CNX Responds to Institutional Shareholder Services Regarding Recent Shareholder Proposal
April 21, 2023
Institutional Shareholder Services (“ISS”)
702 King Farm Boulevard, Suite 400
Rockville, Maryland 20850
Dear Sir or Madam:
We write to express our disappointment with the recently published ISS Proxy Analysis & Benchmark Policy Voting Recommendations (“ISS Report”). In particular, we take issue with ISS’ recommendation regarding a shareholder proposal from Handlery Hotels (via Proxy Impact) about how CNX’s lobbying and policy influence activities align with the Paris Agreement (the “Handlery Proposal”). Despite five full pages of commentary, you fail to mention the point we have been making for weeks through our public filings: CNX does not lobby against the Paris Agreement. The Handlery Proposal is a thinly veiled sham proposal and to treat it otherwise is poor corporate governance – which ISS would typically criticize. Thus, we feel compelled to reiterate four key points.
First, CNX does not lobby, either directly or indirectly through membership in trade associations, against the Paris Agreement. We made that clear in the one-page report we issued and filed with the SEC in response to the Handlery Proposal. ISS notes this in its report and we reiterate here that our lobbying and policy influence activities focus on local policy initiatives that directly impact our business, such as local license to operate issues.
Second, instead of focusing on what yet another third-party has to say about CNX’s written disclosure on a topic that it does not actively lobby about, we urge shareholders to look at what CNX is doing. As disclosed in our Corporate Responsibility Report, our Proxy Statement, and other public communications, CNX has achieved over a 90% reduction in GHG emissions since 2011, and we invest millions of dollars of capital into methane emissions reduction technologies to achieve continued reductions in Scopes 1 and 2 CO2e. We have set goals to further reduce our Scope 1 and 2 CO2e emissions by 67% and 59% respectively across our production and gathering and boosting segments by 2024 to reach a methane intensity target below 0.020%. Despite these efforts being documented and publicly disclosed, we are being asked to undertake an additional meaningless paperwork exercise to prove a negative. To say that this is an inefficient use of company resources is an understatement.
Third, the ISS Report cites a March 2023 report from InfluenceMap, also a third-party ratings service, regarding CNX’s policy engagement activities. Curiously, it fails to mention the following statement contained in the InfluenceMap report: “CNX does not appear to hold any memberships to industry associations currently covered by InfluenceMap’s database. InfluenceMap is therefore unable to provide an overview of CNX’s indirect climate policy engagement via industry associations.” We think this point should be highlighted in the ISS Report since this statement is an affirmation that we are not engaged with organizations conducting such activities.
Lastly, and most importantly, as communicated to you previously in a letter dated March 29, 2023 and through various other communications we have filed with the SEC since, the Handlery Proposal is an abuse of the shareholder engagement process. As we have stated publicly for weeks, Handlery Hotels, our shareholder, has refused to engage with CNX about its proposal. As far back as February 21, 2023, when we communicated to Handlery Hotels our opposition statement to the Handlery Proposal, Handlery Hotels has ignored our overtures to meet with us and engage in meaningful dialogue. Instead, we see a filing by Proxy Impact regurgitating its original messaging, which appears designed to advance its agenda of benefiting financially from the cottage industry of mass shareholder proposal submissions, without directly addressing CNX’s actions and publicly disclosed lack of lobbying against the Paris Agreement. For over two months, Jon Handlery and Handlery Hotels have ignored our requests to discuss the Handlery Proposal. To acquiesce to Proxy Impact’s demands without meaningful direct engagement with the shareholder of record is bad corporate governance. By association, your recommendation to support the Handlery Proposal is support for poor governance, and we urge you to reconsider.
We know that ISS typically does not engage with issuers during the time between their proxy publication and annual meeting, but we remain willing and eager to discuss these issues directly with you. We hope you will consider revising your report, and we will continue to engage directly with our other shareholders (and Handlery Hotels if they ever decide to respond to us) about the meaningful actions CNX is taking to reduce emissions and better the communities in which we operate.
To be clear, we continue to recommend a vote “AGAINST” the Handlery Proposal and suggest to our shareholders, including any that are recipients of the ISS Report, to review the above points and research the tangible impacts CNX is making before passing judgment on a shareholder proposal that its own proponent is unwilling to discuss.