Companies Face Higher Costs to Report Climate Risks (Newsletter 6/25)

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Investor Updates

Companies Pressed to Share Environmental Data

As the SEC is reviewing public comments on what climate-related regulations should entail, investors argue that current reporting from companies that disclose data is complex and fragmented. While greenhouse gas emissions is one category commonly sought after, additional environmental information can be material to investors, depending on a company’s operations. Currently, about 80% of companies in the S&P 500 disclose some carbon emissions data. Another topic in question is the frequency of reporting climate risks. As companies are facing higher costs to respond to the impacts that climate change could have on their business, many believe the data should be issued annually at most, due to the time and resources needed for the data collection and reporting.

In an effort to obtain more comparable data, 168 investors with $17 trillion AUM have joined CDP’s 2021 Non-Disclosure Campaign asking companies that have never disclosed or have stopped disclosing through CDP to report environmental data to the non-for-profit organization. The number of investors participating in the campaign is up 56% from last year. Over 1,300 companies have been engaged, including Alibaba Group, Netflix, Boeing Company, and Conoco Philips, among others.

BlackRock Launches Active Thematic Funds

BlackRock announced two new funds focused on long-term sustainability within the healthcare and consumer sectors.

  • The BGF Next Generation Health Care Fund seeks growth opportunities in micro-, small-, and mid-cap companies. The themes include genetic medicine, next-generation diagnostics, immunotherapy, robotic-assisted surgery, biosensors & trackers, medical AI applications, and telehealth.
  • The BGF Future Consumer Fund invests in small-, mid-, and large-cap companies, and looks for businesses driving changes in consumption patterns, evolving entertainment, and the development of personal wellbeing. It aims to invest in companies reducing carbon intensity within the consumer ecosystem over time.

Proxy Season Briefing

Delta to Report on Climate Lobbying Activities

At Delta’s AGM, a shareholder proposal requesting Delta report on how its lobbying activities align with the Paris Agreement goals achieved 63% of votes. This climate lobbying proposal is the fifth of its kind to have won majority support at a U.S.-listed company in 2021. Similar proposals filed at Exxon Mobil, Phillips 66, United Airline Holdings, and Norfolk Southern won between 62-76% support.

Say on Climate Proposal Fails to Gain Traction with Monster Investors

As You Sows’ proposal, which sought to amend the company bylaws in order to annually hold a vote on Monster’s climate transition plan, achieved only 7% support. According to Proxy Insight, Glass Lewis had recommended shareholders oppose the proposal because it sought to amend the company’s bylaws, making it more binding and prescriptive than typical “say on climate” proposals.

ISS & Glass Lewis Recommend Vote Against BlackBerry CEO Comp

Over 40% of BlackBerry’s shareholders rejected CEO John Chen’s pay package, and both ISS and Glass Lewis recommended to vote against the plan. Glass Lewis noted a portion of Chen’s stock awards had vested because BlackBerry was a “meme stock” when the price spiked in late-January of 2021, and has not yet leveled off.

Company Spotlight

Johnson & Johnson ESG Investor Update Webcast

Senior leaders at Johnson & Johnson presented an hour-long webcast to provide an update on its ESG approach to investors. The company touched on the 2020 goals that were achieved, its 2020 priority topics assessment, and the new goals set for 2025. The new 21 goals have KPIs attached to each and are tied to the UN Sustainable Development Goals. HR and Diversity leaders discussed the changes to its human capital and DEI strategies implemented over the past year. Following the presentation, the Vice President of Investor Relations moderated a Q&A with investor questions and the business leads on the call. Investor questions included topics on reputational risk, product quality, patient safety, climate-related goals, diversity improvements and performance compared to peers, hiring and retention, global health threats, and ethics and compliance program and risks.

MetLife Commits to $500M in E&S Impact Investments

In MetLife’s Sustainability Report, the insurance company states it will invest $500 million in impact investments through MetLife Investment Management (MIM), of which 25% will be allocated towards climate change. At the end of 2020, MIM had more than $122 billion invested in public corporates. The firm employs an active engagement strategy for interacting with senior management from due diligence to monitoring the portfolio, and to effectively manage investment risk. Additionally in the report, MetLife says it will increase its focus towards underserved communities’ financial health, aligns to the UN SDGs, GRI, SASB, TCFD, UN Global Compact, and links to its CDP response.

Target Unveils Sustainability Strategy

This week, Target announced “Target Forward”, its new sustainability strategy. By 2040, the retailer’s branded products will be designed for a circular economy, and the company will be net zero, which includes zero waste to landfills for its U.S. operations, net zero in global operations, and net zero across its supply chain, encompassing Scope 1, 2, and 3 emissions. Additionally, by 2023 Target strives to increase Black representation within its workforce by 20%. The release also highlights the progress Target has made towards achieving its broader ESG objectives.

Regulatory Updates

ESG Disclosure Act Moves to the Senate

The House of Representatives passed the Corporate Governance Improvement and Investor Protection Act, which aims to make ESG-related disclosure mandatory in U.S.-listed companies’ annual reporting and would require companies to disclose how ESG metrics connect to long-term strategies. The bill also calls upon the SEC to develop a Sustainable Finance Advisory Committee, which would determine how to facilitate sustainable investment by determining challenges and opportunities to such investment.

News Bites