SEC signals plan to block shareholder requests for climate targets 

The Securities and Exchange Commission (SEC) has signalled it will once again stop investors from asking companies to set climate targets, with the reinstatement of guidance on “micromanagement”.  

Companies can seek the blessing of the US regulator to block certain requests from being voted on at annual meetings, but the rules that govern the process have been subject to a fierce political tug-of-war in recent years.  

In a staff legal bulletin published on Wednesday, the SEC’s Division of Corporation Finance said it had revived an interpretation that was established during President Trump’s first term, but revoked under Biden.  

The announcement came alongside the removal of guidance introduced during the Biden administration, which enabled shareholders and activist groups to submit record numbers of ESG filings.  

What is the guidance?  

Last time Trump was in office, companies frequently used something known as Rule 14a-8(i)(7) to banish ESG-related proposals – especially ones asking them to set climate targets – on the grounds of micromanagement.  

In the SEC’s guidance at the time, requests for time-bound targets were identified as breaching the rule.

In 2019, most shareholder resolutions calling for Paris-aligned decarbonisation targets were blocked on this basis.  

This changed under Biden, when the guidance was removed and the SEC relaxed its rules substantially.  

Now the guidance has been reintroduced, investors are likely to struggle again to force a vote on climate targets at a company.  

Clampdown on proposals  

Shareholder proposals have become a battleground in the US, partly because of the recent boom in sustainability-related requests.  

Many corporates, investors and right-wing critics believe the voting process has been hijacked by campaign groups who use it to make demands that aren’t relevant to investors.   

Last year, ExxonMobil filed a lawsuit against activist investors Arjuna Capital and Follow This because the pair used the shareholder proposal process to ask it for climate targets. 

But it’s not just campaigners that have made such requests.   

Last year, one of the world’s biggest institutional investors, Norges Bank Investment Management, called on oil pipeline operator Kinder Morgan to “set an emission reduction target, on an intensity or absolute basis, covering operational (scope 1 and 2) emissions”. 

Just shy of a third (31%) of fellow shareholders backed the request by NBIM, which runs Norway’s trillion-dollar sovereign wealth fund.

Proxy advisors also pull back

On Tuesday, one of the world’s biggest proxy houses said it would stop considering some diversity, equity and inclusion issues when advising shareholders.

ISS said recent pushback against DEI in the US, including moves by the Trump Administration to eliminate policies at federal government-level, had prompted it to “indefinitely halt consideration of certain diversity factors in making vote recommendations with respect to directors at US companies”.

“We anticipate that institutional investors and US companies will have a range of perspectives on DEI, including whether and how companies can or should adapt their specific policies and practices to the evolving market and government activity,” said the firm, which advises shareholders on how to vote at companies’ annual meetings.