Sustainable Finance Newsletter - On China, 2 early wins for conservatives

Evergreen Marine Taiwan

10/01/2024 17:59

By Ross Kerber
       Jan 10 (Reuters) - While most U.S. companies' annual
shareholder meetings are months away, it is high season for
jockeying over what ballot items will appear on corporate proxy
statements. The bureaucratic arguments take place before the
U.S. Securities and Exchange Commission, with scores of
companies each year seeking permission to skip proposed
shareholder votes.

Traditionally, many of these items were filed by investor
activists pushing companies to take more consideration of
environmental, social and governance (ESG) factors. On Jan. 3 
for instance the SEC sided with a labor group pushing companies
to report on their use of artificial intelligence software.
    
In recent years conservative organizations have brought forward
more resolutions to counter what they see as executives' liberal
excesses.

With some SEC decisions now out, this seemed a good time to look
at conservatives' plans for 2024. In addition to this week's
main story below, I've included links to our coverage of topics
such as the resignation of Harvard's president. And, shipping
companies are growing cautious about Houthi attacks on vessels
in the Red Sea. 
   
Feel free to connect with me on LinkedIn. Or, if you have a news
tip, potential content, or general thoughts feel free to email
me at ross.kerber@thomsonreuters.com

    This week's most-read
  
    Libya's NOC declares force majeure at Sharara oilfield
  
    Green backlash will spread to European Parliament
  
    Harvard President Gay resigns after rocky testimony,
plagiarism allegations
  
    
    On China, early wins for conservative activists
  
The SEC rejected Apple's bids to skip shareholder votes on two
measures tied to the iPhone maker's record on human rights in
China, setting up new tests for conservative-leaning activists
who usually win little support from investors.

Groups including the National Legal and Policy Center, the
National Center for Public Policy Research and the Alliance
Defending Freedom have worked to put a growing number of
resolutions on company ballots. 

But their calls for things like corporate reports on transgender
care or the costs of diversity programs generally earn only
single-digit support, a fraction of the backing for proposals
for things like lower emissions or workforce diversity reports.
        
  
Jeremy Tedesco, senior counsel for the Alliance Defending
Freedom, said the pattern shows a groupthink among big asset
managers and proxy advisers who "have lost sight of their
fiduciary responsibility to investors." He added that "There's a
whole system biased against these proposals."
    
Last year Tedesco's group assisted shareholders who filed
resolutions with five financial companies aimed at addressing
concerns they had withdrawn banking services from individuals
over political speech. None got more than 2.3% support of votes
cast. 
    
This year Tedesco said he hopes for more backing on matters like
a resolution at Apple filed by the American Family Association,
which his group represents.

The resolution calls for Apple’s board to review procedures like
how it manages "disputes between government interests and user
rights." It cites the reported removal of reading apps from the
company’s App Store in China at the request of authorities. 
 
Apple declined to comment.

A few resolutions from conservatives have done well in the past,
such as 37% support for a call for a human rights report at Walt
Disney  DIS.N  in 2022, according to a review by the Sustainable
Investments Institute, which provides research to institutional
investors about ESG proposals.
    
But the institute's executive director Heidi Welsh said most
investors focus their attention elsewhere. “Investors don't
think any of the culture-war issue being raised by the anti-ESG
groups are relevant to business,” she said. 

Regulators rejected Apple’s argument that its disclosures
already provide the information the American Family resolution
seeks. The SEC also turned down Apple's requests to skip another
vote, on a resolution calling for it to report how its human
rights declarations square with things like its restrictions of
news apps during protests in China.

The second resolution was brought by the National Legal and
Policy Center, a Washington D.C.-based nonprofit which also
filed the 2022 resolution at Disney. Paul Chesser, who directs
the Center's "Corporate Integrity Project," said he doesn't
expect any the 28 or so resolutions it will file this year to
win majority support. 
    
But they will help push companies to avoid divisive issues, he
said. He noted how big fund firms like BlackRock and Vanguard
have already reduced their support for some ESG matters and
cited cases like the blowback facing brewer Anheuser-Busch Inbev
 ABI.BR  over a promotion with a transgender influencer.

“Companies respond to the squeaky wheel, so now we’re providing
a way for companies to go back to doing what they should be
doing,” Chesser said. 
     
    Company News    
The U.S. Supreme Court declined to hear a bid by Exxon  XOM.N ,
Koch Industries and a trade group to move the state of
Minnesota's lawsuit accusing them of worsening climate change
out of state court and into federal court, the energy industry's
favored venue.
    
Endeavour Mining  EDV.L  removed CEO Sebastien de Montessus,
citing "serious misconduct." The action followed a board
investigation into an irregular payment instruction of $5.9
million he issued in relation to an asset disposal by the
company.
    
Oil and fuel tanker traffic in the Red Sea was stable in
December, even though many container ships have rerouted due to
attacks by Iran-aligned Houthi militants, a Reuters analysis of
vessel tracking data showed.
              
    On my radar  
  
On Jan. 5 a federal judge rejected a bid to dismiss a Wall
Street trade group's suit against a new Missouri rule meant to
curb the use of ESG investment considerations. The decision
allows the case to continue against part of a Republican effort
to advance an "anti-woke" business agenda.

On Jan. 5 the Federal Energy Regulatory Commission turned down a
request from Republican attorneys general to rehear an
authorization it granted BlackRock. BLK.N  But commissioner Mark
Christie invited the group to submit their views as part of a
broader review FERC began last month of investment firms'
utility holdings.

 (Reporting by Ross Kerber; Editing by David Gregorio)
 ((ross.kerber@thomsonreuters.com; (617) 412 0093;))