SEC rule change stifles key risk signal, disenfranchises retail investors

October 5, 2020 by  
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SEC rule change stifles key risk signal, disenfranchises retail investors Sara Murphy Mon, 10/05/2020 – 02:00 The U.S. Securities and Exchange Commission (SEC) voted Sept. 23 to amend its shareholder proposal rule , effectively depriving most retail investors of the ability to use the process to protect and advance their interests. In so doing, the SEC is dampening an important risk signal to corporate management and investors, especially with respect to environmental, social and governance issues. The change appears to have been heavily influenced by a network of corporate oil and gas interests, and is likely to be contested in court. First, some background. Shareholders in publicly traded companies have the right to vote on certain corporate matters. As most people cannot attend companies’ annual meetings, corporations offer shareholders the option to cast a proxy vote by mail or electronic means. While most proposals originate with company management, a growing investor movement uses shareholder proposals or resolutions to promote more sustainable business practices. This is becoming increasingly difficult for corporate boards to ignore. This process is codified under SEC Rule 14a-8, and investors with an interest in environmental protection and social justice consider it a useful way to proactively and constructively engage with the companies in their portfolio. Risk and opportunity signals Over time, the shareholder resolution process has evolved to offer an additional benefit. “Shareholder proposals provide an early warning signal of risks and opportunities for management and boards,” said Heidi Welsh, executive director of the Sustainable Investments Institute (Si2). Shareholder proposals provide an early warning signal of risks and opportunities for management and boards. Si2 is a nonprofit organization that provides impartial research and analysis about corporate responsibility issues for institutional investors and maintains a rich database of information on shareholder resolutions, including support levels and the most detailed and precise issue taxonomy available in the marketplace. Si2’s data reveal that proponents were filing resolutions as far back as 2010 on issues that have risen to stark prominence in 2020 as the impacts of the COVID-19 pandemic and social unrest over racial inequality have rippled through the business world. For example, the number of shareholder resolutions related to decent work — addressing topics such as minority pay disparity and income inequality — has steadily increased over the last decade (see chart below). Data source: Si2 Note: The chart above includes resolutions that were withdrawn (usually by agreement between the company and the proponent) or omitted (usually after the company successfully challenged the resolution at the SEC on procedural grounds). Such resolutions, while not ultimately submitted to a vote, still provide risk and opportunity signals. Average shareholder support for these resolutions also has increased over the same period, as reflected in the chart below. Data source: Si2 Note: The chart above includes only resolutions that went to a vote. Process changes and impacts The SEC’s decision alters the shareholder resolution process in several significant ways, including by: Increasing the value of stock shareholders need to own before they can submit proposals if they haven’t been invested for three years; Eliminating shareholders’ longstanding practice of pooling their shares to meet filing thresholds; and Raising the level of support shareholders need to resubmit a proposal from the previous year. The ownership threshold changes are substantial. For investors who have held a company’s securities for one year, the previous ownership threshold was $2,000 — it is now $25,000. This bar becomes higher still now that the practice of pooling shares has been prohibited. The SEC’s own impact analysis — which it published long after the public comment period on these amendments had closed — estimated that at 55 percent of all companies, less than 5 percent of investor accounts would be eligible to file a shareholder proposal under the amended rule. At 99 percent of all companies, three-quarters of investor accounts would be unable to meet the new proposal submission thresholds. “The sheer racism of a $25,000 threshold for submission (no matter the holding period) in a country with a racial wealth gap like ours is stunning,” said Rick Alexander, co-founder of The Shareholder Commons (TSC), in a LinkedIn post. SEC Chairman Jay Clayton said in a press call that the amendments will modernize the shareholder proposal process to benefit all