CLIMATE TSUNAMI – A flood of climate-related shareholder proposals are headed to a vote at some of the largest banks and insurers in the country. A friendly nudge by the Securities and Exchange Commission late last year made it harder for corporations to block investors from casting ballots on environmental, social and governance issues. Now, we’re seeing the result – with key votes scheduled through May. Proposals calling for an end to financing new fossil fuel projects are pending at Bank of America Corp., Citigroup Inc., Goldman Sachs Group Inc., JPMorgan Chase & Co., Wells Fargo & Co. and Morgan Stanley – all of which have signed on to the Net-Zero Banking Alliance. Chubb Ltd., the Travelers Cos., Berkshire Hathaway Inc. and the Hartford Financial Services Group Inc. – top property and casualty insurance firms – are facing similar requests. The requests cite a landmark International Energy Agency report that said a halt to new oil, gas or coal development is needed to limit global warming to 1.5 degrees Celsius above preindustrial levels – and avoid the worst effects of climate change. David Lynn, the former chief counsel of the SEC’s Division of Corporation Finance, said it’s “undeniable” that the new guidance had an impact. “A lot of issues around sustainability, climate change, human capital management – those are issues that it’s very difficult for the staff at SEC to somehow say that’s not a significant social policy issue right now. And they’re not inclined to say that,” he said. All the banks and insurers oppose the resolutions, arguing that they are already supporting a low-carbon economy through new investments in renewable energy and policies that restrict underwriting new coal plants and tar sands extraction, respectively. They contend that fossil fuels are needed during the transition and writing them off comes with enormous risks for the global economy. That argument wasn’t enough to convince the SEC that the shareholder proposals shouldn’t be heard. Last month, the agency rejected attempts by Citigroup, JP Morgan, Morgan Stanley, Chubb, Travelers and the Hartford to strike the requests from their proxy statements. “There is a sense of urgency on climate change and a sympathetic ear in the White House,” said Heidi Welsh , executive director of the Sustainable Investments Institute, which tracks environmental, social and governance proposals. “Also, the big enchilada – the Build Back Better agenda – is dead. So what else is going to cause action in the private sector to address climate change?" Two public pension funds are also weighing in. It’s the usual cast of characters, Lynn said, but they are big ones that wield influence: California and New York. The California Public Employees’ Retirement System is supporting the climate-focused proposals at Berkshire Hathaway, Inc. Meanwhile in New York, Comptroller Tom DiNapoli didn’t just back the climate proposals at the country’s six largest banks. He’s launched a get-out-the-vote effort among other shareholders to get these proposals across the finish line. His spokesperson, Matthew Sweeney, says the state’s pension fund will also support the proposals at insurance companies. Catherine and Jordan have the story. SHAREHOLDER ENGAGEMENT, PART 2 — Investor activists are taking their fossil fuel playbook and applying it to corporate water use and pollution. Environmental nonprofit Ceres has analyzed which industries are contributing most to water degradation (spoiler: it's food, beverage and livestock production) and is hoping to convene a "large tent of investors" to engage with them. Read more from Hannah Northey at POLITICO's E&E News. PART 3 — Some added momentum on the side of engagement versus divestment : A bill in the California legislature to make the state's pension funds divest from fossil fuel companies is facing headwinds after a key lawmaker said he would stay off today's committee vote, citing "a negative effect on the retirement systems' ability to engage with the energy companies." POLITICO's Colby Bermel has more.
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