Last week the Securities and Exchange Commission disclosed in a report it had dropped an investigation into Climate Action 100+ members — including former members BlackRock and State Street — over potential regulatory violations prompted by their alleged climate activism. Vanguard, which never joined the group, was also named in the report.
The probe centered on ExxonMobil’s 2021 annual meeting, where activist investors at holding company Engine No. 1 led a campaign that resulted in the group winning three board seats, the SEC said in the Wednesday report. The agency said it has declined to pursue enforcement “based on the conduct and activities known to the Commission at this time.”
The SEC documented CA100+’s role in supporting the Engine No. 1 2021 director slate, including its and Ceres members’ engagement with BlackRock prior to and following the director vote. The agency sought to look at the campaign through the lens of Section 13(d) of the Securities Exchange Act of 1934, which requires disclosures when any person or group owns more than 5% of a corporation’s stock.
CA100+ focuses on engaging companies to improve their climate change governance, slash emissions and strengthen climate-related financial disclosures to “create long-term shareholder value,” according to its website. The group lost several notable members in 2024, including State Street, JPMorgan, Goldman Sachs, who departed the coalition against a backdrop of heightened scrutiny surrounding ESG and climate initiatives, while BlackRock downgraded its membership to a smaller international arm.
The SEC’s report functionally serves as a warning shot for investors and asset managers that are members of or looking to join investor networks with a mission.
Despite taking no enforcement action, the agency released the Oct. 7 report to remind asset managers and investors “of their responsibilities with respect to shareholder engagement, especially in the context of organized efforts that follow a playbook similar to that of Climate Action 100+,” the agency said in a LinkedIn post.
“Shareholders have the right to express their views on a particular topic and explain their voting decisions,” the SEC wrote. “Congress has mandated that shareholders, acting individually or as a group, owning more than five percent of a public company must disclose their plans and other information if they seek to change or influence control of the company.”
The agency defined organization as any initiative, association or similar groups “that combine for the purpose or effect of changing or influencing control at a specific issuer.” In addition to CA100+, the agency specifically names sustainability nonprofit Ceres and its investor network.
The report notes CA100+’s engagement with BlackRock to raise awareness of the investor group looking to bolster the Engine No. 1 campaign. BlackRock, whose proxy votes helped seat three of the four-member dissident director slate at Exxon, did not inform other members of its vote until it was cast.
The SEC said that members of CA100+ voting in alignment after the group flagged the director vote and engaged members “may constitute circumstantial evidence of an ‘agreement, arrangement, understanding, or concerted action’” with regards to the 2021 Exxon director campaign.
“Although certain CA100+ members deny that they acted as a group, certain members’ coordinated activities could be perceived as an implicit agreement to advance voting outcomes aligned with the organization’s stated objectives,” the report said.
The report and the conclusions drawn show the lens through which the agency plans to view groups, associations or initiatives with regards to the beneficial ownership rule and the 5% threshold.
“If the aggregate beneficial ownership held by shareholders acting as a group exceeds five percent of a single class of equity securities specified in Rule 13d-1(i)(1), those shareholders must be mindful of the reporting obligations applicable to groups under Sections 13(d) and 13(g),” the SEC said. “While an organization’s members may, from the start of their joining, set limits on their membership by seeking to avoid group status, such limitations are only effective when the established parameters are both sufficient to prevent formation of a group and are respected.”
Despite name-dropping State Street and Vanguard, the report does not explore the two asset managers’ roles in the election of the dissident directors at Exxon’s 2021 meeting.
