June 3, 2021 | Editor: Martin Wennerström
Dutch court orders Shell to slash emissions
A Dutch court has ordered Royal Dutch Shell (“Shell”) to reduce its CO2 emissions by net 45% by the end of 2030. The lawsuit was filed in April 2019 by NGO Milieudefensie and claims that Shell is “misleading the general public with regard to the (un)sustainability of its policies” and set “insufficient” climate ambitions. Under its February 2021 Energy Transition Strategy, Shell pledged to reduce the carbon intensity of its energy products by 20% by 2030, vowing to become a net-zero emissions business by 2050. However, the company’s 2021 AGM saw 17% of votes oppose this strategy, with nearly 30% of votes supporting a management-opposed shareholder resolution calling on Shell to set more “inspirational” GHG reduction targets. Meanwhile, two other leading oil companies have faced recent shareholder backlash on climate. Exxon was dealt a major blow at its 2021 AGM as an activist investor won three seats on its 12- member board, ending a proxy battle that had focused on climate concerns. Chevron’s 2021 AGM saw a similar rebuke when a majority of votes supported a management-opposed proposal calling for the company to cut its Scope 3 emissions.
Hague District Court | Shell | Reuters | CNN|Forbes | Exxon | Chevron
U.S. SEC greenlights primary direct listings proposal
The SEC has approved Nasdaq's proposal to allow primary direct listings on its Global Select Market. This occurs after the regulator signed off on a similar proposal from the NYSE in December 2020. Previously, direct listings were only allowed when selling existing shares to the public without the use of an underwriter. Now, this approach will also be available when first going public. The Council of Institutional Investors opposes the changes, citing a potential “decline in the effective corporate governance of U.S. public companies.”
KCS merger trusteeship under scrutiny
Kansas City Southern (“KCS) has entered a merger agreement with Canadian National Railway (“CN”), abandoning its previous deal with Canadian Pacific Railway (“CP”). The USD 33.6 billion transaction faces scrutiny over CN’s plan to place its acquired KCS shares in a voting trust pending regulatory review of the merger. The voting trust is meant to, inter alia, deter a hostile bid from CP while protecting against premature control by CN. In the meantime, KCS would continue to be led by its existing management and board of directors, with a former KCS CEO serving as trustee.
Business Standard | Reuters | WSJ | Justice Dep't
UK FRC report highlights stronger remuneration disclosure
The UK FRC has released a report concluding that the FTSE 350 companies’ remuneration reporting improved following the introduction of the 2018 UK Corporate Governance Code. The report found that the number of companies with policies designed to align executive remuneration with the corporate purpose and values increased by 30% between 2017 and 2019. The study however raised concerns over “boilerplate” explanations, with many firms allegedly lacking a “reported understanding about the reasons for significant votes against remuneration policy”.
FRC | Pinsent Masons
Governance in Brief – March 23, 2023
SVB Financial Group sued after the collapse of Silicon Valley bank unit SVB Financial Group, the parent company of Silicon Valley Bank, and two of its top executives, CEO Greg Becker and CFO Daniel Beck, are being sued by shareholders following the bank’s collapse. The lawsuit, filed by retail shareholder Chandra Vanipenta on behalf of a group of shareholders, accuses the bank and its two top executives of filing false and misleading financial reports.
Governance in Brief – March 16, 2023
Canada introduces climate reporting framework Canadian regulators have issued new guidance for the country's banks and insurance companies to better manage climate-related risks. The framework, which requires disclosure on governance, strategy, risk management, and metrics related to financial institutions’ greenhouse-gas emissions, was first drafted in 2022.
Governance in Brief – March 9, 2023
The U.S. Congress has passed a resolution repealing a Department of Labor (“DOL”) rule empowering retirement plan managers to consider climate change and ESG factors in their investment decisions. The rule, introduced by the Biden administration, falls under the Employee Retirement Income Security Act (“ERISA”), a federal law which sets protection standards for participants in private pension plans. Biden’s ruling entered into force in January this year, overturning prior Trump-era DOL rules that limited pension fund managers to restrict their investment strategies to “pecuniary factors.”
Governance in Brief – March 2, 2023
Indian regulator proposes enhancement to ESG disclosure rules India’s securities and market regulator SEBI has released a new ESG disclosure framework for public consultation. The proposed regulations impact India’s 1,000 largest companies by market capitalization, ESG funds and ESG ratings providers. For the largest companies, the regulator proposes areas of assurance of ESG disclosures and reporting and assurance of ESG footprint of the supply chain. The proposals expand on the 2021 Business Responsibility and Sustainability Report (“BRSR”) guidelines and propose mandatory assurance of certain KPIs under ESG disclosure. The KPIs contain intensity ratios such as GHG emissions, water consumption, and waste generation. For supply chain, SEBI will introduce a comply-or-explain approach for the top 250 companies starting in 2024, and assurance beginning in 2025. For ESG funds, SEBI proposes that at least 65% of AUM be invested in companies reporting on comprehensive BRSR and provide assurance on BRSR core disclosures. Under the proposed rules, ESG rating providers should also provide a “core ESG rating” based on assured information in addition to their own products.