SEC's rule adjustment criticized as a breach of fair legal proceedings by As You Sow's Fugere.
In a notable change, investors in US companies have filed approximately 34% fewer climate-related resolutions this year compared to previous years. This decline, however, does not signal a reduction in concern for climate issues, but rather a strategic shift in tactics.
Instead of focusing on the quantity of resolutions filed, investors are increasingly prioritizing backing managers that develop and pursue credible climate transition plans and climate adaptation strategies. This change reflects a move toward engagement and active management rather than resolution filing itself.
Regulatory and market changes have also played a role in this shift. For instance, investors might be responding to new obligations, such as in the UK, which mandate credible transition plans, influencing how climate action is pursued in investment portfolios.
Broader political and regulatory uncertainty in the US may contribute to a more cautious or strategic approach toward climate-related shareholder actions, favoring deep responsible investment experience and research expertise over filing resolutions.
Danielle Fugere, president and chief counsel of shareholder advocacy group As You Sow, attributes this decrease to a "wait and see" attitude regarding changes in the administration and the threat of legal action from the judiciary committee and red state attorneys general related to ESG issues. Fugere indicated that As You Sow is being judicious and carefully assessing where they can achieve more movement on important issues.
Transition planning has become a key priority for investors, according to As You Sow. ESG resolutions (Environmental, Social, and Governance resolutions) remain a focus of concern for Fugere and As You Sow. The SEC's revised regulations 13D and 13G in February have made it significantly more burdensome for investors to meet the reporting requirements associated with filing resolutions.
Despite this shift, climate change remains the issue attracting the most attention from investors. The campaign group As You Sow has published a podcast featuring a conversation about these issues, and Fugere has spoken on the podcast about the evolving priorities of As You Sow.
As As You Sow evolves its priorities, it is focusing on companies that use oil and gas, such as those involved with AI, instead of engaging with companies like Exxon. The group is now looking at ensuring that the demand for AI and its electricity use is directed towards renewables.
Asset managers and owners have been reporting to Congress and clarifying the rules with legal counsel due to legal threats. The latest Proxy Voting Preview by As You Sow was published, providing insights into the group's ongoing work and priorities. Fugere believes that the process to establish the legality of filing proposals is nearing completion.
In summary, the decrease in climate-related shareholder resolutions in 2021 is better understood as a shift in investor tactics—from quantity of resolutions filed to quality of engagement through climate-focused asset management and policy compliance—rather than a reduction in concern for climate issues.
- Instead of focusing on filing numerous climate-related resolutions, investors are now prioritizing investing in businesses with credible climate transition plans and adaptation strategies, which reflects a move towards engagement and active management.
- Asset managers and owners are increasingly focusing on companies that use oil and gas, such as those involved with artificial intelligence, and are now aiming to ensure demand for AI and its electricity use is directed towards renewable energy sources.
- The campaign group As You Sow is evolving its priorities and has been reporting to Congress and clarifying rules with legal counsel due to potential legal threats, as they believe the process to establish the legality of filing proposals is nearing completion.
