Investors Worried About Climate Change Run Into New SEC Roadblocks

The Securities & Exchange Commission has more Trump appointees now, and energy and utility companies see an ally as they argue shareholder resolutions ‘micromanage’.

ConocoPhillips refinery. Credit: Luis Sinco/Los Angeles Times via Getty Images
The Securities & Exchange Commission is siding with industry more often over shareholder climate resolutions. It's a setback for investors seeking to shape a more responsible corporate policy toward climate change. Credit: Luis Sinco/Los Angeles Times via Getty Images

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Investors’ efforts to get energy and utility companies to set greenhouse gas reduction targets and disclose their plans for meeting those goals are facing more hurdles now than in the past five years.

Nearly two-thirds of the climate-related shareholder resolutions filed with publicly held energy and utility companies this year have been contested before the U.S. Securities and Exchange Commission, an agency now dominated by appointees of President Donald Trump who appear more sympathetic to the fossil fuel industry.

So far this year, the SEC has sustained 45 percent of the challenges, the highest percentage in the last five years.

Exxon, Chevron and Devon Energy have all succeeded with arguments that some shareholder proposals infringe on the companies’ oversight of everyday business operations. The SEC concluded that forcing the companies to comply with the demands would be micromanaging.


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“The SEC’s ruling is a bump in the road, but as long-term investors determined to protect the value of our portfolio, we are not going away,” New York State Comptroller Thomas P. DiNapoli said in a statement following the SEC’s decision to let Exxon exclude a resolution asking the company to set greenhouse gas targets. “We will continue to press Exxon, and others, on climate risk and consider all options available to us in our next steps.” 

The number of climate-related resolutions filed with publicly traded companies has dropped, from 82 last year to 58 this year. Thirty-three of those were filed with fossil fuel companies, down from 35 in 2018. 

“The overall number of resolutions are down a bit from last year, but this is mostly viewed as a good sign as it shows that companies have either been responding to shareholder concerns or that the mainstreaming of this issue has led companies to address it without the need of shareholder pressure,” said Michael Passoff, CEO of Proxy Impact, a shareholder advocacy and consulting firm for socially responsible investors.

Still, the SEC rulings are setbacks for investors seeking to shape a more responsible corporate policy toward climate change.

Chart: Shareholder Climate Resolutions Face SEC Crackdown

“The big takeaway is the SEC is not in a mood to be friendly or generous to investors,” said Andrew Logan, senior director of oil and gas at the sustainability nonprofit organization Ceres.

“As we shifted administrations, the SEC has made it more difficult to allow these proposals to get though,” Logan said. “There is a narrowing of the window by the SEC for investors to bring attention to environmental issues that have an effect on the future and with investments with these companies.”

SEC and the ‘Micromanaging’ Argument

Several of the climate resolutions filed this year ask that companies set and report on greenhouse gas reduction targets for emissions—both from their operations and from the use of their products—that are in line with the Paris climate agreement goal to keep global warming below 2 degrees Celsius.

The resolutions note that many governments are already moving toward lower-emissions economies and say that setting goals is an essential part of positioning the company for the future.

The term “micromanage” has become the linchpin to objections by companies seeking to block these resolutions. The precedent was set last year when the SEC agreed with EOG Resources, a Texas-based oil and gas exploration company, that a resolution asking the company to adopt emissions goals had sought to “micromanage” the company.

Killing climate resolutions “will undermine the rights of shareholders to engage with publicly traded companies on issues that are essential to risk management, strong governance, and long-term value creation, such as the impact of climate change on companies and companies’ impact on climate change,” U.S. Sen. Brian Schatz, D-Hawaii, wrote in a letter to SEC Chairman Jay Clayton.

Exxon persuaded the SEC to block the shareholder resolution seeking greenhouse gas reduction targets by also arguing that the resolution sought to micromanage the company.

“In our view, the proposal would require the company to adopt targets aligned with the goals established by the Paris climate agreement,” an SEC lawyer told Exxon officials. “By imposing this requirement, the proposal would micromanage the company by seeking to impose specific methods for implementing complex policies in place of the ongoing judgments of management as overseen by its board of directors.”

Shareholder Success Has Been Growing

These fights come against the backdrop of investors successfully overcoming company opposition to win shareholder votes on climate issues in recent years.

Shareholder support for climate change proposals has steadily increased, with resolutions winning approval about a third of the time in the last two years. That was up from an average of about a fifth in 2007.

Resolutions that specifically asked a company to conduct a climate risk assessment of challenges the company would face if greenhouse gas emissions are cut enough to meet Paris Agreement’s 2 degree target have received an average of 45 percent support recently, and include majority votes in the last two years from stockholders in Exxon, Occidental Petroleum Corp., PPL Corp. and Anadarko.

Since then, more than a half dozen energy companies and utilities have told shareholders that they would consider their climate-related requests without the necessity of a vote.

“This year has a different tone—an increased intensity,” said Andrew Behar, CEO of As You Sow, a nonprofit organization dedicated to increasing corporate environmental and social responsibility that produces an annual report that addresses social issues, including climate change. “Time seems to be running out.”

What’s in This Year’s Climate Resolutions?

This year, climate-related shareholder proposals include:

  • Resolutions addressing greenhouse gas emissions that demand companies develop strategies to meet the Paris Agreement’s goal of holding global warming to below 2 degrees Celsius.
  • Resolutions asking for carbon asset risk reports explaining how companies plan to transition to a lower-carbon economy and deal with extreme weather occurring with climate shifts.
  • Resolutions asking about renewable energy use and goals.

Other resolutions ask companies to explain what’s being done to limit methane emissions, agree to nominate board members with expertise in climate change, produce detailed reports on their political contributions and lobbying intended to influence climate policy, and produce reports explaining how they plan to mitigate the public health risks associated with continued reliance on coal to fuel electric generating plants.

A resolution presented to Anadarko, which has rich assets in the Permian basin, warned against an ill-advised buildup of capacity expansion amid the drilling boom. That’s ironic, because the company is expected to be bought out by one oil giant or another amid a frenzied bidding war.

The resolution, asking the company to explain how it plans to reduce its total contribution to climate change, says: “While the investment choices of oil and gas companies can play a major role in the transition to a clean energy economy, every dollar invested in fossil fuel resource development and infrastructure slows that transition, increasing risk to the global economy and investor portfolios.”

At Chevron, one of the companies bidding for Anadarko, shareholders are asking the board of directors to take on oversight responsibility for climate change strategy to insure the company remains successful in an increasingly decarbonizing economy.

“A failure to plan for a low-carbon transition, including climate change policy, competition from renewables, peak oil demand, and unburnable fossil fuel reserves, may place investor capital at substantial risk,” the resolution states.

A resolution by stockholders in Duke Energy, a North Carolina-based electric power holding company, focused on addressing “well-established” risks to public health from water contamination, poor air quality and climate change. It called on Duke to mitigate the public health risks associated with its coal operations “in light of increasing vulnerability to climate change impacts such as flooding and severe storms” but was voted down at the company’s annual meeting Thursday. 

Curbing climate change goes hand-in-hand with investors concerns about how their companies can succeed in a future based on sustainable energy.

“All of the resolutions—whether they are trying are to reduce negative impacts, or promote positive solutions—are trying to help companies manage the transition to a low carbon economy,” Passoff said. 

That in turn will move them toward the objectives and timelines of the Paris accord, he said.