman, he is widely expected to take a tougher line on companies on ESG issues. The number of resolutions rejected by SEC “no-action” letters will likely decline, analysts said.

“Interpretations of the reasons for admission under the no-action process tend to go in waves, top to bottom, depending on the administration in place and the chairman of the SEC,” said Patrick McGurn, responsible for strategic research and analysis at the ISS.

As Gensler has yet to be confirmed to the post, any policy changes will take time and will likely be too late for the 2021 AGM season. Still, analysts have said John Coates, a Harvard scholar who was appointed acting head of the corporate finance division of the commission, could already exert some influence.

In a promising sign for activists, the SEC on Friday rejected ExxonMobil’s request to block a shareholder proposal asking the company to report how its political lobbying activities align with concerns about climate change. The proposal was filed by French bank BNP Paribas, which in 2020 filed a similar petition on climate change and lobbying at Chevron. The Chevron proposal has gained majority support from investors, including asset management giant BlackRock.

“There is insufficient information available to assess how ExxonMobil ensures that its lobbying activities, directly, on behalf of the company and indirectly, through trade associations, align with the objectives of the Paris Agreement and the way misalignments are handled, ”BNP said.

The SEC did not respond to a request for comment.

Additional reporting by Patrick Temple-West in New York

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