A frustrated Sierra Club is suing the SEC to see if the regulator is denying too many shareholder resolutions on climate change.
The lawsuit filed Thursday in U.S. District Court in Oakland, Calif., is asking the court to force the Securities and Exchange Commission to respond to a Freedom of Information Act request for records related to what the grassroots environmental organization claims is a "drastic increase" in SEC decisions allowing companies to omit climate-related shareholder resolutions from proxy statements.
"Since President Donald Trump took office, the SEC has increasingly allowed companies to exclude shareholder proposals aimed at curbing global warming and adopting environmental standards. In effect, the SEC has quietly allowed companies to kill such proposals before they can even be presented for a shareholder vote," the lawsuit claims.
The FOIA was filed April 29 and the SEC was required to respond by May 17. Instead, the SEC on June 25 informed Sierra Club that the request was being placed on a "complex track," which allows for several years before a review begins.
The lawsuit also takes issue with SEC legal guidance issued in November 2017 clarifying the definition of "micromanagement" as a basis for excluding shareholder proposals. Following that, the SEC issued an "unprecedented" no-action letter regarding EOG Resources Inc.'s request to omit a resolution requiring the company to set a target to reduce its greenhouse gas emissions, and recently the SEC has "increasingly cited micromanagement to support its recent shareholder proposal no-action letters," the lawsuit alleges, citing 21 instances in 2019, up from 11 in the 2018 proxy season and fewer before that.
According to the Sierra Club, the SEC has allowed companies not to hold votes on at least 12 climate-related shareholder resolutions in the last 18 months, including one that, if passed, would have compelled Exxon to disclose emissions targets in line with the Paris Climate Agreement.
SEC officials declined to comment on the lawsuit.
Danielle Fugere, president of As You Sow, a nonprofit organization promoting environmental and social corporate responsibility through shareholder advocacy, applauded the Sierra Club lawsuit.
"We do think it's important to understand what is driving the SEC, especially when it comes to climate, (which) is one of the most important issues to shareholders right now," Ms. Fugere said in an interview. "When the SEC won't allow these resolutions, that is troubling to us. Last year was very difficult and this year there is even further concern."