Bulletin
Investor Alert

New York Markets Open in:

Sept. 11, 2019, 8:39 a.m. EDT

Demand for climate-proofed portfolios was a key proxy-season theme this year

2019 sees record levels of shareholder and mutual-fund support for environmental concerns — and increased action to head off proxy votes

new
Watchlist Relevance
LEARN MORE

Want to see how this story relates to your watchlist?

Just add items to create a watchlist now:

  • X
    Amazon.com Inc. (AMZN)
  • X
    Chevron Corp. (CVX)
  • X
    Capri Holdings Ltd. (CPRI)

or Cancel Already have a watchlist? Log In

By Rachel Koning Beals


Getty Images
Amazon trucks line up at a regional distribution center in Las Vegas.

Shareholders want Amazon.com /zigman2/quotes/210331248/composite AMZN -1.68% 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 -0.53% cut its carbon footprint and that Michael Kors, a unit of Capri Holdings /zigman2/quotes/206301876/composite CPRI +0.19%  , 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.


Morningstar
The trend toward demanding more climate-risk disclosures from stock holdings, tracked by the yellow line, is rising.

Trillium Asset Management, for example, filed a resolution at EOG Resources /zigman2/quotes/204634330/composite EOG -3.49% 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.

Read: Regulation rollback expected for climate-changing methane releases from oilfields

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.


Morningstar
Shareholders put the most ‘climate minded’ pressure on these firms this proxy season.

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.

/zigman2/quotes/210331248/composite
US : U.S.: Nasdaq
$ 1,757.51
-29.97 -1.68%
Volume: 3.37M
Oct. 18, 2019 4:00p
P/E Ratio
72.92
Dividend Yield
N/A
Market Cap
$869.36 billion
Rev. per Employee
$359,671
loading...
/zigman2/quotes/205871374/composite
US : U.S.: NYSE
$ 114.74
-0.61 -0.53%
Volume: 5.68M
Oct. 18, 2019 6:30p
P/E Ratio
14.86
Dividend Yield
4.15%
Market Cap
$217.83 billion
Rev. per Employee
$3.27M
loading...
/zigman2/quotes/206301876/composite
US : U.S.: NYSE
$ 31.03
+0.06 +0.19%
Volume: 1.98M
Oct. 18, 2019 6:30p
P/E Ratio
11.67
Dividend Yield
N/A
Market Cap
$4.70 billion
Rev. per Employee
$341,762
loading...
/zigman2/quotes/204634330/composite
US : U.S.: NYSE
$ 64.44
-2.33 -3.49%
Volume: 6.60M
Oct. 18, 2019 6:30p
P/E Ratio
10.49
Dividend Yield
1.78%
Market Cap
$37.40 billion
Rev. per Employee
$6.17M
loading...
1 2
This Story has 0 Comments
Be the first to comment
More News In
Investing

Story Conversation

Commenting FAQs »
Link to MarketWatch's Slice.