Major U.S. banks who looked to the Securities and Exchange Commission to allow for excluding shareholder proposals with requests to disclose banks’ climate change planning and exposures were turned down by the agency. The SEC ruled that financial institutions must put the submissions to a vote, according to the agency’s no-action request database.
Banks looking to leverage the SEC’s no-action process to dodge shareholder proposals on indigenous rights have also been unsuccessful, so far. Historically, companies that are looking to have shareholder proposals excluded from the proxy ballot approach the agency, which frequently provides relief.
All of the banks’ no-action requests were filed between December and January, and the agency has provided responses to the majority of their requests over the past few weeks.
The failures to have the proposals excluded come despite the change in agency leadership and updates to the staff bulletin that governs the process. The decisions also follow a year where the agency, under the prior administration, had increased the number of proposals it deemed excludable due to their proposed “micromanagement” of company boards.
The climate-related no-action requests came from four banks — Bank of America, Goldman Sachs, Morgan Stanley and Wells Fargo — who were looking to avoid a proposal to disclose their clean energy supply ratios. So far the SEC has denied Bank of America, Goldman Sachs and Wells Fargo’s attempts to exclude the proposals over the past two weeks. Morgan Stanley has not yet received a response on the issue.
The energy supply ratio proposals were submitted by New York City Comptroller Brad Lander to the banks for the second year in a row. Citigroup, JPMorgan Chase and Royal Bank of Canada agreed to the proposal last year while it failed to garner more than 29% support at any of the other banks’ annual board meetings.
Goldman Sachs’ no-action letter said Lander’s request — which asked that banks disclose their funding ratios of low-carbon energy to fossil fuels — seeks to micromanage their operations. The letters from Bank of America, Morgan Stanley and Wells Fargo additionally allege that the proposals seek to influence “ordinary business operations.” The banks argued they should be allowed to exclude the request under Rule 14a-8, which governs the no-action process.
Each of the banks took exception to the fact that the proposal detailed a specific method of disclosure, which the financial institutions viewed as micromanagement, according to the no-action letters.
However, the SEC disagreed and told the banks it is “unable to concur” with the opinion that the proposals are excludable. The agency told BofA, Goldman Sachs and Wells Fargo that it does not view the proposal as seeking to micromanage.
“In our view, based on the information you have presented, the Company has not demonstrated that the Proposal relates to its ordinary business operations,” the agency told Bank of America and Wells Fargo. “In addition, in our view, the Proposal does not seek to micromanage the Company.”
A January report from BloombergNEF found that global banks improved their clean energy financing ratios last year, but the sector is still far off the pace required to hit net-zero emissions.
While JPMorgan has already adopted and disclosed its clean energy supply ratio, it still awaits a decision on whether it will be allowed to exclude a shareholder proposal requesting the bank annually disclose its net-zero activities. That proposal also asked JPMorgan to disclose any memberships in net-zero groups, and any corporate commitments, activities and transactions involving net-zero goals or policies.
The bank argued it has already "substantially implemented” the proposal, which it also views as dealing with the company’s ordinary business operations.
“As demonstrated by [JPMorgan’s] existing public disclosures … the Company already discloses its net zero activities,” the no-action letter said. “Therefore, the Company has satisfied the Proposal’s essential objective and its existing disclosures regarding its net zero activities compare favorably with the Proposal’s request.”
Indigenous Peoples’ rights proposals survive
The SEC also ruled last week that Citi and Wells Fargo must also hold votes on proposals that focus on the effectiveness of their indigenous rights policies. Both banks also faced votes on the topic during last year’s proxy season, with investors modestly supporting.
Citi had argued in its December no-action request letter that it had already met the conditions of the resolution, proposed by a group of investor nuns, when it released a report on its Indigenous Peoples’ rights practices last year. However, the agency said in its March 7 response that “based on the information [Citi] presented, it appears that the Company’s public disclosures do not substantially implement the Proposal.”
Wells Fargo, meanwhile, argued that it should be allowed to exclude the proposal because of an update to the staff bulletin that governs the no-action process. The SEC, under Acting Chair Mark Uyeda, issued an update last month that reinstated prior guidance which said the agency will determine the excludability of an issue, in part, based on how economically significant the portion of the business affected by the proposal is, according to an analysis by law firm White & Case.
Wells Fargo had argued that the proposal pertained to a portion of the business that accounted for less than 5% of its total assets, net earnings and gross sales — the threshold set by Uyeda’s February update — and should be excludable.
“The Proposal requests a report on the effectiveness of [Wells Fargo’s] policies, practices, and performance indicators in respecting Indigenous Peoples’ rights in its existing and proposed general corporate and project financing,” the bank said. “The Company’s general corporate and project financing activities where the Company can identify that use of proceeds may potentially impact Indigenous Peoples represent a narrow subset of the Company’s general business operations.”
The SEC said it was “unable to concur” with that view in the agency’s March 5 response.
Sister Susan Francois, lead filer of the Citi resolution and a member of the Sisters of St. Joseph of Peace, said in an emailed statement to ESG Dive Monday that “it’s important that investors have their say and express their views” on Indigenous People’s rights.
“We are delighted that the SEC has backed shareholders and allowed the vote to go ahead on our resolution, which aims to assess the bank’s effectiveness in mitigating risk to investors when it comes to the impacts on Indigenous Peoples and their lands,” Francois said.
Despite Citi and Wells Fargo failure to get Indigenous rights proposals excluded, JPMorgan submitted a no-action letter on March 7 seeking to exclude a similar proposal. The bank argued that the Indigenous Peoples’ rights proposal submitted by the United Church Funds has already been substantially implemented, and it deals with matters related to JPMorgan’s ordinary business operations.
Last year, 30% of JPMorgan’s shareholders voted to support a proposal requiring such disclosures.
