Proposal seeks climate-lobbying report from Sempra Energy

Mar 22, 2021
As You Sow and Calvert say lobbying that seeks to prevent climate-related laws presents risk to investors

Shareholders in Sempra Energy appear set to vote on a proposal regarding the company’s lobbying in relation to climate change after the SEC rejected a request from the company for no-action relief if it excluded the measure.

The proposal’s co-filers are As You Sow, Calvert Research and Management and Illinois State treasurer Michael Frerichs. They request that the company’s board release a report ‘describing if, and how, Sempra’s lobbying activities (direct and through trade associations) align with the Paris Agreement’s goal to limit temperature rise to [1.5°C] and how Sempra plans to mitigate risks presented by any misalignment.’

The proposers write in a supporting statement that corporate lobbying activities seeking to prevent climate-related laws and regulations present growing risk to investors. ‘Delays in implementing the Paris Agreement’s decarbonization goals increase the physical risks of climate change, pose systemic risk to economic stability and introduce uncertainty and volatility into investor portfolios,’ they say.

‘Unlike peers, Sempra has no net-zero or long-term climate targets. Instead, it continues to invest in greenhouse gas-intensive natural gas assets, acknowledging this will cause its emissions to balloon. While Sempra discloses how its trade associations align with its own views on climate change, current reporting does not disclose whether its lobbying is aligned with Paris goals, especially regarding natural gas use.’

The company unsuccessfully requested that the SEC grant it no-action relief to exclude the proposal from its proxy statement, arguing that as per Rule 14a-8(i)(10)it has substantially implemented the measure.

In its request, Sempra Energy argues that its existing disclosures on its website regarding its direct and indirect lobbying activities, including how those activities align with the Paris Agreement’s goal of limiting global temperature rise, are ‘directly responsive to each element of the proposal.’

The company says it is committed to transparency regarding its policies and position statements relating to the environment and energy. It also says it engages in lobbying activities, both directly and through trade associations, at the federal, state and local levels of government in support of its business and ‘consistent with [its] commitment to creating long-term, sustainable value, including the important role [its] infrastructure plays in lowering greenhouse gas emissions.’ It says it further publishes on its website its direct political contributions and trade association membership fees.

Among other things, Sempra Energy says its existing public disclosures:

  • State that the company believes its ‘direct lobbying activities align with the relevant policies of the legislative and regulatory jurisdictions in which [it] operate[s] (such as California’s goal to achieve economy-wide carbon-neutrality by 2045 and the [US Environmental Protection Agency’s] methane rules) and important global multi-lateral collaborations, including the Paris Agreement’s goals of limiting average global warming to well below 2°C above pre-industrial levels and pursuing efforts to limit the temperature increase to 1.5°C’
  • Address how the company’s direct and indirect lobbying activities align with the Paris Agreement, including the 1.5°C scenario, by providing an example of both a direct and indirect lobbying activity that aligns with the Paris Agreement and cross-referencing to its CDP-climate questionnaire responses
  • Address how the company already works to mitigate risks presented by any misalignment with the Paris Agreement and recognize that at times the company’s indirect lobbying activities do not fully align with the agreement.

In response to the no-action request, the proposers argue that the company’s disclosures ‘do not enable investors to understand how Sempra’s lobbying and advocacy, especially in support of natural gas use, do or do not align with Paris goals and global efforts to transition toward net-zero greenhouse gas emissions by 2050 or earlier, nor do they enable investors to adequately understand how Sempra mitigates growing risks in instances of apparent misalignment.’

The SEC decided that it was unable to concur that Rule 14a-8(i)(10) provides a basis to exclude the proposal.

Lila Holzman, senior energy program manager with As You Sow, tells IR Magazine sister publication Corporate Secretary: ‘We will continue to engage with Sempra on the concerns raised in our shareholder proposal, which we anticipate will be included in Sempra’s proxy statement and be voted on at its [AGM].

‘Investor concerns related to climate lobbying and alignment with the Paris Agreement are growing – we believe this is an important issue for Sempra to address given the role the company plays as a large power and gas provider based in California. Investors seek more transparent disclosure from Sempra on its climate-related lobbying activities, especially related to natural gas, as local and global policy efforts to combat the crisis gain urgent momentum.’

The company has not yet released its 2021 proxy statement, which will include any proposals to be voted on at its AGM. A spokesperson for Sempra Energy says in a statement to Corporate Secretary: ‘Sempra Energy is committed to an open dialogue with all shareholders and considers investor perspectives in the context of the company’s existing strategy and opportunities to deliver long-term shareholder value.’

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