Activist investors put climate-change issue up for vote at bank
Activist investors have succeeded for the first time in placing a shareholder resolution on the risks of greenhouse-gas emissions up for a vote at a major bank, a step toward making climate change an important consideration for corporations.
The resolution, which follows years of protests over banks financing certain coal operations, is to be included in proxy material being sent to shareholders of PNC Financial Services Group of Pittsburgh before the bank’s April 23 annual meeting.
It asks PNC to assess and report back to shareholders on how its lending results in greenhouse gas emissions that can alter the climate, posing financial risks for its corporate borrowers and risks to its own reputation.
PNC is the only major bank based in Appalachia, a region where coal and gas extraction is a major business. It has long lent to mining companies, including those engaged in mountaintop removal, which involves blowing up peaks to reach coal seams below and has been blamed for degrading landscapes, destroying habitat and polluting streams.
In recent years, PNC has cultivated an environmentally friendly image, building energy-conserving branches, making loans for solar projects and offering incentives to small businesses to protect the environment.
The backers of the resolution said, however, that PNC had offered only vague responses to the risks posed by climate change. What’s more, they said, the bank reneged on a promise made in 2011 not to extend credit to individual mountaintop removal projects or to mining companies that receive the bulk of their production from the controversial process.
“As a result, it is the focus of a consumer boycott,” the shareholder resolution says, adding: “PNC has ignored investors’ requests to provide information detailing its [mountaintop removal] policy implementation or the lending impacts of this policy.”
PNC spokesman Frederick Solomon declined to comment on the resolution, saying the bank’s board would respond in due time.
The sponsors of the resolution include Quaker and Roman Catholic groups and mutual funds focused on investments they deem to be socially responsible, including Domini Social Investments, Walden Asset Management and Boston Common Asset Management.
In the mid-2000s, the Securities and Exchange Commission excluded similar resolutions at banks and insurers, holding that they concerned “ordinary business” at the financial firms, said Meredith Benton, a portfolio manager at Boston Common.
But in 2010 the SEC issued guidance saying corporations should disclose to shareholders the potential effect of climate change on their business and their strategies for dealing with the risks. The agency said the issue had become a topic of intense public discussion and a target for national and international regulation.
As this year’s annual meeting season approaches, numerous corporations have shareholder resolutions focusing on sustainability and climate change, along with hot-button social and environmental topics such as sexual orientation, lobbying and political contributions and genetically modified food ingredients.
But most other companies facing climate change resolutions this year are directly involved with carbon energy production: oil giants Chevron Corp. and Exxon Mobil Corp. and coal producer Alpha Natural Resources Inc.
PNC had asked the SEC to bar the climate change resolution on grounds that lending and investing were part of its day-to-day business, but the SEC declined.
“In arriving at this position, we note that the proposal focuses on the significant policy issue of climate change,” the SEC said in a letter to George P. Long III, PNC’s chief governance lawyer. “Accordingly, we do not believe that PNC may omit the proposal from its proxy materials.”
SEC spokesman John Nester said the decision does not mean every financial company must consider the issue of climate change. The ruling was based on the particular facts of PNC’s case, he said, including the nature of the bank’s lending criteria and public statements, which demonstrated a “meaningful relationship” between climate change and its operations.
Many activist stockholders have become less confrontational over the years, holding discussions with corporations over social and economic issues instead of filing shareholder resolutions, said Laura Berry, executive director of the Interfaith Center on Corporate Responsibility in New York.
The center, a 41-year-old coalition of activist investors, said its members have filed 180 shareholder resolutions while engaging in 225 “corporate dialogues” this proxy season.
“Filing a proposal can appear to be confrontational and can lead to all sorts of interactions — some more effective than others,” Berry said. “Withdrawing a proposal is often viewed as a sign progress is being made.”
In the case of climate change and banks, that potentially could take place — not at PNC but at JPMorgan Chase & Co., said Benton, the Boston Common portfolio manager.
The sponsors of the PNC resolution have proposed a similar shareholder vote at JPMorgan Chase but may withdraw it after discussions with a team of employees focused on climate change at the New York bank “who have real chops and are working on these issues,” Benton said.
By contrast, she said, discussions with PNC turned up no evidence of a “holistic response” to climate change issues. And despite the bank’s pledge to cut back lending for mountaintop removal projects, she said, “they haven’t changed their practices in any way.”
