Shareholders want Amazon.com /zigman2/quotes/210331248/composite AMZN +0.55% to come clean on the amount of fossil fuels it burns and reveal how it plans to buffer profits from environmental risk as it zooms packages around the world.
Their own stakeholders insist that oil-industry stronghold Chevron /zigman2/quotes/205871374/composite CVX +3.01% cut its carbon footprint and that Michael Kors, a unit of Capri Holdings /zigman2/quotes/206301876/composite CPRI +3.09% , reveal how much energy it uses to stitch and ship its designer clothes.
These investors, including some of the fund firms acting on investors’ behalf, are squawking loudly enough on climate-risk disclosure to impact recently released results from the 2019 proxy season: Shareholder support for climate-related resolutions at the companies they invest in hit an all-time high of 30% in the latest filing round, Morningstar’s Jon Hale and Jackie Cook confirmed.
The analysts, part of the Chicago-based fund research and data firm’s environmental, social and governance team, stressed that even as the percentage of shareholder support per climate issue is rising, the number of shareholder resolutions coming to a company vote has dropped sharply.
That’s not necessarily because of a lack of environmental and social concern, Cook told MarketWatch in an interview. Instead, sensing the groundswell of interest, more companies are heading off environmental-risk and social-capital issues raised by shareholders long before votes are forced. It’s roughly the stock market’s equivalent of settling out of court.
Trillium Asset Management, for example, filed a resolution at EOG Resources /zigman2/quotes/204634330/composite EOG +2.39% requesting that the oil-and-gas explorer set and disclose goals for methane-emission reduction. After some back-and-forth, the company committed to reduce its methane emissions and set longer-term emissions goals, and the shareholder resolution was withdrawn.
In 2016, 57 resolutions asking companies to report on their business risks and strategy with respect to climate change were put to shareholder votes. By comparison, in 2019, there were more withdrawals of climate-risk disclosure resolutions than the 17 that actually faced votes.
Thirty-percent support is the level at which many boards take note of a proposal topic; at 50% support, if the board is deemed to take insufficient action in response, many investors will consider voting against incumbent directors at the next annual meeting. Since 2004, shareholders have voted on over 400 resolutions asking companies to report on the business risks of climate change and to disclose strategies for addressing these risks.
SEC’s ‘ordinary business’ pass on emissions
There’s a notable factor that is dissuading company responses to shareholder climate requests, however. The regulatory atmosphere eased at the Securities and Exchange Commission by way of “no-action” letters between July 2018 and June 2019.
In a particular 2018 case, the SEC broke with years of precedent, according to Morningstar, by granting EOG Resources no-action relief for omitting from its ballot a shareholder resolution asking the company to “adopt company-wide, quantitative, timebound targets for reducing greenhouse gas emissions and issue a report discussing its plans and progress toward achieving these targets.”
Other companies could then play the same card, and they did in 2019. At least five resolutions were omitted this year on the basis that the request for greenhouse-gas-emission goals interfered with the regular operation of business, according to SEC filings, and possibly more were deterred from being filed in the first place.