The U.S. Securities and Exchange Commission has introduced rules that limit small investors' ability to influence corporate climate policies through shareholder proposals and communications. These changes, announced in November and January, aim to reduce regulatory burdens but raise concerns among activists about diminished corporate accountability. Critics argue the moves could sideline voices pushing for environmental action at major firms.
Five years ago, climate activists secured three board seats at Exxon Mobil, sparking similar challenges at other large U.S. companies to address climate change. Now, the Securities and Exchange Commission (SEC) is curtailing tools that small shareholders have used in these efforts.
In November, the SEC announced it would cease providing guidance on whether companies must include shareholder proposals in votes, halting its issuance of non-binding "no action" letters for at least a year due to resource constraints and a government shutdown. Previously, these letters signaled whether the agency would challenge a company's exclusion of a proposal. Companies can still exclude resolutions deemed unimplementable or as micromanagement, a threshold tightened during President Donald Trump's first term.
In January, the SEC barred investors holding less than $5 million in shares from using its EDGAR system for exempt solicitations—documents outlining positions on issues like climate action. Advocacy groups such as As You Sow, which issued over 200 such solicitations since 2018 on various concerns including climate, will be largely excluded. "They are no longer going to be the referee," said Andrew Behar, CEO of As You Sow.
The SEC handled 291 no-action requests last year from Russell 3000 companies, up from 207 the prior year and 144 in 2023, prompting complaints of overload. Ariane Marchis-Mouren of The Conference Board noted, "It was too much," viewing the shift as delegating responsibility to firms. While some see reduced legal risks for companies, activists worry exclusions will rise without enforcement, as lawsuits burden small investors.
An SEC spokesperson stated that exempt solicitations were not intended for broadcasting views via EDGAR, suggesting alternatives like press releases or social media. Steven Rothstein of Ceres countered that official channels better reach voters: "An exempt solicitation reaches the people voting."
On Wednesday, SEC Chairman Paul Atkins testified before the House Committee on Financial Services, defending further deregulatory steps like reevaluating quarterly reporting. To Representative Ayanna Pressley, he said, "Our rules are geared to the company."
Rothstein warned that curbing engagement harms transparency and U.S. capital markets: "Engagement has made our capital markets great." As You Sow reported over 100 company engagements last year, highlighting a collaborative process now at risk.
