Earlier this month, Arizona Attorney General Mark Brnovich confirmed plans to begin investigating ESG policies and groups like Climate Action 100+, accusing them of attempting to manipulate markets in favor of green energy and climate agendas, according to an op-ed published by the Wall Street Journal.
“The biggest antitrust violation in history may be in plain sight,” the report reads. “Wall Street banks and money managers are bragging about their coordinated efforts to choke off investment in energy. It’s nearly impossible to raise money to explore for oil and gas right now, and we may all be experiencing rising energy costs because of this market manipulation.”
The investigation is confirmed in response to the efforts made by the organization, serving as the largest climate change investor engagement initiative in the world, to flag key shareholder proposals in North America ahead of this year’s Proxy Season in hopes of reducing greenhouse gas emissions and improving the current climate status overall.
“Flagging shareholder resolutions as well as routine votes, including those on directors and audit committees, is an impactful and increasingly critical tool for investors aiming to accelerate action on the escalating risks of the climate crisis,” Ceres CEO and president and a member of the global steering committee for Climate Action 100+, Mindy Lubber, said.
The group uses its influence to shut down coal and natural gas plants using tactics like highlighting climate goals at shareholder meetings and voting against directors and proposals who don’t support their sustainable effort. So far this year, the initiative has flagged three proposals submitted by North American companies, including Berkshire Hathaway, Inc., who reports on "physical and transitional climate-related risks and opportunities."
“Accordingly, the proposals filed so far this year carry a clear message from investors: Companies must act immediately and take ambitious, necessary climate action and they must be transparent and accountable to their investors as they work toward our collective goal of limiting global temperature rise to 1.5 degrees Celsius,” Lubber said.
The organization is supported by 617 global investors who are responsible for more than $65 trillion in assets under management across 33 markets. Serving as signatories, investor participants are responsible for direct engagements with focus companies, individually and/or collaboratively.
"Companies take shareholder votes seriously — resolutions garnering more than 30% approval have been found to prompt change by the company,” the release states. “In last year’s historic proxy season, the number of majority votes on climate-related proposals in the U.S. and Canada reached a record high of 14."
To Climate 100’s advantage, investment in oil and gas exploration and production in 2021 was nearly 25% below 2019 levels. One private-equity CEO described trying to raise wide-scale capital for drilling oil as almost impossible.
“The average approval vote among all climate-related shareholder proposals at North American companies leapt to a record 44%, compared to 34% in 2020,” a Climate 100 press release published by Globe Banner states. “A Ceres analysis shows that Climate Action 100+ flagged resolutions have received higher votes over the years, both among its investor signatories and across the broader investment community."
In the report titled "ESG May Be an Antitrust Violation," Brnovich states that large banks and money managers want to implement compliance with political agendas such as the Paris Climate Accord. From there, groups like Climate Action 100+ rally together to push the specific agenda. Members of Climate Action 100+ together manage $60 trillion.
"The activism can include pushing climate goals at shareholder meetings and voting against directors and proposals that don’t comport with the agenda, even if other decisions may benefit investors," Brnovich said. Firms then create their plans and report back to Climate Action 100+.
The official went on to raise concerns about how the energy-related initiatives could be impacted by the conflict in Russia and Ukraine and the impact price increases associated with rising fuel costs are having on lower-wage workers, highlighting the importance of energy independence as it leads to national security, arguing that "the U.S. can’t maintain its security while depending on foreign dictators and oligarchs to supply its energy."
“While climate activists believe they know best, international tensions heighten the need for domestic companies to maximize efficiency and productivity," Brnovich wrote. "Proper corporate governance is good not only for shareholders but for the stability of America and the world."
Despite Brnovich feeling that it’s his "responsibility to protect consumers from artificial restrictions on production,” Climate Action 100+ hopes to continue going forth with the decarbonization of capital expenditures and the reduction of gas emissions, among other sustainable goals.
“Extreme weather events, forest fires and other environmental changes have devastating effects on people and communities around the world – not to mention the increased physical and systemic risks for companies and investors,” director of shareholder advocacy at Mercy Investment Services, Inc., Mary Minette, said. “We need companies to develop ambitious, transparent plans to address the clear and growing risk of climate changes.”