Gary Gensler, SEC chair, promoted the ‘right to put proposals in front of other shareholders for a vote’ © REUTERS

US companies will have a harder time blocking climate change and human rights petitions from annual shareholder votes following changes at the Securities and Exchange Commission.

The US regulator on Wednesday revoked policies concerning shareholders that were adopted during the Trump administration. The move is a win for environmentalists and other socially-conscious investors who file resolutions to pressure companies to reform their business practices.

Previously, the SEC said companies could exclude shareholder climate proposals that ask them for certain timelines and targets for their greenhouse gas emissions. But in future, “we would not concur in the exclusion of similar proposals that suggest targets or timelines so long as the proposals afford discretion to management as to how to achieve such goals”, the SEC said.

For human rights and other social matters, the SEC said it is less likely to focus on how the issue pertains to a particular company. Instead, in deciding whether a shareholder proposal should proceed to a vote, “[SEC] staff will consider whether the proposal raises issues with a broad societal impact, such that they transcend the ordinary business of the company”.

“Proposals that the staff previously viewed as excludable because they did not appear to raise a policy issue of significance for the company may no longer be viewed as excludable,” the SEC said.

Josh Zinner, chief executive of the Interfaith Center on Corporate Responsibility, a coalition of faith-based investors, said the SEC’s changes would tilt proxy voting battles in favour of those filing shareholder resolutions.

“It will certainly mean that more resolutions that have been filed will make it on to company proxies,” he said.

The large asset managers BlackRock, State Street and Vanguard have recently supported more environmental and social shareholder proposals. Because of their involvement, companies “may be more willing” to settle with shareholder activists rather than see petitions go to a vote, Zinner said.

Companies routinely ask the SEC for permission to shut down these proposals, often arguing that they are filed by gadflies and inappropriate attempts at micromanagement.

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In October, Apple asked the SEC to block six shareholder proposals on issues ranging from alleged forced labour to how it decides which apps to delete from its App Store. SEC staffers ordinarily grant company requests when shareholder petitions fall on the agency’s list of permitted exclusions.

During president Donald Trump’s term, the SEC tended to favour companies in excluding shareholder proposals. But since Joe Biden’s inauguration, the agency has taken a stance more receptive to investors.

“The right to put proposals in front of other shareholders for a vote is an important part of the securities laws,” said Gary Gensler, SEC chair.

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