The Securities and Exchange Commission has denied efforts by ExxonMobil and Chevron to exclude shareholder resolutions seeking additional disclosures related to climate change. The decision was detailed in recent no-action letters issued by the Division of Corporation Finance.
A coalition of investors, including New York State Comptroller Thomas DiNapoli (who oversees the New York State Common Retirement Fund and its $184.5 billion in assets under management) and the endowment fund of the Church of England, asked ExxonMobil, Chevron, and other energy companies to “stress test” and disclose any effect the so-called Paris Agreement, an international effort to combat global warming, could have on their business models and oil and gas reserves.
At the recent United Nations Conference on Climate Change, a coalition of 195 world leaders agreed to unified actions intended to keep the rise in global temperatures below two degrees Celsius. The sought-after disclosures would be incorporated into existing reporting to “assess the resilience of the company’s full portfolio of reserves and resources [through 2040 for ExxonMobile, 2035 for Chevron] and address the financial risks associated with such a scenario.”
The SEC rejected arguments for not including the shareholder proposals. “We are unable to concur in your view that ExxonMobil may exclude the proposal under rule 14a-8(i)(3),” the response to that company read. “We are unable to conclude that the proposal is so inherently vague or indefinite that neither the shareholders voting on the proposal, nor the company in implementing the proposal, would be able to determine with any reasonable certainty exactly what actions or measures the proposal requires.”
An exclusion of the proposal under rule 14a-8(i)(10), was also rejected because “it does not appear that ExxonMobil’s public disclosures compare favorably with the guidelines of the proposal.” The company had positioned a 2014 report, itself the result of a shareholder proposal, as sufficient to meet the current resolution’s objectives.
“We are unable to concur in your view that Chevron may exclude the proposal under rule 14a-8(i)(7),” the SEC’s response to that company said. “We note that the proposal focuses on the significant policy issue of climate change. Accordingly, we do not believe that Chevron may omit the proposal from its proxy materials.” A request to exclude the proposal under rule 14a-8(i)(12) was similarly denied because “the proposal does not deal with substantially the same subject matter as the proposal included in the company’s 2015 proxy materials.”
A separate resolution, not addressed in the current SEC responses, asks Chevron to add at least one board member with “environmental expertise.” Disclosure resolutions were also filed with energy companies AES Corp. and Southern Company.
This year, building upon the environmental momentum sparked by the Paris accord, a record number of shareholder resolutions have been filed with U.S. energy companies asking them to disclose their strategies amid a potential shift away from fossil fuels, according to Ceres, a non-profit organization that advocates for sustainability leadership and has helped coordinate many of those resolutions. Nearly two-dozen carbon asset risk-related resolutions have been filed with oil & gas, coal and electric power companies. Marathon Oil and Anadarko are among those being asked by investors to disclose “stranded asset risks,” the potential of fossil fuel reserves being unusable. Resolutions to end executive compensation linkage to with fossil fuel reserve replacement were filed with Chesapeake Energy, ConocoPhillips, and Devon Energy.
There are also more than 160 climate-related resolutions filed at a broader array of companies focused on such issues such as methane emissions, renewable energy sourcing, greenhouse gas reduction targets, and climate policy lobbying .