No-action requests 2024: the climate resolutions companies don’t want to discuss

It is that time of year again. The world’s publicly traded corporate behemoths are preparing their annual paperwork. Over the coming months, shareholders and boards will meet and discuss a bevy of topics of common commercial interest. Corporate decarbonisation will be amongst them.

Proxy season, as the pundits refer to it, is here. However, for climate-related shareholder resolutions to be put to debate, they must first be placed on the agenda. That is easier said than done. This year, 217 no-action requests have been filed, over 30 of them are against climate-related shareholder resolutions.

In America, this annual festival of corporate governance is preceded by a careful selection of shareholder resolutions. Each year, companies write to the Securities and Exchange Commission (SEC) seeking to avoid certain resolutions on legal grounds that America’s corporate governance rulebook provides for.

They send their justification in writing to the SEC’s corporate finance division. Officially, this is known as a “no action” request. The SEC then responds, either in agreement or not, with the company’s reasoning.

In 2023, companies sent over a hundred requests. 19 were against climate resolutions. This year the numbers are higher - companies have filed no action requests against 217 resolutions so far. Over 30 of which, are climate related.

This two-part series revisits three questions posed by NZI in 2023 – (a) what do companies not want to talk about? (b) On what grounds? (c) Does the SEC agree?

Part – I: the resolutions.

Climate risk at oil and gas majors continues to be at the heart of no-action requests in 2024. Companies such as Exxon Mobil have successfully avoided resolutions filed by shareholder advocacy groups such as As You Sow. The SEC has approved these requests on the grounds of breaching the ordinary business rule.

Beyond this familiar debate, the issues companies want to avoid at their AGMs in 2024 vary from biodiversity concerns at Chemours and greenwashing at Kraft Heinz to deep sea mining at Tesla.

The following issues stand out:

Financed emissions.

America’s banks are under increased pressure to measure and disclose their financed emissions. In response, some companies are pushing back against climate resolutions.

A resolution filed at Bank of America by As You Sow – a nonprofit – asks for a report on financed emissions in auto manufacturing, energy and power. The bank is currently the world’s fourth largest lender to the fossil fuel industry.

“Despite investor demand for clearer disclosure of its transition planning, shareholders lack sufficient information as to whether Bank of America is on a path to meet those targets”, the resolution says.

Bank of America made the case that the resolution seeks to micromanage the company. The SEC agreed.

Similar resolutions have been filed at Wells Fargo, Goldman Sachs and J.P. Morgan Chase. In each case, the banks have raised the micromanagement argument. In each case, the SEC has agreed.

Proxy voting

Listed asset managers have also filed no-action requests against resolutions seeking information on the extent to which proxy voting is aligned with a client’s climate preferences.

Take for example - a resolution filed (and later withdrawn) at State Street, a large asset manager with $3.6 trillion assets under management. The proposal, filed by United Church Funds and other co-filers was motivated by a Share Action survey according to which State Street supported only 30% of climate-related resolutions in 2022 and 25% in 2023.

“Proxy voting that appears to ignore the full scope of climate risks creates reputational and business risk for State Street, especially with global clients committed to sustainability and concerned about the broader economic impact of climate change”, said United Church Funds in its supporting statement.

Similar resolutions have been filed at Citi Group, Bank of America and J.P. Morgan Chase. Here too, the micromanagement argument has prevailed. In all three cases, the SEC has granted the no-action request.

Lobbying

Investor pressure over anti-climate policy lobbying has been brewing since 2021. 17 climate-related shareholder resolutions targeted the lobbying issue that year. In 2022, that grew to 25 resolutions. In 2023 and 2024, boards seem to be fighting back through no action requests.

In 2023, truck manufacturer PACCAR faced questions over its footprint in Washington. The company filed a no-action request against these resolutions. So did CDW Corporation, a technology company and Pittsburgh-based natural gas company CNX Resources.

In the shadow of the Inflation Reduction Act, questions over lobbying have resurfaced in 2024. A proposal filed by Zevin Asset Management at Alphabet reads:

“Alphabet notes that it speaks to industry associations about climate policy, yet it is still active in groups like the U.S. Chamber of Commerce, Business Europe, and Japan Business Federation, all of which have consistently opposed ambitious climate action in their respective jurisdictions, per numerous sources”.

Alphabet then filed a no-action request on the grounds that a similar proposal was included in the 2023 AGM and failed to gather more than 15% support. The resolution has since been withdrawn.

PACCAR, Wells Fargo and consumer goods manufacturer Church & Dwight have also filed no-action requests against lobbying-related resolutions; the latter two have done so successfully.

The next installment of this series will focus on how companies justify a no-action request and the SEC’s response.