Vanguard is one of the world’s largest asset managers, handling the retirement savings of millions of Americans. Its mission is to help people save for the future. At the same time, it’s playing a major role directing billions in funding to carbon polluters — companies maintaining and expanding the fossil fuel infrastructure that threatens to make the future uninhabitable.Fossil fuel stock prices are based on oil reserves that will not actually be burnable if we expect to avoid catastrophic effects due to climate change. Countries are already moving to restrict emissions and transition to clean energy alternatives. Money invested in fossil fuel infrastructure is likely to become ‘stranded assets’….Vanguard is behind the curve with only one socially responsible portfolio. That’s the Vanguard FTSE Social Index Fund, and with holdings in ConocoPhillips, Kinder Morgan, and other large oil companies, it’s hardly fossil free. But it’s the only mutual fund Vanguard offers with a responsible investing mandate.
BlackRock Inc., the world’s biggest asset manager, is telling companies that now is the time to start reporting clear information on climate risk to their businesses.
The firm, which oversees almost $6 trillion in assets, sent letters from its corporate-governance team to about 120 companies this week, urging them to report climate dangers in line with the recommendations of the Financial Stability Board’s Task Force on Climate-related Financial Disclosures, set up by Bank of England Governor Mark Carney. The letters were sent globally to BlackRock holdings with “material climate risk inherent in their business operations,” such as those in the energy, transportation and industrial sectors, according to a copy seen by Bloomberg. They were signed by Michelle Edkins, the firm’s global head of investment stewardship.
API has gone beyond the lobbying typical of trade associations, helping spawn permanent substructures within the executive branch that ensure its voice is heard. These government entities, which include the petroleum council and an obscure but powerful White House office, have for decades worked in tandem with API to fortify the oil and gas industry, often, its critics say, at the public’s expense.
API’s history on climate issues goes back farther than most realize. As early as 1959, it grappled with global warming, hosting a conference where the looming, manmade catastrophe was discussed. As the environmental movement was blossoming, API – with the government’s support – was working behind the scenes to undermine it by distorting projections of regulatory costs. An enduring false narrative was constructed: the economy or the environment.
For nearly a century, API has enjoyed special access to the executive branch, furtively shaping policy from the inside. Now, under Donald Trump, the industry smells victory on multiple fronts with a White House that openly detests regulation as much as it does. Days before Trump’s inauguration, API president Jack Gerard heralded the “once-in-a-generation opportunity” to reshape energy policy.
Fifty-two environmental rules have since been overturned or are in the process of being rolled back. API has publicly supported at least 23 of these actions. In May, the institute also sent a 25-page wish list to the US Environmental Protection Agency. Among the items it wants reconsidered: tougher standards for ozone – the main ingredient in smog – and regulation of methane, a greenhouse gas that is far more potent than carbon dioxide.
ExxonMobil, the US energy giant, has bowed to shareholder pressure and will publish a report on the impact of climate change on the company’s business.In a regulatory statement made yesterday, Exxon said the board had reconsidered a proposal from the New York State Common Retirement Fund, and will push ahead with a climate change statement.
Exxon said: “Consistent with ExxonMobil’s corporate governance guidelines, the company’s board of directors has reconsidered the proposal requesting a report on impacts of climate change policies (Item 12) that the New York State Common Retirement Fund submitted for the 2017 annual shareholders meeting.
“In reconsidering the proposal, the company sought input from a number of parties, such as the proponents and major shareholders. As such, the board has decided to further enhance the company’s disclosures consistent with the Item 12 proposal and will seek to issue these disclosures in the near future. These enhancements will include energy demand sensitivities, implications of two degree Celsius scenarios, and positioning for a lower-carbon future.”
Another step in corporate statesmanship on climate change — and separation from ALEC:
Exxon Mobil Corp. is coming out against an American Legislative Exchange Council (ALEC) proposal that would push the Trump administration to rescind a federal finding that greenhouse gases are harmful.ExxonMobil is the country’s largest oil and natural gas company and a member of the ALEC task force planning to vote on the resolution Wednesday.
ALEC’s draft resolution goes after the Obama administration’s 2009 endangerment finding at the Environmental Protection Agency (EPA), which requires the EPA to take actions under the Clean Air Act to restrict greenhouse gas emissions. That finding served as a lynchpin for climate regulations under former President Barack Obama.
ALEC’s resolution calls the Obama administration finding “flawed,” specifically taking issue with the science that it cited, and calls upon the EPA to “reopen and review” it.
“As has been previously communicated to ALEC, we are concerned by the language of the resolution, especially relating to climate science, and do not support the resolution,” Kenneth Freeman, ExxonMobil’s manager of United States government relations, wrote in the Monday letter to ALEC’s energy, environment and agriculture task force.