shareholders and public companies. “It’s all about having a credible demonstration that the proponent’s interests are aligned with all of the others’ interests from an investment or ownership standpoint,” Clayton said. SEC Commissioner Allison Herren Lee disagreed. “Today’s amendments do not serve shareholders or the capital markets more broadly,” Lee said in her statement of opposition . “They will have pronounced effects in two important respects. First, in connection with environmental, social and governance issues at a time when such issues — climate change, worker safety, racial injustice — have never been more important to long-term value. Second, in connection with smaller shareholders, Main Street investors, who will be dramatically disadvantaged by the changes we adopt today.” Industry support These outcomes appear to be part of the design. Bloomberg reporters Zachary Mider and Ben Elgin published an investigation in November 2019 that bolstered claims of a clandestine campaign by oil and gas interests to promote the rule amendments at the SEC. The investigation found evidence that a coalition of industry groups including the National Association of Manufacturers (NAM) — of which Exxon Mobil and Chevron are members — manipulated the public comment process to create the impression that droves of ordinary Americans passionately supported the rule revisions. The Business Roundtable (BRT) — a group that includes major companies such as Amazon, Wells Fargo and JPMorgan Chase — expressed its support for the rule changes, despite a statement its member companies signed late last year to redefine the purpose of a corporation to one that delivers value to all stakeholders, not just shareholders. It may be no coincidence that the 2020 proxy season featured shareholder resolutions at six BRT signatories that sought to pin down what the companies’ purported stakeholder focus meant in practice. For example, the resolutions asked Bank of America, Citigroup and Goldman Sachs to determine if the BRT statement “is reflected in our Company’s current governance documents, policies, long-term plans, goals, metrics and sustainability practices” and to publish their recommendations on “how any incongruities may be reconciled by changes to our Company’s governance documents, policies or practices.” The sheer racism of a $25,000 threshold for submission (no matter the holding period) in a country with a racial wealth gap like ours is stunning. A September analysis of BRT signatories found that they performed no better than their non-signatory counterparts on measures of stakeholder well-being related to the pandemic and social unrest over racial inequality. “The result [of the rule changes] will be fewer shareholder proposals,” said Amy Borrus, executive director of the Council of Institutional Investors, “and that is precisely the goal of the business lobby that pressed the SEC to make these changes. Simply put, CEOs and corporate directors do not like being second-guessed by shareholders on environmental, social and governance matters.” What happens next? The final rule amendments are slated to apply to any proposal that will go to a vote on or after Jan. 1, 2022. Many observers expect to see legal challenges that could forestall implementation. The outcome of the Nov. 3 election is also likely to influence the process considerably. Some stakeholders envision a more systemic shift. A September analysis by nonprofit organizations The Shareholder Commons and B Lab calls for comprehensive legislative and regulatory change to U.S. corporate and securities laws. The policy proposals revolve around a core concept: creating a legal structure that encourages the creation of “guardrails,” investor-sanctioned limits on corporate behavior that exploits vulnerable communities or common resources. The report proposes that the current amendments to Rule 14a-8 be reversed, and that the rule be further amended to clarify that proposals aimed at protecting social and environmental systems are proper matters for shareholders to bring before annual meetings. Such proposals would seem to be a necessary feature of our collective future, not our past. At a time when social and environmental stressors have an increasingly potent impact on the systems that support our economy, corporate accountability to a broad range of stakeholders is paramount. Pull Quote Shareholder proposals provide an early warning signal of risks and opportunities for management and boards. The sheer racism of a $25,000 threshold for submission (no matter the holding period) in a country with a racial wealth gap like ours is stunning. Topics Policy & Politics ESG Shareholder Activism Featured in featured block (1 article with image touted on the front page or elsewhere) Off Duration 0 Sponsored Article Off

