The Securities and Exchange Commission (SEC) has issued a series of responses to “no action” requests by companies in relation to ESG shareholder proposals, creating a confusing picture of what is allowable under its new regime.
Following the US election, filers aired concerns that the SEC would be more likely to side with corporates on no-action requests for ESG proposals. Last month, the regulator issued Staff Legal Bulletin 14M (SLB14M) on the process, which reversed Biden era guidance.
Responses to this year’s no-action requests are therefore under scrutiny by filers keen to understand what is allowable in the new environment.
Among the resolutions given the nod by the SEC this month are energy supply ratio (ESR) proposals at Wells Fargo and Bank of America.
Put forward by the New York City Comptroller, the resolutions call on the banking giants to annually disclose ESRs, which are defined as total financing through equity and debt underwriting, as well as project finance, in low-carbon energy supply relative to that in fossil-fuel energy supply.
According to the filing, the disclosures should also describe the lenders’ methodology, including what they classify as “low carbon” or “fossil fuel”.
The Comptroller put forward similar resolutions at Bank of America, Citigroup, Goldman Sachs, Morgan Stanley, JPMorgan Chase and Royal Bank of Canada (RBC) last year.
The resolutions at JPMorgan Chase, Citigroup and RBC were withdrawn following commitments by the banks. At the AGMs of Bank of America, Goldman Sachs, and Morgan Stanley, the proposals secured 29 percent, 26 percent and 23 percent support, respectively.
This year, Wells Fargo and Bank of America had asked the SEC to keep resolutions kept off their ballots on the basis that they related to ordinary business operations and sought to micromanage them.
For 2025, the Comptroller has also filed at Goldman Sachs and Morgan Stanley.
SEC blocks 5% claims
The SEC also rejected Wells Fargo’s attempt to have two proposals “no actioned” using the recently reintroduced 5 percent threshold.
The rule, brought back in last month under Staff Legal Bulletin 14M, means companies can petition to have resolutions kept off their ballots if they relate to operations that account for less than 5 percent of the firm’s total assets, net earnings and gross sales, and are “not otherwise significantly related to the company’s business”.
One of the resolutions at Wells Fargo was filed by Harrington Investments. It called on the lender to undertake a congruency analysis between corporate values as defined by its stated policies, and contributions on electioneering and to any organisations dedicated to affecting public policy.
The analysis should include “a list of any such contributions occurring during the prior year misaligned with stated corporate values and stating the justification for such exceptions”, the resolution added.
In response to Wells Fargo’s no-action request, Sanford Lewis, attorney and director and founder of the Shareholder Rights Group, noted the rule provides that a proposal that does not meet the numerical thresholds may nonetheless not be excluded from a proxy statement if it is otherwise significantly related to the company’s business.
“Regardless of whether the designated activities of the company as described in the proposal exceed the 5 percent financial threshold, the risk posed to Wells Fargo from incongruent political contributions from its PAC as well as donations to organisations affecting public policy inconsistent with company values, especially in a time in which the company is in the midst of a reputational crisis, elevate the importance of these issues to the company,” he said.
The other proposal was put forward by a group of investors led by the American Baptist Home Mission Society. It requested Wells Fargo to issue a report outlining the effectiveness of its policies, practices and performance indicators in respecting internationally recognised human rights standards for indigenous peoples’ rights in its existing and proposed general corporate and project financing.
This proposal has already been filed at Wells Fargo three times. In 2024, it received 24.1 percent support, while in 2023 it was withdrawn for procedural reasons. When it went to vote in 2022, it received 25.9 percent support from shareholders.
The SEC has also sided with the New York State Common Retirement Fund on a proposal calling on Wells Fargo to prepare an annual public report “describing and quantifying the effectiveness and outcomes of Wells Fargo’s efforts to prevent harassment and discrimination against its protected classes of employees”.
The resolution is a re-filing. When it went to vote in 2024, it secured 28.5 percent support and received majority support from shareholders in 2023.
Worker rights proposal blocked
However, the SEC has sided with Wells Fargo regarding a worker rights proposal.
Like others, this was a refiling. Last year, it was supported by 30.6 percent of shareholders, while a similar resolution received 34 percent support in 2023.
Wells Fargo argued that the 2025 proposal related to ordinary business operations.
Worker rights proposals have been rising up the agenda for shareholders in recent proxy seasons. In 2024, 10 resolutions specifically focused on freedom of association were filed at firms including Delta Air Lines, Tesla, Amazon and Maximus.
The highest level of support was achieved at Warrior Met Coal, where AFL-CIO’s proposal urging an independent assessment of the metallurgical coal miner’s respect for freedom of association received backing from 46 percent of shareholders.
The SEC has also sided with BlackRock and Labcorp Holdings regarding lobbying proposals under the micromanagement argument.
Over the past decade, the few requests filed to block lobbying proposals have always been rejected by the SEC.
But on 29 November, just weeks after the US election, a lobbying resolution was successfully “no actioned” at Air Products and Chemicals.
With the latest round of no-action responses, the SEC has sided with 11 firms on lobbying proposals, with eight judgements published after the reinstatement of SLB 14M. All were disallowed under the micromanagement argument.
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