“ExxonMobil will continue to oppose the resolution and will vote against it should it come before the taskforce or the board.
”ExxonMobil’s public dissent is part of a broader rift that the climate resolution is exposing within ALEC, a group funded by organizations like Koch Industries Inc. and coal miner Peabody Energy Corp., which pushes conservative policies in the state and federal governments.
Board self-governance is an issue that WomenCorporateDirectors (WCD) and Pearl Meyer explored in a recent report, The Visionary Board at Work: Developing a Culture of Leadership.
For this report, WCD and Pearl Meyer conducted in-depth interviews with more than two-dozen global directors, who formed our WCD Thought Leadership Commission, and conducted a survey of board members from US and multinational companies. A picture emerged of the typical processes by which boards currently evaluate and govern themselves and how, for some boards, this is shifting.
For most companies, the focus to date on board “health” has been on the board’s authority and how it functions. In recent years, boards have made great strides in formalising processes and defining “good governance” as it applies to their company and mission—a path influenced by stronger regulatory pressures and greater media and public scrutiny. But the next stage in the board’s evolution is a concentration on how board members interact among themselves and with management, and how those interactions influence decision-making…..As a normal course of regular business, many boards are adopting formal annual outreach campaigns with shareholders to discuss company strategy and compensation programmes. At the same time, some boards also solicit feedback on overall corporate governance matters as well as the shareholders’ view on the board’s effectiveness. By expanding the concept of “good governance” to one of good self-governance, boards today can inspire even greater confidence, and be on firmer footing for the tough decisions and disruptive times that are inevitable.
Should the investment arm of one sovereign nation be using its financial muscle to influence salary policies in other sovereign nations, setting principles which then guide how it votes in particular examples?
It isn’t surprising that he gets the wrong answer, calling the sovereign wealth fund’s votes against excessive compensation “mission creep.” He’s asking the wrong question. It should be: “Should a major shareholders who is a sophisticated institutional investor have the right to exercise its independent judgement on matters legally required to be put to a shareholder vote?”
The answer is yes. That is what capitalism means. A provider of capital has certain rights granted to ensure confidence in the markets through transparency, accountability, and structural limits on conflicts of interest. To put it another way, who is in a better position to evaluate CEO pay, the board members selected by, paid by, and informed by the CEO him or herself or a fiduciary shareholder obligated to deploy its resources to maximize returns for its beneficial owners?
Gilbert presents no evidence that these actions are taken for any reason other than the creation of shareholder value, a case he cannot make for the design of most CEO pay plans. On the contrary, he quotes the fund’s policy approvingly, noting that
it would back remuneration policies that are “driven by long-term value creation and aligns CEO and shareholder interests.” Pay packages should be transparent, pension entitlements should be only “a minor part” of total packages, while a “substantial proportion” should be in the form of equity that’s locked in for “at least five and preferably 10 years.”
His objection is Norges’ conclusion that its efforts should “moderate pay levels in the longer term.” Of course, he has no basis for arguing that this goal, even if achieved, would be anything other than beneficial to shareholders.
The Financial Industry Regulatory Authority fined J.P. Morgan Securities, LLC $1.25 million for failing to conduct proper background checks on 8,600 new employees from 2009-2017. J.P. Morgan’s due diligence failures involved 95 percent of the firm’s “non-registered associated persons.”
Forbes’ Christopher Skroupa interviewed Charles Elson of the University of Delaware’s John L. Weinberg Center for Corporate Governance about what we can expect in next year’s proxy season:
I think you’re going to see a lot more direct involvement between shareholders and directors than before – whether it’s with a non-executive chair of the board, or head of the governance committee, I think there is a real desire on the shareholder side to directly engage with the party who directly represents them, the director, rather than simply engaging with management.
I believe you’re going to see more calls for discussions, obviously subject to the requirements of Regulation Fair Disclosure, but, ultimately, much more engagement. My suspicion is that, from the board’s perspective, it will be more of a listening and awareness exercise, as opposed to discussions, because the law is very strict on what kind of conversations can take place.
For a director, listening carefully to the concerns of investors saves the directors a lot of trouble down the road. Even more importantly, it helps them better analyze management’s actions at the companies which they oversee…[Boards are] going to have to listen to the concerns that the activists express. It’s not the messenger, it’s the message that’s important here. Companies need to become responsive to the message that the activist is carrying. If everything was going beautifully, the activist would never show up.
VEA Vice Chair Nell Minow returned to the Motley Fool Money podcast to discuss corporate governance, including how boards should handle sexual harassment complaints.