NY-Based Goldman Sachs and Wells Fargo Turn Back Investor Climate Change Resolutions
In-house lawyers at Wells Fargo and Goldman Sachs have successfully fought off climate-related proxy resolutions sought by activist investors with the U.S. Securities and Exchange Commission recently granting the banks' motions to exclude the resolutions from shareholder consideration.
March 20, 2019 at 09:41 AM
5 minute read
The original version of this story was published on Corporate Counsel
The in-house lawyers at Wells Fargo & Co. and New York City-based Goldman Sachs have successfully fought off climate-related proxy resolutions sought by activist investors.
The proposed resolutions asked the banks to work to reduce the full carbon footprint of their loan and investment portfolios in line with the 2015 Paris Agreement on global warming.
But the U.S. Securities and Exchange Commission recently granted the banks' motions to exclude the resolutions from shareholder consideration. A number of other banks in the world have already committed to decrease the climate impact of their loans in accord with the Paris goals.
But since the U.S. does not accept the Paris agreement, most U.S. banks have committed to lowering their own operations' footprints but not to reducing loans or investments in fossil fuel companies.
For example, Wells Fargo has promised $200 billion in financing through 2030 to businesses that support the transition to a low-carbon economy, including $100 billion toward clean technology and renewable energy projects. Goldman has committed to financing and investing in clean energy with an expanded target of $150 billion by 2025.
Attorney Danielle Fugere, president of the nonprofit group As You Sow, which promotes environmental and social corporate responsibility, said Tuesday she was disappointed in the SEC's decision and in the banks. Investing in clean technology is not enough, she said.
“What we have found with these banks is they are reducing their own carbon footprints, but are ignoring the impact of their investments in fossil fuels,” Fugere explained. “Every dollar invested in fossil fuel infrastructure lives on for many years.”
Wells Fargo declined to comment Tuesday, and Goldman Sachs did not immediately respond to messages.
Fugere said the group picked just two of the largest U.S. banks to test the waters with resolutions, because last year the SEC surprisingly ruled against a climate change proxy proposal. “So we were not surprised this year, but it is very disappointing and of significant concern.”
From a legal position, she said she does not agree with the recent rulings. “We believe the commission has said in the past it is important for shareholders to raise important issues to be discussed as long as they are not micromanaging the company. We think the SEC staff is not interpreting the commission's directive appropriately.”
The two resolutions were similar in asking the banks to measure the carbon content of their portfolios and decrease the climate impact of their loans.
They cited over a dozen banks that have adopted policies to end or significantly reduce financing for Arctic oil or tar sands projects. In addition, BNP Paribas in Paris also phased out business with companies tied to shale development and coal energy. And the World Bank has committed to end upstream oil and gas financing for exploration and production.
In contrast, the resolution said Wells Fargo has increased investments in the dirtiest fuels in each of the past three years, including tar sands, Arctic oil and coal. The Goldman resolution said between 2015 and 2017 that the bank invested nearly $9 billion into financing of tar sands, Arctic oil, and coal; and last year it added coal loans to its portfolio.
The SEC's letter rejecting the Goldman resolution was sent March 12 to Beverly O'Toole, the bank's associate general counsel for corporate governance. It said, “In our view, the proposal would require the company to manage its lending and investment activities in alignment with the goals of the 2015 Paris Climate Agreement of maintaining global warming well below 2 degrees Celsius.”
The Division of Corporation Finance decision said that by imposing “this overarching requirement, the proposal would micromanage the company by seeking to impose specific methods for implementing complex policies in place of the ongoing judgments of management as overseen by its board of directors.” The decision was signed by special counsel Courtney Haseley.
The Wells Fargo rejection letter was sent March 5 to Elizabeth Ising, a securities partner at Gibson, Dunn & Crutcher, who works closely with Willie White, senior counsel and assistant corporate secretary at Wells Fargo.
The Wells Fargo decision carried essentially the same wording. It was signed by special counsel Kasey Robinson.
Fugere said shareholders can see the problem with the risk of global warming impacting their holdings, “but the SEC is saying 'no, you may not raise these important issues.'“ She cited the Pacific Gas & Electric Co. wildfires in California, and the company's subsequent bankruptcy.
If the planet is to meet its global warming goals and avoid more climate catastrophes, Fugere said, “then it is critical that banks be a part of the solution.”
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