ANALYSIS: Investors Wield Proposals Amid Climate Rule Lawsuits

Some investors consider a company’s material environmental risks when deciding how to vote on their proxy ballot—a major reason why the SEC created the climate rule.

But the rule is currently facing a number of challenges in the Eighth Circuit, and its future is unclear.

Still, even if the Eighth Circuit ultimately strikes down the rule—nothing is clear at this point—companies aren’t off the hook for providing information on their environmental impacts. Shareholders are increasingly requesting companies to produce reports detailing their climate change impacts and emissions.

The number of shareholder proposals on climate change risks and methane/greenhouse gas (GHG) emissions included in definitive proxy statements rose from 21 proposals in 2021 to 80 proposals in 2023, according to Bloomberg data.

And shareholder interest in these topics doesn’t show signs of slowing down. Companies have already included 46 shareholder proposals on climate change risk and methane/GHG emissions in their definitive proxy statements filed this year.

Given this high number of proposals so early in proxy season and the fact that May and June are the most popular months for annual meetings, it’s highly likely that 2024 will rival, if not surpass, 2023’s numbers.

Shareholders Target Familiar Sectors

With the increase in these shareholder proposals, how are they spread across sectors?

From 2019 to 2023, companies in five sectors accounted for at least 70% of the climate change risk and methane/GHG proposals included in definitive proxy statements: financials, energy, industrials, consumer discretionary, and consumer staples.

And year-to-date data suggests that shareholders are continuing to target these sectors, which currently account for 83% of the companies that have included these types shareholder proposals in their definitive proxy statements.

Some shareholders are likely looking for additional information on the environmental impacts of companies in these sectors due to their investment practices, carbon-intensive operations, and complex supply chains (as applicable).

Ultimately, shareholders aren’t waiting for the Eighth Circuit to reach a decision on the SEC’s climate rule to get information on their investments’ environmental impacts. And the usual sectors are likely to be particularly vulnerable to shareholder action.

Bloomberg Law subscribers can find related content on our ESG Practice page, as well as our Practical Guidance: Shareholders and Practical Guidance: Proxy Regulation pages. Data accessible at BI PROXY <GO>.

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