SEC signals firmer line with oil companies on climate
The U.S. Securities and Exchange Commission has ordered two of America’s largest oil companies to hold shareholder votes on new, high-profile emissions targets, as the regulator takes a tougher approach to the climate under the Biden administration.
The SEC has rejected demands by ConocoPhillips and Occidental Petroleum to reject shareholder motions that would force them to present detailed plans to reduce their so-called “Scope 3” emissions – those resulting from the combustion of their products by customers.
Both companies had argued that the proposals, which were to be presented at their annual meetings, were aimed at micromanaging their operations – grounds under which the regulator had allowed companies to reject similar proposals under the Trump administration. But the SEC said it was “unable to agreeWith this argument in both cases.
“In our view, the proposal does not seek to micromanage the business to such an extent that excluding the proposal would be appropriate,” the regulator wrote to Conoco in a letter viewed by the Financial Times.
The decisions mark the first time the SEC has refused requests by oil and gas companies to exclude votes on Scope 3 shows, activists say. They suggest the regulator is moving ahead with a more interventionist approach under the new administration, even before its new president is confirmed.
“They’re wasting no time,” said Mark van Baal, founder of Follow This, a Dutch shareholder group that filed the lawsuit against Conoco. “I think it’s really impressive that less than two months after the inauguration there is a whole new spirit in the SEC.”
Under the Trump administration, activists said the SEC made easier companies to reject shareholder proposals on spurious grounds rather than submitting them to investor votes, following a broadening of the definition of micromanagement.
Companies were allowed to reject around 15% of environmental and social proposals in 2018, up from 9% in 2016, according to Institutional Shareholder Services, an independent advisory group for investors.
Joe Biden has pledged to put climate change efforts at the heart of his presidency. Although a slim majority in Congress limits his ability to use legislation as a tool, analysts said the SEC’s rulings made it clear that it would use all avenues available to achieve its ambitions.
“This is undoubtedly the start of the appointments by Biden which require much greater financial disclosure from fossil interests, similar to those mandated in Europe in recent years,” said Paul Bledsoe, former climate adviser to the White House under Bill Clinton.
“The Biden team intends to leave no stone unturned in the climate, including much shareholder rights and the financial industry more broadly.”
While American oil and gas companies started to settle certain emissions targets, these have generally been less ambitious than those set by their European counterparts.
ConocoPhillips is committed to reducing emissions from its operations and those of its suppliers to zero, but has drawn the line to set targets on Scope 3 emissions, created by its customers. Occidental has said it will reduce Scope 3 emissions to zero by 2050, but has yet to set interim targets on how it will get there.
Occidental declined to comment. Conoco and the SEC did not respond to requests for comment.