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SEC rule change stifles key risk signal, disenfranchises retail investors

Seven ways to inform better decisions with TCFD reporting

September 28, 2020 by  
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Seven ways to inform better decisions with TCFD reporting Steven Bullock Mon, 09/28/2020 – 00:00 This article is sponsored by Trucost, part of S&P Global . The Task Force on Climate-related Financial Disclosures (TCFD) is helping to bring transparency to climate risk throughout capital markets, with the aim of making markets more efficient and economies more stable and resilient.  Many stakeholders are involved in the initiative, across corporations and financial institutions. Each can apply TCFD reporting intelligence to inform better decisions in different ways. Image of seven stakeholders; Source: Trucost, part of S&P Global. 1. Finance director: Developing a business case to increase capital expenditure on carbon-mitigation projects  A global manufacturing company wanted to undertake a carbon pricing risk assessment to understand the current and potential future financial implications of carbon regulation and related price increases on operating margins. The finance director felt the results could strengthen the business case for investment in low-carbon innovation at operational sites around the world. He used the carbon pricing risk assessment in Figure 1 to illustrate the differences the company might see in its operating margins under different climate change scenarios and highlight where investment in carbon-mitigation projects would matter most.  2. Purchasing manager: Minimizing supply chain disruption by identifying suppliers vulnerable to physical risks A global energy company wanted to undertake a physical risk assessment to understand the firm’s potential exposure to climate hazards, such as heatwaves, wildfires, droughts and sea-level rise that could lead to supply chain disruptions and increased operating costs for the business. The purchasing manager felt the results could help identify raw material suppliers that may be affected by these hazards and provide an opportunity to speak with them about steps they are taking to address these risks. As shown in Figure 2, a physical risk assessment can pinpoint vulnerable sites that could cause problems down the road.  3. Sustainability manager: Setting science-based targets for company greenhouse gas (GHG) emissions  A global beverage company wanted to quantify its carbon footprint for its own operations and global supply chain. The sustainability manager saw this as an excellent starting point to set science-based targets for a reduction in emissions, with the targets reflecting the Paris Agreement and carbon reduction plans for countries in which the company did business. As shown in Figure 3, targets could help the company understand the reduction in emissions needed to move to a low-carbon economy and enhance innovation. 4. Investor relations manager: Publishing a TCFD-aligned report  A large consumer goods company wanted to assess the firm’s climate-related risks and opportunities in accordance with the recommendations of the TCFD. Using four core elements — governance, strategy, risk management and metrics and targets — the TCFD assessment helps quantify the financial impacts of climate-related risks and opportunities. The investor relations team wanted to report these findings alongside traditional financial metrics to publicize that the company was taking steps to manage climate-related issues. To illustrate what could be done, the team pointed to the TCFD report shown in Figure 4 completed by S&P Global for its own operations.   5. Portfolio manager: Screening a portfolio for carbon earnings at risk using scenario analysis An asset management firm wanted to test its investment strategy by assessing the current ability of companies to absorb future carbon prices so its analysts could estimate potential earnings at risk. Integral to this analysis is the calculation of the Unpriced Carbon Cost (UCC), the difference between what a company pays for carbon today and what it may pay at a given future date based on its sector, operations and carbon price scenario. A portfolio manager wanted to use the findings, such as those shown in Figure 5, to report these estimates of financial risk to stakeholders and engage with portfolio constituents on their preparedness for policy changes and strategies for adaptation.  6. Chief investment officer (CIO): Using TCFD-aligned reporting as a way to engage asset managers on climate issues A large pension plan wanted to undertake a climate change alignment assessment of its global equity and bond portfolios to understand how in sync it was with the goals of the Paris Agreement, and where there could be potential future carbon risk exposure. The CIO wanted to publish the results and use the findings, such as those shown in Figure 6, to engage with the firm’s asset managers to determine how they were integrating climate risk into investment decisions. 7. Risk officer: Assessing exposure to climate-linked credit risk  A large commercial bank wanted to estimate the impact of a carbon tax on the credit risk of companies in their loan book. The Risk Officer felt this would add an important dimension to the assessment of creditworthiness. Figure 7 highlights the changes that might be seen in quantitatively derived credit scores for the materials sector under a fast-transition scenario. This shows a rapid increase in carbon tax, with companies reacting in various ways. Some invest in greener technology to meet the reduction targets in 2050 (green bars), while others do not invest and pay a high carbon tax or experience lost revenue resulting from bans on the use of certain materials (red bars). There are many more examples of how TCFD reporting is helping organizations inform better decision-making and capture new opportunities in the transition to a low-carbon economy.   Please visit spglobal.com/marketintelligence/tcfd or watch our on-demand webinar to learn more.   Topics Finance & Investing Risk & Resilience Sponsored Trucost, S&P Global Featured in featured block (1 article with image touted on the front page or elsewhere) Off Duration 0 Sponsored Article On Taking action to keep the world green; Source: Trucost, part of S&P Global.

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5 Recommendations When Building an Energy-Efficient House

June 12, 2019 by  
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There are two ways to create an energy-efficient house: Make … The post 5 Recommendations When Building an Energy-Efficient House appeared first on Earth911.com.

