Climate Change - Greenhouse Gas Emissions Management
This year is witness to a slight uptick from 2017 in resolutions asking companies to adopt or report on greenhouse gas emissions targets. Proponents want companies to track, manage and set quantified reduction goals. Companies have been successful in knocking out relatively new requests to set net-zero goals, however, so few of the eight resolutions filed with that language are likely to go to votes; still, 16 proposals seeking more general GHG emissions targets are pending, while one of these has been withdrawn. As You Sow also has a new proposal to auto companies about emissions standards, reporting and regulation, although there is a pending company challenge.
Time-bound quantitative targets:
Nine of the pending GHG goals resolutions ask each recipient to “adopt timebound, quantitative, company-wide, science-based targets for reducing greenhouse gas (GHG) emissions, consistent with the goals of the Paris Climate Agreement, and report annually…[on] plans and progress towards achieving these targets.”
This resolution is new to seven companies—AK Steel Holding, Flowserve, Illinois Tool Works, J.B. Hunt Transport Services, Minerals Technologies, Reliance Steel & Aluminum and one undisclosed company. At C.H. Robinson, it is a resubmission that appeared in the proxy statement in 2017 but did not go to a vote given what the proponents termed “ongoing dialogue,” but the Sisters of the Presentation of the Blessed Virgin Mary refiled after judging there was no further progress in discussions. Mercy Investments withdrew a 2017 goals proposal at United States Steel after the company said it would restart reporting GHG emissions in fall 2017 but refiled after what they term disappointing discussions.
At eight more companies, the proposal seeks essentially the same thing, that each firm “adopt time bound quantitative, company-wide goals for the reduction of greenhouse gas (GHG) emissions, taking into consideration the goals of the Paris Climate Agreement, and issue a report [on] plans to achieve these goals.” It is a resubmission at AES (40.1 percent last year), Emerson Electric (34 percent), EOG Resources (proponents withdrew a 2017 methane targets resolution), Fluor (36.6 percent); it is new to American Electric Power, Genesee & Wyoming, Kansas City Southern and United Rentals.
Vote—The first vote is in, 39 percent at Emerson Electric, which had its meeting on February 6.
Withdrawals—Proponents have withdrawn after reaching agreements at AES, American Electric Power, and Reliance Steel.
SEC action—AES challenged the proposal at the SEC, arguing it was too vague and duplicates the proposal asking for an analysis of climate change impacts that it received first; NYSCRF withdrew before any SEC response. EOG Resources successfully argued it can be excluded because it concerns ordinary business, is moot and is misleading; resolutions to the company since 2010 have focused mainly on methane emissions and reductions and this is the first more general GHG goals proposal it has received.
Amalgamated Bank, Jantz Management and Trillium Asset Management asked eight companies to report on the possibility of setting net-zero GHG emissions, a proposal that had first been broached at a few companies in 2016. The resolution asked, with slight variations, Amazon.com, Cooper Companies, Lowe’s, PayPal and Verizon Communications for a report
that evaluates the feasibility of the Company achieving by 2030 “net-zero” emissions of greenhouse gases from all aspects of the business directly owned and operated by the Company, including corporate office, fulfillment, sortation, delivery, warehouse operations, data center, customer service, and other facilities, as well as the feasibility of reducing other emissions associated with the Company’s activities.
At Apple, Deere and TJX it was similar but asked only for “a fixed date,” rather than the year 2030.
Most companies are challenging the resolution. The first, and perhaps the only one of the proposals that is likely to come to a vote is slated for Cooper Companies on March 19. The only other company not to challenge so far is Lowe’s.
SEC action—The companies are having none of it and have a sympathetic ear at the SEC. All but three have challenged and so far Apple and Deere have prevailed with their contention that the resolution seeks to micromanage the companies and suppliers in its specificity, even though the SEC staff last year rejected a similar argument from PayPal. The decision is one of the first significant SEC responses to follow SEC Staff Legal Bulletin 14I, which called for more board input about whether proposals should be omitted on “ordinary business” and “significantly related” grounds. Omissions are likely at Amazon.com, PayPal, TJX and Verizon Communications since they are using the same arguments that succeeded at Apple and Deere even before publication of the new legal bulletin.
Investors have been lukewarm about these resolutions when they went to votes, giving only 7 percent to 8 percent support to requests to adopt net-zero goals in 2016 at Deere and Coach (now Tapestry). Requests for reports on such goals have earned more—in 2017, 23.8 percent at PayPal and 15.8 percent at Netflix. The idea also seemed to have some traction at companies—prompting withdrawals at Amazon.com, CarMax and GameStop last year after the companies agreed to discussions.
Auto emissions standards:
As You Sow is trying a new approach. It proposes that Ford Motor and General Motors each report, “describing whether our company’s fleet GHG emissions through 2025 will increase, given the industry’s proposed weakening of standards or, conversely, how GM plans to retain emissions consistent with current CAFE standards, to ensure its products are sustainable in a rapidly decarbonizing vehicle market.” The resolution notes outside the resolved clause that electric vehicles make up a small part of the companies’ product mix and that they have lobbied to weaken auto fuel economy standards. Obama-era regulations were set to double the standard for passenger cars to 54.5 miles per gallon by 2025, but President Trump has opened a review of the standards and seeks to roll this goal back, as discussed in an October 2017 opinion piece in The New York Times by former Environmental Protection Agency head William K. Reilly and Kenneth Kimmel of the Union of Concerned Scientists.
SEC action—GM has challenged the proposal at the SEC, arguing that it concerns ordinary business, given its focus on product characteristics, and is moot because of GM’s sustainability reporting and programs. The SEC has yet to respond and no challenge has surfaced so far from Ford.