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Vote
AGAINST Chair Charles H. Noski (Item 1.G) is Warranted
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The
physical and financial risks posed by climate change to long-term investors are systemic, portfolio-wide, unhedgeable and undiversifiable.
Therefore, the actions of companies that fail to align to limiting warming to 1.5°C
pose risks to the financial system as a whole, and to investors’ entire portfolios, in addition to specific risks to those
companies. See Appendix A for more information regarding Majority Action’s Proxy Voting for a 1.5°C
World initiative and the transformation required in key industries.
Wells
Fargo (Wells) has been the world’s third largest financier of fossil fuels over the last five years, with $223 billion in lending
and underwriting over 2016-20, according to the Rainforest Action Network.1 It is the
world’s leading funder of fracked oil and gas.2
Financial
services companies, as providers of financing, advisory and underwriting services to fossil fuel projects and fossil fuel-intensive companies,
have the power to accelerate or stall the decarbonization necessary to limit warming to 1.5°C. Failure to set ambitious decarbonization
targets in line with 1.5°C pathways, measure and disclose climate
impact, and align companies’ business plans to those targets, is a failure of strategy and corporate governance, for which long-term
investors should hold directors accountable.
Failure
to set adequate net-zero targets
Net-zero
by 2050 commitment for financed emissions
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✓
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Commitment
to set interim targets within a year, pursuant to a net-zero financed emissions target
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X
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In March
2021, Wells Fargo announced it was committed to net zero financed emissions by 2050.3 However,
Wells Fargo has not yet announced interim targets. The firm has committed only to setting and disclosing targets “for select carbon
intensive portfolios - including the oil and gas sectors, and power sector - no later than the end of 2022.” With regard to additional
sectors, Wells says only that targets will be announced within an unspecified “reasonable time.”4
Fossil
fuel financing and policies not aligned with 1.5°C pathways
Robust
near-term exclusion policies for fossil fuel intensive companies and projects, in particular Arctic and tar sands oil and gas, and
coal mining and power production
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X
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Wells has
announced an end to financing of new coal-fired power plants and expansion or development of coal mines but reports no exclusion policies
related to tar sands, LNG, fracking or offshore fossil fuel.5 As a result of its failure
to adopt broader exclusions, Wells serves as the “world’s top fracking funder,” according to the Rainforest Action
Network.6 Though it has announced an end to financing of new coal-fired power plants
and expansion or development of coal mines,7 Wells has only committed to reducing credit
exposure to coal mining companies, rather than ending finance altogether.8
Disclosure
and measurement of climate impact
Disclose
and measure climate impact and financed emissions through a rigorous and accepted framework
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X
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Unlike 108
other financial institutions, including 16 banks based in the U.S., Wells has not joined the Partnership for Carbon Accounting Financials
(PCAF), a group of financial institutions committed to measuring and disclosing greenhouse gas emissions associated with their portfolios.9
It has not disclosed Scope 3 financed emissions.10
Conclusion:
Wells Fargo has failed to announce interim targets for reducing financed greenhouse gas emissions, has said it may take until the end
of 2022 to set targets which will cover only two sectors of the economy and has fixed no date for setting targets covering its entire
portfolio. Unlike more than 100 financial institutions, including many of its largest U.S. competitors, Wells has failed to commit to
work with the standard-setting PCAF. Therefore, we recommend that shareholders vote AGAINST Chair Charles H. Noski (Item 1.G) at the
company’s annual meeting on April 27, 2021.
Appendix
A: Proxy Voting for a 1.5°C World
The world
is currently on track to disastrous levels of warming, driving massive harm and threatening the lives and livelihoods of millions.
Corporate leaders in the industries responsible for this crisis have failed to take up the leadership required to change course.
“Climate
risk” is a systemic, escalating, and irreversible crisis––for which corporate boards urgently need to take responsibility.
The UN Intergovernmental Panel on Climate Change (IPCC) in 2018 made clear that in order to have at least a 50% chance of limiting
warming to 1.5°C and avoiding the most catastrophic effects of the
climate crisis, we must bring global, economy-wide carbon emissions down to net-zero by 2050 at the latest.11
That means that corporate directors must ensure that companies set ambitious decarbonization targets in line with 1.5°C
pathways, and align companies’ business plans, executive pay, and policy influence to those targets.
The physical
and financial risks posed by climate change to long-term investors are systemic, portfolio-wide, unhedgeable and undiversifiable.
Therefore, the actions of companies that directly or indirectly impact climate outcomes pose risks to the financial system as a whole,
and to investors’ entire portfolios. In order to manage this systemic portfolio risk, investors must move beyond disclosure and
company-specific climate risk management frameworks, and focus on holding accountable the relatively small number of large companies
whose actions are a significant driver of climate change.
When
directors fail to transform corporate business practices in line with 1.5°C pathways, responsible investors must use their most powerful
tool –– their proxy voting power––to vote against directors. Bold and unprecedented action by investors is
a prerequisite to averting further global economic and financial catastrophe. While past shareholder efforts at standard setting, disclosure
and engagement have laid important groundwork, company commitments won have been far too incremental, far too hard fought, and collectively
insufficient to the scale of the crisis.
In particular,
major asset managers like BlackRock and Vanguard, who hold outsized voting power at the majority of S&P 500 companies, must
use their power to oppose directors on boards who have failed to take up this leadership.
Action
this year is critical, and momentum is growing to oust the directors who are ill-equipped to lead companies to rapid decarbonization.
