Trump's Deregulation Efforts Set to Reach Top Speed
The Securities and Exchange Commission (SEC) is once again at the centre of a significant change in the financial landscape, with the Trump administration's deregulatory agenda poised to impact the shareholder proposal process and the fight against greenwashing.
Under the first Trump administration, the SEC sought to raise the bar for shareholder proposals, such as increasing the stock-ownership threshold for inclusion on proxy ballots. This move was a departure from the historically low bars set by the SEC's Rule 14a-8, which governs shareholder proposals.
However, the Biden SEC reversed this course, making it harder for companies to exclude 'duplicative' or resubmitted proposals. This move was in response to the increasing number of shareholder proposals, particularly those related to environmental and social causes, as tracked by the Manhattan Institute's Proxy Monitor project.
One of the regulations withdrawn by the Trump administration was an anti-greenwashing rule aimed at tightening controls on funds that label themselves 'green'. The anti-greenwashing rule, promulgated by the Biden SEC, used a three-tiered structure to delineate the centrality of Environmental, Social, and Governance (ESG) to the fund at issue: ESG-integration funds, ESG-focused funds, and Impact-focused funds. Depending on the designation, the requirements under the anti-greenwashing rule could become quite complex, including mandating disclosure of the methodologies a fund uses for measuring carbon footprint and the quantitative and qualitative measures by which a fund assessed progress toward ESG goals.
The Trump administration is now poised to raise the bar again for shareholder proposals under Rule 14a-8. The commission will need to decide whether to re-raise the bar for shareholder proposals or to take the more dramatic step of returning the issue to the states. The SEC has largely abrogated state law in the shareholder-proposal area and given itself a 'gatekeeper' role.
Jarrett Dieterle, a legal policy fellow at the Manhattan Institute, suggests a more narrowly tailored effort to ensure basic truth-in-advertising for ESG funds might find favor on both the right and the left. This could be a potential middle ground, as the SEC doesn't have clear statutory authority to involve itself in the shareholder-proposal process, as incorporation law is traditionally the responsibility of state governments.
The next measure the Securities and Exchange Commission (SEC) will likely take regarding the two rules on greenwashing and the shareholder proposal process is to consider reinstating or revising these regulations to enhance corporate transparency and accountability in environmental and governance matters. However, specific details on the exact step or timeline are not provided in the available search results.
In conclusion, the SEC's role in the shareholder proposal process and the fight against greenwashing continues to evolve, reflecting the broader shifts in the financial industry's focus on ESG issues. As these developments unfold, it will be interesting to see how the SEC balances its regulatory role with the need for transparency and accountability in corporate environmental and governance practices.
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