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Feb 19, 2021

The week in GRC: BlackRock urges oil companies to disclose carbon emissions and McDonald’s targets leadership diversity

This week’s governance, compliance and risk-management stories from around the web

The Wall Street Journal reported that IBM said it aims to reach net-zero greenhouse-gas emissions by 2030, with a target of 65 percent lower emissions by 2025 from 2010 levels. It said it would use 75 percent renewable electricity by 2025 and 90 percent by 2030. The company believes its own research can promote emerging technologies such as carbon capture to meet its new net-zero climate-change goal.

‘We’re not going to be in the business of capturing carbon, but we are in the business of working with companies to invent those technologies,’ said IBM president James Whitehurst. ‘Without a doubt, we are relying on some technologies that don’t exist yet. The reason we feel confident in doing [so] is [that] we are at the center of helping to develop those technologies.’

– BlackRock said oil companies and other polluting industries should disclose their carbon emissions and set targets to cut them in the latest sign of the rapid reassessment of climate risks by asset managers, The Guardian reported. All companies in which BlackRock invests will be expected to disclose direct emissions from their operations and from energy they buy, known respectively as Scope 1 and Scope 2 emissions. Fossil fuel extractors should base targets to cut emissions on the carbon released when their products are burned, known as Scope 3 emissions, BlackRock said.

The investment manager said last month it would target net-zero carbon emissions in its portfolio by 2050, and that it would eventually consider divestment from polluters that did not take action.

CNN reported that New York Attorney General Letitia James is taking Amazon to court over claims the company has failed to provide sufficient protections for its workers during the Covid-19 pandemic. In a complaint filed in state court, James argues that Amazon violated labor law with what she says was its ‘deficient’ response to the pandemic. The lawsuit alleges that the company failed to close its facilities for cleaning when it found out about worker infections and did not notify workers who had been in contact with infected colleagues.

Amazon disputes the claims. A spokesperson said in a statement: ‘We care deeply about the health and safety of our employees, as demonstrated in our filing last week, and we don’t believe the attorney general’s filing presents an accurate picture of Amazon’s industry-leading response to the pandemic.’

– The SEC’s acting Democratic leadership hasn’t wasted time sending a signal to Wall Street that it will take a tougher approach to enforcement, the WSJ reported. SEC acting chair Allison Herren Lee said recently that the agency would roll back a policy giving publicly traded companies greater certainty about whether they will be able to maintain access to key regulatory exemptions after settling securities law violations. The regulator is awaiting confirmation of Gary Gensler, President Joe Biden’s nominee to head the commission.

The policy reversal followed another move to return discretion to SEC enforcement officials to approve formal investigation orders. The practical impact of the policy changes may vary but their symbolic significance is clear, according to white-collar defense attorneys.

– According to CNBC, McDonald’s is taking steps to boost the number of women and historically under-represented groups in its senior leadership ranks. The company’s aim is that by 2025 senior directors or higher leadership roles will be at least 35 percent from historically under-represented groups, up 6 percent compared with 2020 baseline data, and at least 45 percent composed of women, up 8 percent from 2020 levels. McDonald’s is seeking total gender parity for leadership positions by the end of 2030.

The company’s board has endorsed the targets, which apply to the highest levels including CEO Chris Kempczinski. Starting in 2021, 15 percent of executive bonuses will be based on human capital metrics. System-wide sales growth and operating income growth will both account for 42.5 percent of incentive plans.

– The Occupational Safety and Health Administration (OSHA) has announced more than $4 million in penalties on more than 300 employers the regulator says have put workers at risk during the Covid-19 pandemic, but about two thirds of these employers are not paying up, Reuters reported. As of last week, only 108 companies had paid a total of about $897,000 in fines to OSHA since the pandemic hit the US.

More than half of the employers cited for Covid-19 safety problems by federal OSHA authorities have appealed, according to a Reuters analysis. That compares with 8 percent of fined companies that appealed in the five years before the pandemic, according to OSHA data.

– The WSJ reported that Apollo Global Management appointed former SEC chair Jay Clayton to the newly created role of lead independent director on its board, the latest step in an overhaul of corporate governance at the investment firm. Clayton will also return to Sullivan & Cromwell, where he was a partner before entering government. He will be senior policy adviser and of counsel at the law firm.

Clayton said he looks forward to serving public investors in his role at Apollo, adding that he supports the firm’s transition to ‘a more shareholder-oriented governance model.’

Reuters reported that major US financial trade groups joined calls for some type of carbon pricing in the country, highlighting the growing corporate enthusiasm for action against climate change. ‘For markets to function, you’ve got to have a price on carbon,’ said Tim Adams, president of the Institute of International Finance (IIF).

A policy document the IIF is releasing with 10 other trade groups states that carbon pricing can ‘spur development of climate-related financial products, promote more transparent pricing of climate-related financial risks, and inform and help scale key initiatives like voluntary carbon markets.’ Other backers include the American Bankers Association and the Investment Company Institute.

– The WSJ reported that Coinbase Global named a new chief compliance officer as the cryptocurrency exchange prepares to go public and faces an evolving regulatory landscape. Melissa Strait fills the post previously held by Jeff Horowitz, who last month became compliance chief of digital asset financial services company BitGo. Strait, who most recently was global head of financial crimes at financial technology company Stripe, will be responsible for Coinbase’s global compliance programs, including those related to know-your-customer and anti-money-laundering regulations.

– John Coates, acting director of the SEC’s division of corporation finance, said the agency ‘should help lead’ the creation of a disclosure system for ESG issues at companies, according to Reuters. Although the comments were in line with those Coates previously made as a Harvard University law professor, they indicated that the agency will now likely play a more active role in the development of ESG reporting standards. Coates said his view does not imply the SEC should mandate rigid, specific disclosures that he said could soon become outdated.

Ben Maiden

Ben Maiden is the editor-at-large of Governance Intelligence, an IR Media publication, having joined the company in December 2016. He is based in New York. Ben was previously managing editor of Compliance Reporter, covering regulatory and compliance...