In 2020, a coalition successfully pushed for Lee Raymond, the chief architect of ExxonMobil’s climate denial strategy, to lose
his position leading the JPMorgan Chase board of directors.
Business-as-usual
proxy voting will not suffice to address the seriousness of the crisis at hand. We urge investors to vote against these directors
at companies failing to implement plans consistent with limiting global warming to 1.5ºC.
Four
Key Sectors Are Critical To Curbing the Climate Crisis
The electric
power, finance, transportation, and oil and gas sectors must all make dramatic transformations to curb the worst of catastrophic climate
change and protect long-term investors.
Substantial
votes against board members at these companies could help realign business and investment plans to the goals of the Paris Agreement,
hold companies accountable for dark money used to influence critical climate policies, and align executive compensation to key decarbonization
goals.
While each
industry and company will need to chart its own path in pursuing decarbonization consistent with limiting warming to 1.5ºC, setting
a target to reach net-zero emissions by no later than 2050 is a critical first step. In the absence of such a target, investors can have
no confidence that the company will be able to transform its business consistent with limiting warming to 1.5ºC.
Voting
Guide: Banks
Financial
services companies, as providers of financing, advisory and underwriting services to fossil fuel projects and fossil fuel-intensive companies,
have the power to accelerate or stall the decarbonization necessary to limit warming to 1.5°C. Given the capital intensity of the
oil and gas, utility, and automotive manufacturing industries, financial services companies have a crucial role to play in decarbonizing
those and other sectors.
Target
setting
The first
step for any U.S. bank in aligning its activities with limiting warming to 1.5°C is committing to reducing its Scope 3 financed emissions
to net-zero by 2050 at the latest. While many banks have yet to disclose interim targets, banks should at a minimum indicate their plan
for establishing short- and medium-term milestones, including science-based interim targets for 2025 and 2030 by the end of 2021.
Key data
sources:
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-
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Science-Based
Targets Initiative (SBTI), Companies list and Sector Guidance12
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-
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Carbon
Disclosure Project (CDP), search company survey responses13
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Rainforest
Action Network (RAN), Banking on Climate Chaos report14
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Capital
allocation and investment
Bank exclusion
policies for fossil fuel expansion provide the most direct indicator for whether banks are taking the near-term steps necessary to realign
their financing activities with a 1.5°C world. Financing for any continued expansion of coal power and coal mining must cease, both
for new projects and the companies behind those projects, and coal financing must be rapidly phased out between now and 2030. Arctic
and oil sands extraction is inconsistent with limiting warming to 1.5°C, economically unviable due to elevated production costs,
and fraught with additional environmental and human rights risks; best practice among global banks restricts financing in these areas,
as first steps on financing for the oil and gas industry.15
Key data sources:
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Rainforest
Action Network (RAN), Banking on Climate Chaos report16
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Disclosures
and measurement
Given the
challenges in appropriately measuring and disclosing the full scope of banks’ financed emissions, banks must move immediately to
put in place a process for measuring and disclosing climate impact. A key indicator of any bank’s commitment to doing so is whether
it has joined the Partnership for Carbon Accounting Framework (PCAF), the leading international effort to develop and standardize robust
greenhouse
gas emissions accounting standards for financial institutions.17 Membership in PCAF requires
a financial institution to measure and disclose greenhouse gas emissions associated with its loans and investments within three years,
using standardized accounting methodologies, to enable alignment with the Paris Agreement.18
Key data sources:
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Partnership
for Carbon Accounting Framework signatories19
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Rainforest
Action Network, Banking on Climate Chaos report20
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1
Rainforest Action Network (RAN), Banking on
Climate Chaos 2021, http://bankingonclimatechaos.org, at 13.
2
RAN 2021, http://bankingonclimatechaos.org,
at 22.
3https://www.businesswire.com/news/home/20210308005799/en/Wells-Fargo-Sets-Goal-to-Achieve-Net-Zero-Greenhouse-Gas-Emissions-by-2050
4
Ibid.
5
https://www08.wellsfargomedia.com/assets/pdf/about/corporate-responsibility/climate-disclosure.pdf
see esp. at 5 and 25. [Wells TCFD Report]
6
RAN 2021, http://bankingonclimatechaos.org,
at 22.
7
https://www08.wellsfargomedia.com/assets/pdf/about/corporate-responsibility/climate-disclosure.pdf,
at 5 and 25. [Wells TCFD Report]
8
https://www.wellsfargo.com/about/corporate-responsibility/environmental-social-risk-management/
9
https://carbonaccountingfinancials.com/financial-institutions-taking-action#overview-of-financial-institutions,
accessed on 3/26/21
10
Wells TCFD Report says it calculates “several
relevant categories of Scope 3 emissions” but these do not include emissions from financed investments. [Wells TCFD Report at 18,
29]
11
Intergovernmental Panel on Climate Change. Special
Report on Global Warming of 1.5 Celsius, https://www.ipcc.ch/sr15/
12
https://sciencebasedtargets.org/
13
https://www.cdp.net/en
14
https://www.ran.org/bankingonclimatechaos2021/
15
https://carbontransfer.wpengine.com/wp-content/uploads/2019/09/Capex-report-2019_Infographic.pdf
; https://www.ran.org/funding_tar_sands/
16
https://www.ran.org/bankingonclimatechaos2021/
17
https://carbonaccountingfinancials.com/financial-institutions-taking-action
18
https://carbonaccountingfinancials.com/join-pcaf
19
https://carbonaccountingfinancials.com/financial-institutions-taking-action
20
https://www.ran.org/bankingonclimatechaos2021/