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Jan 18, 2024

Tesla and GM face deep-sea mining shareholder proposals

Concerns over sourcing of materials for electric vehicles

Shareholder advocacy group As You Sow has filed proposals at Tesla and General Motors (GM) asking them to address concerns about the impact of deep-sea mining as used to extract materials for vehicle batteries.

According to the group, Tesla and GM are yet to state their positions on the issue. 

‘Mining the deep sea for battery-related minerals will create irreversible habitat and ecosystem loss, with the risk of permanently destroying invaluable carbon storage,’ As You Sow states. ‘A commitment or clarification on deep-sea mining from Tesla and [GM] would signal to shareholders and the auto industry that they acknowledge the importance of careful action as vehicle electrification accelerates in the US and abroad.’

Specifically, the proposal filed with Tesla asks the company to commit to a moratorium on sourcing minerals from deep-sea mining.

As You Sow writes: ‘Unlike its peers, Tesla has not supported a [deep-sea mining] moratorium, leaving shareholders concerned that the company is not addressing the serious reputational and regulatory risks of [the activity]. The supply of deep-sea minerals is also legally, technologically and financially insecure, making it expensive and risky for Tesla to incorporate deep sea-sourced minerals into its supply chain.’

Tesla is seeking no-action relief from the SEC to exclude the proposal from its proxy materials on the grounds that, per Rule 14a-8(i)(7), the resolution ‘inextricably deals with matters relating to the company’s ordinary business operations.’

In a filing with the agency, the company argues that the proposal implicates ‘core matters’ involving its business and operations, namely its selection of suppliers and the source and types of raw materials used in Tesla’s products. ‘[These] are fundamental to management’s ability to run the company on a day-to-day basis and therefore cannot, as a practical matter, be subject to direct stockholder oversight,’ it argues.

The SEC has not yet announced its decision on Tesla’s request. A request for comment from Tesla was not returned immediately.

Coral reef

Mining policies?
Unlike with Tesla, the proposal filed with GM does not ask for a commitment to a moratorium, but rather asks that the company ‘publicly disclose [its] policies on the use of deep-sea mined minerals in its production and supply chains.’ 

As with Tesla, the supporting materials highlight concerns over deep-sea mining. As You Sow states that GM has not supported a deep-sea mining moratorium or taken a public position on the issue, leaving shareholders concerned that the company is not addressing reputational, financial and regulatory risks: ‘By taking a public stance on [deep-sea mining] and deep sea-sourced minerals, GM can assure investors that it is addressing the risks… and practicing responsible sourcing.’

A spokesperson for GM says in a statement: ‘We’ll respond to As You Sow’s proposal in our proxy, which will be filed in April. I can confirm… that GM does not source material from undersea mining.’

The proposals are part of As You Sow’s recently launched biodiversity program, which it says is a response to growing shareholder concern about ‘the systemic risks posed by biodiversity loss and looming ecosystem collapse’.

‘The risks of deep-sea mining cannot be overstated, especially at an industrial scale, and companies should be prepared to act with extreme caution lest they cause irreversible harm,’ Danielle Fugere, president and general counsel of As You Sow, says in a statement. ‘Ecosystem services – the invaluable yet often ignored benefits of our environment functioning normally – are at risk, and shareholders are raising the alarm.’