Sustainable Finance Newsletter - On China, 2 early wins for conservatives

Jan 10 (Reuters) - While most U.S. companies' annual shareholder meetings are months away, it is high season for jockeying over what ballot items will appear on corporate proxy statements. The bureaucratic arguments take place before the U.S. Securities and Exchange Commission, with scores of companies each year seeking permission to skip proposed shareholder votes. Traditionally, many of these items were filed by investor activists pushing companies to take more consideration of environmental, social and governance (ESG) factors. On Jan. 3 for instance the SEC sided with a labor group pushing companies to report on their use of artificial intelligence software.

In recent years conservative organizations have brought forward more resolutions to counter what they see as executives' liberal excesses. With some SEC decisions now out, this seemed a good time to look at conservatives' plans for 2024. In addition to this week's main story below, I've included links to our coverage of topics such as the resignation of Harvard's president. And, shipping companies are growing cautious about Houthi attacks on vessels in the Red Sea. Feel free to connect with me on LinkedIn. Or, if you have a news tip, potential content, or general thoughts feel free to email me at ross.kerber@thomsonreuters.com

This week's most-read

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Harvard President Gay resigns after rocky testimony, plagiarism allegations

On China, early wins for conservative activists The SEC rejected Apple's bids to skip shareholder votes on two measures tied to the iPhone maker's record on human rights in China, setting up new tests for conservative-leaning activists who usually win little support from investors. Groups including the National Legal and Policy Center, the National Center for Public Policy Research and the Alliance Defending Freedom have worked to put a growing number of resolutions on company ballots. But their calls for things like corporate reports on transgender care or the costs of diversity programs generally earn only single-digit support, a fraction of the backing for proposals for things like lower emissions or workforce diversity reports.

Jeremy Tedesco, senior counsel for the Alliance Defending Freedom, said the pattern shows a groupthink among big asset managers and proxy advisers who "have lost sight of their fiduciary responsibility to investors." He added that "There's a whole system biased against these proposals."

Last year Tedesco's group assisted shareholders who filed resolutions with five financial companies aimed at addressing concerns they had withdrawn banking services from individuals over political speech. None got more than 2.3% support of votes cast.

This year Tedesco said he hopes for more backing on matters like a resolution at Apple filed by the American Family Association, which his group represents. The resolution calls for Apple’s board to review procedures like how it manages "disputes between government interests and user rights." It cites the reported removal of reading apps from the company’s App Store in China at the request of authorities. Apple declined to comment. A few resolutions from conservatives have done well in the past, such as 37% support for a call for a human rights report at Walt Disney in 2022, according to a review by the Sustainable Investments Institute, which provides research to institutional investors about ESG proposals.

But the institute's executive director Heidi Welsh said most investors focus their attention elsewhere. “Investors don't think any of the culture-war issue being raised by the anti-ESG groups are relevant to business,” she said. Regulators rejected Apple’s argument that its disclosures already provide the information the American Family resolution seeks. The SEC also turned down Apple's requests to skip another vote, on a resolution calling for it to report how its human rights declarations square with things like its restrictions of news apps during protests in China. The second resolution was brought by the National Legal and Policy Center, a Washington D.C.-based nonprofit which also filed the 2022 resolution at Disney. Paul Chesser, who directs the Center's "Corporate Integrity Project," said he doesn't expect any the 28 or so resolutions it will file this year to win majority support.

But they will help push companies to avoid divisive issues, he said. He noted how big fund firms like BlackRock and Vanguard have already reduced their support for some ESG matters and cited cases like the blowback facing brewer Anheuser-Busch Inbev over a promotion with a transgender influencer. “Companies respond to the squeaky wheel, so now we’re providing a way for companies to go back to doing what they should be doing,” Chesser said.

Company News The U.S. Supreme Court declined to hear a bid by Exxon, Koch Industries and a trade group to move the state of Minnesota's lawsuit accusing them of worsening climate change out of state court and into federal court, the energy industry's favored venue.

Endeavour Mining removed CEO Sebastien de Montessus, citing "serious misconduct." The action followed a board investigation into an irregular payment instruction of $5.9 million he issued in relation to an asset disposal by the company.

Oil and fuel tanker traffic in the Red Sea was stable in December, even though many container ships have rerouted due to attacks by Iran-aligned Houthi militants, a Reuters analysis of vessel tracking data showed.

On my radar On Jan. 5 a federal judge rejected a bid to dismiss a Wall Street trade group's suit against a new Missouri rule meant to curb the use of ESG investment considerations. The decision allows the case to continue against part of a Republican effort to advance an "anti-woke" business agenda. On Jan. 5 the Federal Energy Regulatory Commission turned down a request from Republican attorneys general to rehear an authorization it granted BlackRock. But commissioner Mark Christie invited the group to submit their views as part of a broader review FERC began last month of investment firms' utility holdings. (Reporting by Ross Kerber; Editing by David Gregorio)