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Newsmakers

NYC Pension Funds Call for Greenhouse Gas Disclosure From 4 Major Banks

Shareholder proposals have been filed with Bank of America, Goldman Sachs, JPMorgan Chase and Royal Bank of Canada.

By Michael Katz


New York City Comptroller Brad Lander and three of the five New York City Retirement Systems pension funds have filed shareholder proposals at Bank of America, Goldman Sachs, JPMorgan Chase and Royal Bank of Canada, calling for them to disclose absolute greenhouse gas emissions targets for 2030, it was announced on Tuesday. [Source]

Lander, on behalf of the New York City Employees’ Retirement System, the Teachers’ Retirement System and the Board of Education Retirement System, wants the banks to set and publish interim science-based reduction targets for the end of the decade. Lander sees the targets as necessary for the banks to meet their net-zero goals and notes that greenhouse gas emissions from the oil and gas industry account for more than 40% of global emissions. Each proposal requests that a report be issued within one year.

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As of November, the three pension funds that filed the proposals combined to own 2.99 million shares of JPMorgan Chase, worth $412.9 million; 7.74 million shares of Bank of America, worth a little more than $239 million; 437,000 shares of Goldman Sachs, worth $168.8 million; and 293,000 shares of Royal Bank of Canada, worth $28.9 million.

“Shareholders applauded these banks when they set net-zero goals—but it can’t be all talk,” Lander said in a press release. “We expect them to take the steps needed now to reduce emissions on the timeline to which they have committed.”

Lander said he and the pension funds are asking the banks to set and disclose “absolute, science-based targets for 2030, to show investors they are serious about reaching those goals.” He added that, “absent a concrete plan to reduce absolute emissions in the real world in the near term, any net-zero plan rings hollow.”

The four banks are members of the United Nations-backed Net-Zero Banking Alliance, a group of banks that have committed to aligning their lending and investment portfolios with net-zero emissions by 2050. The group claims to represent more than 40% of global banking assets. [Source]

However, according to Lander, the four banks have only set targets to reduce the intensity of their emissions, which he said does not show if the company’s total financed emissions have decreased.

Lander noted that other banks have already set interim targets to reduce emissions, such as Citigroup, Wells Fargo, HSBC, Société Générale, BBVA and Deutsche Bank. According to Lander, Citigroup has committed to reducing absolute emissions for the energy sector by 29% by 2030. Meanwhile, Wells Fargo, HSBC, Société Générale, BBVA and Deutsche Bank have set targets to reduce absolute emissions for the oil and gas sector by 26%, 34%, 30%, 30% and 23% respectively.

Bank of America, JPMorgan and Wells Fargo declined to comment. Royal Bank of Canada did not immediately respond to a request for comment.

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Home > News > Regulation > SEC Targets Conflicts of Interest in Asset-Backed Securities in New Proposal
Regulation

SEC Targets Conflicts of Interest in Asset-Backed Securities in New Proposal

If adopted, the proposal would prohibit transactions that allow asset-backed issuers to benefit from an adverse event affecting the security.
By Paul Mulholland



At an open hearing on Wednesday, the Securities and Exchange Commission proposed a new rule that would prohibit securitization participants, largely the investment banks that bring such deals to market, from shorting or otherwise betting against asset-backed securities in which they are a participant. The proposal received unanimous support from SEC commissioners.

According to the SEC, “Securities Act Rule 192 would prohibit an underwriter, placement agent, initial purchaser, or sponsor of an ABS, including affiliates or subsidiaries of those entities, from engaging, directly or indirectly, in any transaction that would involve or result in any material conflict of interest between the securitization participant and an investor in such ABS.”

Common examples of conflicted transactions include a short sale of the ABS; purchase of a credit default swap that would pay the participant if an adverse credit event affected the ABS; or the purchase or sale of any other financial instrument that would result in the issuer benefitting from an adverse event affecting the ABS, such as a decline in market value.

The proposal provides for some exceptions, which include risk hedging, “bona fide market-making activities” and liquidity commitments. The prohibition also only lasts for one year after the initial sale of the ABS.

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A statement from one SEC commissioner, Jaime Lizárraga, noted that the SEC proposed a similar rule in 2011, but it was never finalized.

The latest proposed rule would implement Section 27B of the Securities Act of 1933, a provision which was added by Section 621 of the Dodd-Frank Act. The proposal was informed by the experience of the 2008 financial crash in which market actors shorted their own assets, a practice that in one instance contributed to a $550 million settlement between Goldman Sachs and the SEC.

The comment period for this rule will stay open for 60 days from its proposal yesterday or 30 days after its entry in the Federal Register, whichever is longer.

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