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Trump orders Perry to take steps to curb coal plant shutdowns

June 4, 2018 by  
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It seems President Donald Trump doesn’t want to let coal die. Bloomberg reported he ordered Secretary of Energy Rick Perry to take steps to stem closures of nuclear and coal power plants. An emailed statement from White House spokesperson Sarah Sanders read, “Impending retirements of fuel-secure power facilities are leading to a rapid depletion of a critical part of our nation’s energy mix and impacting the resilience of our power grid .” Coal and nuclear plants are losing money as cheaper renewable energies and natural gas gain steam. Trump’s administration alleges that declines in nuclear and coal power jeopardize America’s security. According to the White House statement, the president told Perry “to prepare immediate steps to stop the loss of these resources and looks forward to his recommendations.” The Department of Energy’s strategy, as detailed in a memo Bloomberg obtained , could be to draw on power given by federal laws to create a “strategic electric generation reserve” and compel grid operators to purchase power from plants that are at risk. The National Security Council was to meet last week to talk over the idea. Related: Biggest grid operator in US attacks Perry’s proposal to prop up coal One purpose of this draft plan, Bloomberg reported, is to buy time for a two-year study probing vulnerabilities in the country’s energy delivery system. Administration officials have already used up a year of this time. Following an Energy Department grid reliability study, Perry suggested a rule that would have compensated nuclear and coal plants — and federal regulators killed the proposal. Major grid operator PJM Interconnection said in a statement its grid “is more reliable than ever” and “there is no such need for any such drastic action.” The company said it has analyzed planned deactivations of nuclear stations and found no immediate threat to reliability. PJM said, “Any federal intervention in the market to order customers to buy electricity from specific power plants would be damaging to the markets and therefore costly to consumers.” Electric Power Supply Association president John Shelk said, “National security is being invoked by people who once favored markets. Everybody loses in a fuels war.” Via Bloomberg Images via Depositphotos (1, 2)

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Gorgeous barn is built of reclaimed, century-old oaks from the site itself

June 4, 2018 by  
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In 2017, Dutch design firm HilberinkBosch Architects found out that seven of their century-old oak trees were in ailing health and would need to be cut down. Instead of sending the oaks to the paper mill, the architects decided to try their hand at building a timber barn using traditional construction techniques. The result—called the Sixteen-Oak Barn—was a stunning success that combines modern and rustic features with large panels of glazing and untreated timbers. The idea for a barn came from the local building vernacular in the Dutch region of Meierij van ‘s-Hertogenbosch, which features gabled farmhouses traditionally built from locally available materials . In a design the architects describe as “haphazard aesthetics,” the Sixteen-Oak Barn was constructed of the locally felled, century-old oak trees in addition to a couple of oaks sourced from the nearby Wamberg estate. The barn comprises a carport, storage room, and a workshop / meeting room for office use. There is also an addition loft space located above the storage room. A mobile sawmill brought on-site was used to cut the core sections of the felled oak tree trunks into structural timber for the frames, roof, and siding. The transverse-frame barn involves tie rod trusses and roof rafters to hold up an asymmetrical shingled roof clad in cleaved soft sapwood. Stanchions with bark serve as solar fins to shield the glazed facade from unwanted solar heat gain. Board-formed concrete complements the timber palette indoors. Leftover timber was chopped and stored as firewood in the barn’s recessed north facade. Related: Traditional barn raising techniques bring a modern cost-effective farm to life “The barn’s aesthetics have been strongly influenced by coincidence,” wrote the architects. “It lends this contemporary building a vital expression that merges old and new in a wonderful and extraordinary way. Untreated timber, concrete and glass have been intermingled in various ways. The irregular dimensions of the wood used to build the formwork resulted in far from perfect concrete surfaces.” + HilberinkBosch architects Images by René de Wit

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Gorgeous barn is built of reclaimed, century-old oaks from the site itself

Task Force Releases Recommendations for Safe Nuclear Power Production in the US

July 13, 2011 by  
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A special task force of the US Nuclear Regulatory Commission , brought together after the Fukushima Daiichi nuclear disaster in Japan, has just released their recommendations for the continued production of nuclear power in the United States in a safe manner. The task force was asked to look at how the disaster in Japan relates to the state of nuclear power production in the United States, and if the government requires further safety improvements of plants to help prevent a similar incident. The task force returned to the Nuclear Regulatory Commission with a laundry list of measures needed to prevent a future disaster. Read the rest of Task Force Releases Recommendations for Safe Nuclear Power Production in the US Permalink | Add to del.icio.us | digg Post tags: “clean energy” , green energy , new nuclear regulations , nuclear laws , nuclear power , nuclear power plant , nuclear reactor , nuclear regulations , safe energy , tighter nuclear power regulations , us nuclear power

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