2024 Proxy Vote Alerts

Lobbying – Natural Gas – Small Cap Climate Risk – Carbon Offsets

WELCOME TO WEEK 3 (APRIL 2- May 3, 2024) OF PROXY PREVIEW’S ESG PROXY VOTE ALERTS.

The 2010 Citizens United ruling prompted a wave of corporate political influence resolutions that continues to this day. These proposals are roughly split into three categories: election contributions, lobbying and ‘values congruency’ (which focus on inconsistencies between corporate policies and the viewpoints of politicians and groups who receive corporate money). This week we look at lobbying resolutions as well as a new report highlighting the critical, but often overlooked role of state level lobbying, where companies report almost nothing.

And although Earth Day was a week ago, climate resolutions are just now going to votes. We look at an upcoming climate change resolution on natural gas, discuss the growth of climate resolutions at small cap companies, and explore the controversy surrounding carbon offsets.

Lobbying

Lobbying via trade associations and undisclosed “dark money” spending by non-profit groups using corporate funds to influence public policy after elections remains a core challenge to political accountability as few companies report on it. Investor concern about undue corporate political influence remains high and the ‘standard’ lobbying resolution regularly receives strong support. It has remained virtually unchanged for years and ask companies to report on:

  1. Company policy and procedures governing lobbying, both direct and indirect, and grassroots lobbying communications—at the federal, state and local level.

  2. Payments used for (a) direct or indirect lobbying or (b) grassroots lobbying communications, in each case including the amount of the payment and the recipient.

  3. Membership in and payments to any tax-exempt organization that writes and endorses model legislation.

  4. Description of management and the Board decision-making process and oversight for making payments described above.

Many of these resolutions ask for general lobbying disclosure but a growing number are focused on climate lobbying. An investor guide to Responsible Climate Lobbying: The Global Standard helps companies and investors assess and ensure that all lobbying efforts support the Paris Climate Treaty goals. There are more than 20 ESG-oriented lobbying resolutions pending and a few upcoming ones include:

A nascent SEC disclosure rule prompted a new Si2 report about The Corporate State Lobbying Black Hole, explaining the gap in mandatory reporting that is particularly acute at the state level.

Expert insight from:

Heidi Welsh, Founding Executive Director, Sustainable Investments Institute (Si2)
Heidi has been providing impartial, detailed analysis on corporate responsibility issues for more than 30 years. Starting at the Investor Responsibility Research Center in 1987, she has authored annual assessments of shareholder advocacy covering a wide array of social and environmental issues including recent anti-ESG developments. She previously headed sustainability research within a unit of what is now MSCI and consulted on Global Reporting Initiative guidelines. Heidi is the lead author of several Si2 studies about corporate political activity governance and spending, as well as the lead author of the Proxy Preview since 2011.

Robin Young, Research Director, Sustainable Investments Institute
A contributing researcher and analyst since Si2's inception, Robin oversees Si2's research efforts in all areas of corporate political activity and related shareholder proposals. Together, with Heidi Welsh, he has co-authored several studies on corporate political spending, policies and disclosure. Previously, he was a senior analyst for the Investor Responsibility Research Center, ISS and RiskMetrics.

Natural Gas

Natural gas is touted by industry as a bridge fuel to clean energy because when burned it emits far less CO2 than coal or oil. Yet shale gas has more methane and the overall climate footprint may not be any better than existing fossil fuels. Total methane leakage in production and use remains unknown and it causes 28 times more near-term warming than CO2. This hasn’t stopped dozens of new natural gas plants from being developed - but will these multi-decade infrastructure investments still be competitive given the escalating need for net zero emissions? A climate transition plan resolution at DTE raises this concern.

Small Cap Company Climate Transition Plans

Climate resolutions initially focused on the energy and utility sectors and slowly expanded to other large GHG emitters such as transportation and tech companies. But climate risk is a systemic risk, which makes questions about climate transition plans valid for smaller companies in other sectors, as well. This is even more urgent for constituents in the supply chains of larger companies that have committed to trim their carbon footprints. Shareholder outreach to small cap companies is still relatively new but is growing. The resolutions ask about plans to reduce GHG emissions in keeping with the goals of the Paris Agreement.

Carbon Offsets

Carbon offsets have become a key indicator for corporate greenwashing on climate action. Science-based targets exclude them as meaningful because they do not result in the absolute emissions reductions we need. A resolution filed at Valero (AGM May 14) asked the company to “adopt a 1.5 degree C-aligned, near-term emissions reduction target that does not include the use of carbon offsets and avoided emissions.” The SEC agreed with the company’s contention that the proposal was too specific and it will not go to a vote. But the widespread misuse of carbon offsets and other misleading GHG emission claims clearly will continue to be part of discussions about the validity of corporate carbon reduction strategies.

 
 
 

Read Previous Vote Alerts

Week 1 - April 15-19
Week 2 - April 22-26