Shareholders Target Big Bank's Financing of Coal

For the first time, shareholders of a major bank will get to vote on whether the greenhouse gas emissions generated by its loans exposes the bank to serious risks.

Pittsburgh-based PNC Financial Services Group is the first bank to face this kind of shareholder resolution.

The move comes after years of protests against the role banks play in financing mountaintop removal coal operations and coal-fired power plants. Even though PNC is a pioneer in green building, it among the three banks that give the most loans to mining companies for mountaintop removal.

The resolution asks PNC to analyze and report back to shareholders on how these loans result in greenhouse gas emissions that further climate change, exposing the bank to financial risks as well as to its reputation.  

"There was a shift this year in the realization we are locked into significant warming, sea level rise, ocean acidification and more extreme weather," Rob Berridge, senior manager of investor programs for Ceres, told Bloomberg. "We’re now beginning to see renewed interest in the actual financial risks from climate change."

It will appear on PNC’s proxy statement in advance of its April 23 annual meeting. The bank tried to block it, but the Securities and Exchange Commission (SEC) denied the request.

"In arriving at this position, we note that the proposal focuses on the significant policy issue of climate change," says the SEC in a letter to PNC. "Accordingly, we do not believe that PNC may omit the proposal from its proxy materials."

Companies used to routinely block these kinds of shareholder resolutions, but that changed in 2010 when the SEC issued the first economy-wide climate risk disclosure requirement in the world.

The SEC clarified that publicly-traded companies need to disclose information to investors on climate-related ‘material’ effects on business operations.

Until now, PNC either ignored investor requests for information or provided only very vague responses, say those that submitted the shareholder resolution.

Although the SEC doesn’t require all banks to consider the issue of climate change, in this case it does because of "the nature of the bank’s lending criteria and public statements, which demonstrated a "meaningful relationship" between climate change and its operations,"John Nester of the SEC told the Los Angeles Times.

Who submitted the resolution? Socially responsible mutual funds Domini Social Investments, Walden Asset Management and Boston Common Asset Management, and religious groups through the Interfaith Center on Corporate Responsibility, one of the biggest filers of shareholder resolutions.

When shareholders submit a resolution, their real goal is to have a dialogue with the company that leads to change, and many resolutions are withdrawn if that happens. A similar resolution has been filed with JPMorgan, but because the bank has been willing to discuss taking action, it could be withdrawn. 

Last year, the Interfaith Center on Corporate Responsibility filed 180 shareholder resolutions and engaged in 225 corporate dialogues.

Climate change resolutions were one of the two biggest areas for shareholder resolutions last year – the other main area was asking corporations to abstain from making political contributions.

This year, the big areas for shareholders resolutions are asking corporations to set greenhouse gas reduction targets; publish sustainability reports across their supply chain; address methane emissions from natural gas fracking; and to source sustainably-produced palm oil.

The biggest banks have also become big financiers of renewable energy, but they also continue to finance coal, such as Wells Fargo, Bank of America, and Goldman Sachs.

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