The SEC Just Made The Case For Divesting From Fossil Fuel Companies Much Stronger

The agency's ruling in a little-noticed case last month has knocked the wind out of the push for shareholder activism, a favorite neoliberal tactic to address climate change.
Rigging equipment outside Sweetwater, Texas.
Rigging equipment outside Sweetwater, Texas.
Cooper Neill / Reuters

The Securities and Exchange Commission has waded into the debate over what investors can do to stop fossil fuel companies from destroying the Earth’s habitable climate. And in siding with a major oil company, the agency inadvertently strengthened the case for divesting from fossil fuels altogether.

Late last year, Trillium Asset Management, an investment firm that works with environmental groups but also has fossil fuel investments, proposed a shareholder resolution calling for EOG Resources, one of the largest oil producers in the country, to set a target for cutting greenhouse gas emissions. But before shareholders could vote on the proposal, EOG complained to the SEC, requesting approval to ignore the proposal, which it said would “micromanage” the company with a “rigid and time-bound” target.

In February, the SEC agreed with EOG’s concerns, stating shareholders “would not be in a position to make an informed judgment” on the “matters of a complex nature” on which the resolutions sought to act. Last month, the SEC sent a formal letter to Trillium rejecting the proposal, allowing EOG to ignore the resolution and block a vote.

Axios’ Amy Harder, who drew national attention to the case earlier this month, called the move “unprecedented,” leaving investors “stunned.”

The ruling is a major setback for advocates who say internal shareholder pressure from high-minded investors is the best way to reduce pollution by corporate giants. It also adds new weight to arguments calling for more severe government intervention in the energy industry, either by nationalizing utilities and fossil fuel producers or imposing steep levies on emissions and extractive industries. But with Republicans in control of all three branches of the federal government and Democrats largely wrestling over whether to embrace more leftist economic principles, neither of these prospects is likely to happen in the near future.

So, at least in the short term, the SEC decision strengthens the case that the only serious strategy for investors to pressure fossil fuel companies is to completely pull their money out.

The logo of U.S. oil and gas company EOG Resources is seen in its office in Chongqing, China.
The logo of U.S. oil and gas company EOG Resources is seen in its office in Chongqing, China.
Reuters Staff / Reuters

In the year leading up to last February, shareholders filed 429 resolutions, 83 focused on climate change, according to an annual report tracking such proposals. Of that 83 figure, which represents 20 percent of all proposals, 27 resolutions called for carbon risk disclosures and another 27 demanded that companies set deadlines for reducing emissions.

Such proposals, even when enacted, do little to incentivize companies to change polluting business practices while providing a veneer of progressive action. Take, for example, Exxon Mobil Corp. The oil giant caved to shareholder pressure last year to thoroughly account for its climate change risks and, in February, issued its first report. But, in a brazen move, the report claimed there is nearly no risk to Exxon Mobil’s business.

In March, Occidental Petroleum, one of the largest oil producers in Texas, responded to shareholders’ climate concerns with its own report, finding, curiously, that the company’s business won’t be impacted by global warming or policies to reduce the emissions causing it.

The existence of the reports represents the start of slow change at these companies, said Danielle Fugere, president of the nonprofit As You Sow, which tracks shareholder proxy fights. Even if the reports are tailored to bolster companies’ profit outlook, she said they provide information to investors that can ultimately strengthen the case for divestment.

Jeremy Corbyn, the leader of Britain's Labor Party, speaks at the launch of a local election campaign, in London.
Jeremy Corbyn, the leader of Britain's Labor Party, speaks at the launch of a local election campaign, in London.
Hannah Mckay / Reuters

“Even when a company doesn’t necessarily give you the response you want, their response gives you information, and that’s the real goal,” she told HuffPost. “Obviously the oil and gas companies haven’t changed what they do, but from an investor perspective, even getting them to think about how they can transition is good.”

But that sort of patient approach to shifting away from fossil fuels conflicts with the increasingly dire warnings from climate scientists who say the world economy requires an urgent transformation to avoid planetary catastrophe. Small, incremental fixes in the form of market solutions and corporate reformism represent what The Intercept’s Kate Aronoff described as “denial by a different name.”

“Shareholder resolutions and shareholder activism pushing fossil fuel companies to change has to take into account what we are really asking for: We need to see real decarbonization plans,” Ben Cushing, who helps lead the Sierra Club’s Beyond Dirty Fuels campaign, told HuffPost. “That really gets at the core of the fossil fuel industry’s business model.”

The divestment movement gained significant momentum this year after New York City announced plans in January to pull roughly $5 billion in pension fund investments out of oil, gas and coal companies and sue oil companies for climate change-related damages, a move quickly followed by other cities. European capitals including Berlin, Stockholm and Paris made similar divestments in 2016.

“The dominant framework has been about a neoliberal approach and it has failed over and over again.”

- Ashley Dawson, author of "Extreme Cities"

“Since companies weren’t being responsive to shareholders anyway ― witness Exxon’s recent absurd declaration that it faced no real climate risk ― it may save everyone the trouble of pretending that they’ll someday actually engage,” Bill McKibben, the founder of, told HuffPost. “It further strengthens the already overwhelming argument for divestment, and makes politicians like Bill de Blasio and Scott Stringer look prescient for the announcement earlier this year that New York City was done playing around with these guys.”

Still, even divestment is only a first step.

“The dominant framework has been about a neoliberal approach and it has failed over and over again,” Ashley Dawson, author of the bookExtreme Cities: The Peril and Promise of Urban Life in the Age of Climate Change,” told HuffPost. “That whole approach is hugely flawed, so I think we need to really think about a much more radical solution.”

Dawson pointed to the proposal from British Labour Party Leader Jeremy Corbyn to nationalize the electrical grid and shift the United Kingdom to 65 percent renewable energy by 2030.

“We need to have really progressive conversations about how we get from where we are presently to carbon zero state,” he said. “To have a conversation about how to do that on a national scale and how to do that at a really fast rate we need to be talking about a public push rather than the kind of market-based arguments you hear so much in the United States.”

Before You Go

1. The unprecedented recent increase in carbon emissions.

How Scientists Know Climate Change Is Happening

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