Investors call on General Motors for transparency on lobbying

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The Top of the GM or General Motors Headquarters in Downtown Detroit, The Renaissance Center © Linda Parton/123RF Stock PhotosAlmost a third of General Motors Inc. investors with nearly $2 trillion in total assets under management voted in favour of a shareholder resolution last week requesting the car manufacturer disclose its lobbying practices around vehicle emission standards.

The vote, led by Canadian responsible investment firm NEI Investments and New York City Comptroller Scott Stringer, took place last week ahead of GM’s annual general meeting and netted support from 29 per cent of the company’s investors.

In addition to calling on GM to be more transparent on lobbying practices, the resolution lambasted the company for its support for weakening clean vehicle standards in submissions to the U.S. Environmental Protection Agency and the National Highway Traffic Safety Administration in their review of corporate average fuel economy standards.

In formal comments to the two agencies last October, GM called the Obama administration’s rules for fleet-wide fuel efficiency “not technologically feasible or economically practicable.” The rules would increase efficiency by 4.4 per cent per annually starting in 2022 until they hit more than 50 miles per gallon by 2025. Instead, GM asked the agencies to consider annual increases in fuel-efficiency standards based on historic rates.

GM’s preferences are a middle ground between the Obama administration’s standards and President Donald Trump’s proposal to freeze standards at 2020 levels until 2026, increase U.S. oil consumption considerably by the 2030s and reduce the collective regulatory costs of car manufacturers.

Jamie Bonham, NEI’s corporate engagement manager, says the automobile manufacturer’s statements are at odds with its public positions on climate change and fuel efficiency.

“[GM is] saying all the right things. It wants to prepare for the transition and wants to be a leading company in that transition. It supports the Paris agreement and all that, but when it came to lobbying around the CAFE standards, it was obvious that they weren’t. They were directly lobbying a position, it seemed, that’s contrary to what they’re saying in public.”

Bonham also notes GM is a member of various industry associations, which in their own submissions to the agencies have asked for standards to be watered down even further than what GM suggested.

Bonham says NEI and the New York comptroller chose to target GM specifically because it had been less responsive to shareholder engagement than other automakers. “We found [GM] . . . not ignoring investors on this topic, but having said that, they clearly didn’t see things the way we did on this. And in conversations with other auto manufacturers, they were being much more proactive and more public about support for tighter regulations,. Essentially, it came down to, while we were having the conversation, the results of that conversation just weren’t that fruitful.”

The resolution said GM’s lobbying exposes it and its investors to several business risks related to regulatory uncertainty, reduced global competitiveness and climate change.

Bonham says the vehicle emissions standards review, “done somewhat at behest of the industry,” has created a worst-case regulatory scenario for automakers. California and 19 other states employ the Obama-era standards and have threatened to take any changes the Trump administration makes to court. The Trump administration, in return, has said it will bar California from requiring automakers to sell a higher number of electric vehicles or set its own emission rules.

“[This] will create a legal gun fight of epic proportions,” says Bonham. “The situation we have is, not only do we not know where the regulations are going to end up, but we have the potential of two different expectations in one market, which is radically inefficient from a market perspective for this company.”

To its credit, GM and other automakers have written to both the Trump administration and the state of California asking them to work together, notes Bonham.

The company would also face differing rules in the U.S. and other countries, forcing it to create numerous versions of the same vehicle to be compliant in all markets. “The direction of travel on vehicle efficiency standards is crystal clear,” says Bonham. “Almost every major market has some set of goals and targets around that.”

He notes that when stringent standards are placed on companies, they’re forced to innovate to meet them. “They’re missing out on that opportunity and that’s a significant risk.”

Advocating for changes to the regulations could also prevent climate progress, says Bonham. “We absolutely need some form of policy in order to make the progress we need to make to avoid the impacts of climate change. Any companies we have in our portfolio that are slowing that progress are amping up the systemic risks we face.”

While the resolution was ultimately unsuccessful, there was enough heft behind it that Bonham hopes it will spark GM to conduct an in-depth review of its own lobbying positions and those of its industry associations. He notes Royal Dutch Shell previously completed a similar audit and ultimately removed itself from an industry organization that didn’t align with its views.

“That is something I would love to see from GM . . . that level of disclosure and thought into, ‘How are associations influencing climate policy and does it align with us?’”

According to Canada’s lobbyist registry, GM’s Canadian subsidiary has lobbied the federal government 12 times so far in 2019, speaking with ministers and staffers in the innovation, science and economic development, transportation, natural resources, environment and climate change and finance ministries, as well as with Prime Minister Justin Trudeau.

In its registration, the company says it’s interested in lobbying around vehicle emission regulations and the “design and implementation of policies/programs associated with the federal carbon backstop and the output-based pricing system as it impacts our manufacturing facilities,” among other topics.

This article originally appeared on CIR’s companion site, Benefitscanada.com. Read the full story here.

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