One night in October 2017, John Harrington was getting ready for bed when his wife heard a violent wind screaming around their house in Napa County, California. Their daughters had just left after coming over for dinner, and they flicked on the television. A local station reported a fire on Atlas Peak, where their home was located. Harrington ran out to his deck and saw it: Embers were swirling in the air, and winds were howling at 60 miles per hour. They bundled the dog into one of their cars and drove down the one road that led off the peak. Towers were down, so they didn’t have phone service. Trees had fallen across the road.
A few days later they returned to find their house burned to the ground.
At this year’s annual meeting of Citigroup shareholders, Harrington told his harrowing story, and then called on fellow investors to support a resolution that would force the bank to stop financing fossil fuel projects. Harrington runs a socially responsible investment firm that manages more than $300 million in assets and advocates for corporate responsibility on things like racial equality and climate change. For Harrington, who divested from oil and gas holdings years ago, the loss of his home crystallized how wide the rift still was between financial institutions and everyday people who bear the brunt of climate tragedy. “This is not bullshit,” he said in an interview. “The banks, they make money financing fossil fuels, and it’s just a game to them. They have no idea.”
Shareholder resolutions can be put forward every year by company owners who have held at least $2,000 in company stock for at least three years; they are proposals for how management should run the company. Shareholders vote on the proposals during proxy season, leading up to and during companies’ annual shareholder meetings, which are often held in the spring. Such proposals aren’t binding, but traditionally those that gain a significant percentage of shareholder votes send a strong message to management about how to steer the company. They can influence corporate decisions even if the proposal doesn’t garner majority support.
This kind of corporate activism is an increasingly popular tool among investors concerned about how exposed their holdings are to the mounting risks posed by climate change. After seasons of sustained campaigns by organizations like Follow This, which aims to pressure oil and gas companies to invest in renewable energy technologies, 2021 became a watershed year. Multiple shareholder proposals on climate change gained majority support, and a more aggressive board takeover bid by an investment fund at ExxonMobil came away with three seats.
Earlier this year, a suite of shareholder resolutions was submitted to address one of the catalysts of such expansion: banks underwriting the loans for such projects. Organizations like the Sierra Club Foundation (which funds this magazine) and firms like Harrington’s submitted proposals recommending that the boards of major banks end lending and underwriting for new fossil fuel development. In response, three banks—Citi, JPMorgan, and Morgan Stanley—appealed to the Securities and Exchange Commission to strike the proposal from their proxy statements, which would mean that they wouldn’t be subjected to a shareholder vote. The SEC rejected the appeals.
“If we want a 1.5-degree world, we have to stop expanding fossil fuels. We know that. This set of resolutions is a sharp and powerful way of confronting this set of carbon majors with the choices that follow from that fact,” said Jason Disterhoft, a campaigner for the Rainforest Action Network. “Either you stop supporting the expansion of fossil fuels, or your commitments are greenwashing.” Disterhoft worked on a recently released report on the role that banks play in such expansion and found that six of the banks extending the greatest support for oil and gas companies represent 31 percent of lending and underwriting for fossil fuels. The banks are all based in the United States. Last year the world’s largest 60 banks extended $742 billion in financing for oil and gas projects.
Well Fargo, Citi, Goldman Sachs, and Bank of America, which have continued to pour billions of dollars into the oil and gas industry since the Paris Agreement, were the first of the major banks to hold a shareholder meeting where the results of their votes on this season’s proposals would be made known. All four of the banks told their shareholders not to support the climate proposals and pointed to their goal of net-zero greenhouse gas emissions by 2050 as justification for not ceasing support for new fossil fuels immediately. During the final vote tally, all four measures failed.
A few weeks later, shareholders at JPMorgan Chase also voted down the resolution put forward by Harrington with the same proposal: that the bank stop funding new fossil fuel development projects. Another climate-related proposal, that the bank set absolute targets for limiting the amount of emissions produced by projects it funds, also failed. All the resolutions garnered more than 10 percent of the shareholder vote share—a fair amount, but likely not enough to considerably influence the decisions of management about changing lending practices.
The vote counts also indicate that most of the major institutional investors, who hold the overwhelming majority of shares in companies across the market, did not back the climate resolutions. Big firms like Blackstone, Vanguard, and State Street—particularly Blackstone—have underscored their commitment to supporting investment decisions that mitigate the risk of climate change, and they have increasingly voted in favor of resolutions aimed at reducing the emissions of greenhouse gases. One large investor that did back the climate resolutions in front of bank shareholders was the New York State Pension Fund, headed by comptroller Tom DiNapoli. The fund, which oversees $280 billion, has been proactive in supporting climate action. “Financial institutions have a key role to play in decarbonizing the global economy and addressing the systemic risks posed by climate change,” DiNapoli said in a statement issued by the fund prior to the vote. “Failure to achieve net-zero greenhouse gas emissions by 2050 at the latest and limit global warming to 1.5-degrees Celsius poses enormous risks to the global economy.”
Harrington said he never had high expectations for changing the bank’s oil and gas financing practices in one proxy season. But as a longtime shareholder advocate, he said the power of putting forward proposals lies in their ability to change the conversation—and to force corporations to put their views on the record. He also knows that it can take multiple resolutions over years to finally win. On climate, the risks might be imminent, but banks are slow-moving and averse to institutional upheaval. At a certain point though, with enough groundswell and evidence that investors take the climate threat to their portfolios seriously, that could change. “They will respond if they get a big-enough vote against them,” Harrington said. “But ordinarily, that is long in the making. In other words, it’s deep into the future if they put things off for as long as they can.”
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