Dan Romito is Consulting Partner, ESG Strategy & Integration, at Pickering Energy Partners. This post is based on a Pickering Energy Partners memorandum by Mr. Romito and Addison Holmes. Related research from the Program on Corporate Governance includes The Illusory Promise of Stakeholder Governance by Lucian A. Bebchuk and Roberto Tallarita (discussed on the Forum here); For Whom Corporate Leaders Bargain by Lucian A. Bebchuk, Kobi Kastiel, and Roberto Tallarita (discussed on the Forum here); and Restoration: The Role Stakeholder Governance Must Play in Recreating a Fair and Sustainable American Economy—A Reply to Professor Rock by Leo E. Strine, Jr. (discussed on the Forum here).
Across the existing spectrum of ESG ratings, guidelines, and frameworks, higher quality environmental scores are commonly associated with technology companies while lower relative scores are typically linked to energy companies. This is not necessarily a novel statement, but it does highlight a critical inefficiency. We feel ESG-ratings agencies and, in some cases, reporting frameworks, currently miss the mark in their respective evaluation environmental impact for both sectors. Digitalization, artificial intelligence, and big data are evolutionary trends affecting every sector; however, these trends mean something inherently different for energy. Long-term success for the energy space is contingent upon developing greener technologies and adopting advanced data analytics, yet ratings agencies provide less of an opportunity for energy companies to showcase these explicit talents.
As a result, the narrative conveyed by ESG ratings data fails to outline the longer-term economic reality for most capital-intensive businesses, particularly energy. Empirically speaking, the data indicates environmental impact metrics for the energy and technology sectors are actually converging, but existing ratings data does not reflect this. As paradigm shifts within the global economy materialize, technology and energy are becoming increasingly interlaced. As big data and technological advances continue to represent a greater proportion of the overall global economy, think about the respective “inputs” the technology world will require just to keep the lights on.
Sidley Sends Formal Comment Letter on the SEC’s Universal Proxy Proposal
More from: Beth Berg, Derek Zaba, Holly Gregory, Kai Haakon Liekefett, Leonard Wood, Sidley Austin
Kai H.E. Liekefett, Derek Zaba, and Beth E. Berg are partners at Sidley Austin LLP. This post is based on a Sidley memorandum by Mr. Liekefett, Mr. Zaba, Ms. Berg, Holly J. Gregory, and Leonard Wood. Related research from the Program on Corporate Governance includes Universal Proxies by Scott Hirst (discussed on the Forum here); The Case for Shareholder Access to the Ballot by Lucian Bebchuk (discussed on the Forum here); and Private Ordering and the Proxy Access Debate by Lucian Bebchuk and Scott Hirst (discussed on the Forum here).
On June 7, 2021, we sent a formal comment letter regarding the recent proposal of the U.S. Securities and Exchange Commission (SEC) to adopt a universal proxy (File No. S7-24-16) under the Securities Exchange Act of 1934 (as amended, the Exchange Act) (the Proposed Rule). We summarize our comments in this post (our full 20-page comment letter, including citations, can be reviewed here.
Since proxy contests are the context in which universal proxy cards would be used, we believe that our experience affords us with relevant perspectives on legal, procedural, and practical considerations. We have been involved in over 85 proxy contests in the past five years, more than any other law firm representing companies. In 2020, Sidley was ranked as the No. 1 legal advisor to companies in proxy contests by number of representations in the league tables maintained by Bloomberg, FactSet, Refinitiv (formerly Thomson Reuters), and Activist Insight.
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