February 15, 2013
SEC Allows Climate Change Proposal at PNC Financial Services
by Robert Kropp
The bank had sought to exclude a proposal by Boston Common Asset Management requesting that it
report on climate change risks in its lending portfolio.
Requesting that corporations account for greenhouse gas (GHG) emissions in their supply chains has
become a common practice of sustainable investors and other shareowners. The recently published Supply Chain Report by the Carbon Disclosure Project (CDP) indicates that a significant
gap persists between the emissions reduction strategies of corporations and those of their
While it may be something of a stretch to consider the components of a
bank's lending portfolio to constitute a supply chain, there are parallels to which investors are
focusing their attention. Signatories to the Natural Capital Declaration,
which was launched at last year's Rio+20 conference on sustainable development, commit to embedding
environmental considerations into their decision-making processes.
However, the more than
40 signatories to the Declaration do not include a single US-headquartered bank. One the other
hand, three US-based sustainable investment firms—Calvert Investments, PaxWorld Management, and Zevin Asset Management—are current signatories.
banking signatories to the Equator
Principles, formed in 2003, commit to bringing the management of environmental and social risks
to project finance transactions. Yet four of the five US-headquartered signatories—Bank of America,
CitiGroup, Ex-Im Bank, JPMorgan Chase, and Wells Fargo—are among the leading financiers of the
construction of coal-fired power plants in the world.
PNC Financial Services, another
US-based financial institution, is the target of a shareowner resolution filed this year by Boston Common Asset Management, requesting
that it report to shareowners on the GHG emissions resulting from its lending portfolio and its
exposure to climate change risk in its lending, investing, and financing activities.
"Despite a policy not to extend credit to individual mountain top removal (MTR) mining projects
or to a coal producer that receives a majority of its production from MTR mining, PNC continues to
finance four of the top nine MTR coal mining companies," the resolution states. "PNC has ignored
investors' requests to provide information detailing its MTR policy implementation or the lending
impacts of this policy."
In December, PNC requested that the Securities and Exchange
Commission (SEC) issue a no-action letter allowing it to omit the resolution from its proxy
statement. The bank argued that the resolution addressed "complex decisions that would not be
appropriate for a shareholder vote." Also, the bank continued, "PNC has no primary link to the
controversial actions" of MTR and coal-burning power plants, in effect denying the relevance of
environmental impacts in lending portfolios.
In what Boston Common described as "a
reversal of earlier SEC rulings," and one which "sets a precedent with broader implications for
resolutions seeking information about the financial sector's contribution and response to climate
change," the SEC allowed the resolution to remain on PNC's proxy ballot. During the last decade,
the Commission allowed the exclusion of similar resolutions on the basis of "ordinary business;"
however, in 2010, it issued guidance on climate change reporting by corporations, "intended to
remind companies of their obligations under existing federal securities laws and regulations to
consider climate change and its consequences as they prepare disclosure documents to be filed with
us and provided to investors."
"Investing in a coal dependent infrastructure, as PNC
continues to do, requires assumptions that there will be no shifts in public policy and that
current rates of greenhouse gas emissions will be allowed to continue," said Meredith Benton,
Client Portfolio Manager at Boston Common. "Given the climate crisis, we know that a business based
on current emissions levels is unsustainable. As investors, we want to ensure that the PNC Board
and top management understand climate change as an issue, and the implications it may have for