In Focus

SEC’s ‘Economic Analysis’ Parroted Companies’ Claims of Proxy Advisors’ Errors

In a memorandum released January 16, the SEC’s Division of Economic Research and Analysis responded to CII’s requests for data behind a key table in the Commission’s proposed rule to regulate proxy advisors. The table, found on page 96 of the “Economic Analysis” section of the proposed rule, outlines company disputes with proxy advisors over the content of their reports. The response suggests that the division performed no analysis of its own to corroborate the veracity of companies’ claims. Also, the release excludes company-specific determinations as to whether each registrant had committed a factual error, analytical error, methodological deficiency or some other action causing company concern. The memorandum’s release stems from a CII Freedom of Information Act request and subsequent appeal to the Office of the General Counsel. The SEC so far has declined to extend the comment period for the proposal, scheduled to end February 3, despite requests by CII and other organizations.

SEC’s Jackson to Leave Commission February 14

Ending months of speculation, SEC Commissioner Robert Jackson Jr. said he will leave the agency on February 14 to return to teaching, the Wall Street Journal reported. Jackson is a tenured professor at New York University’s School of Law. In his two years at the SEC, Jackson has been a vigorous advocate for investor protection and reforming stock exchange governance. He criticized the SEC’s pending proposal to tighten regulation of proxy advisory firm as “a tax on firms who recommend that shareholders vote in a way that executives don’t like.” Jackson has also blasted dual-class share structures and mandatory arbitration of shareholder disputes. See stories here and here. His departure will leave Allison Herren Lee as the lone commissioner nominated by Senate Democrats. Reuters has reported that Senate Minority Leader Chuck Schumer (D-N.Y.) nominated Caroline Crenshaw, an attorney in Jackson’s office, to fill his seat.

BlackRock Escalates Approach to Sustainable Investing

In his annual letter to investors, BlackRock CEO Larry Fink said investment risks related to climate change are set to accelerate a significant reallocation of capital and he announced several initiatives aimed at making sustainability integral to investment decision-making. To get a clearer picture of how its portfolio companies are managing climate change risk and other sustainability issues, the giant asset manager is asking firms to (1) publish disclosure in line with industry-specific Sustainability Accounting Standards Board (SASB) guidelines by year-end, or disclose a similar set of data in a way that is relevant to their particular businesses; and (2) disclose climate-related risks in line with the Task Force on Climate-Related Financial Disclosures’ recommendations. BlackRock also just joined the Climate Action 100+ initiative and has been engaging companies on investment risks surrounding sustainability. Fink said BlackRock will be “increasingly disposed to vote against management when companies have not made sufficient progress.” To further expand its commitment to sustainable investing, BlackRock explains in its letter to clients that in its discretionary active portfolios it is divesting from companies that generate more than 25% of their revenues from thermal coal production. BlackRock is also creating more ESG investment funds with data scores, engaging with index providers on developing sustainable versions of their flagship indexes and providing much more transparency on how its engages with companies and votes its proxy ballots.