Costco Withdraws Request to Exclude Green Century Proposal on Net Zero Targets

Media Contact: Annie Sanders, asanders@greencentury.com, 781-349-2615; Josh Chetwynd, jchetwynd@greencentury.com, 303-573-5558

Boston, November 15, 2021 – Costco has withdrawn its request to exclude Green Century’s shareholder proposal asking to adopt net zero science-based greenhouse gas emissions reduction targets. New guidance from the Securities and Exchange Commission (SEC) two weeks ago signaled that proposals asking that “companies adopt timeframes or targets to address climate change” will not be excludable, making it unlikely that Costco’s challenge would succeed.

Green Century’s proposal, which made headlines last month as a “​​litmus test for the SEC on investor requests for Paris-alignment,” asks Costco to “adopt short, medium, and long-term science-based greenhouse gas emissions reduction targets, inclusive of emissions from its full value chain, in order to achieve net-zero emissions by 2050 or sooner and to effectuate appropriate emissions reductions prior to 2030.” The proposal will now go to a vote at Costco’s annual shareholder meeting in January.

“We believe Costco has taken insufficient action to reduce its climate impact and is significantly lagging behind its peers,” said Green Century President Leslie Samuelrich. “Shareholders will now have the opportunity to directly ask Costco to set emissions targets that meet the scale and urgency of the climate crisis. This will be the first of many opportunities for investors to vote on proposals directly requesting these ambitious targets.”

Costco claims to prioritize “addressing the climate impacts attributed to our global operations and supply chains.” However, the emissions from Costco’s operations and purchased energy, heating and cooling (known as Scope 1 and 2 emissions) have increased in each reported year since 2016. Worryingly, Costco does not plan to announce Scope 1 and 2 emissions reduction targets until December 2022 and has no time-bound plans to set reduction targets for its value chain emissions, which are technically known as Scope 3 emissions.

The lack of target-setting plans for Costco’s net-zero value chain is particularly concerning, as these emissions are likely responsible for the vast majority of the company’s carbon footprint. For context, Walmart, a Costco competitor, discloses that Scope 3 emissions make up a staggering 95% of its total emissions.

Rather than accelerating its efforts on climate in response to Green Century’s proposal, Costco instead submitted a “no action request” to the SEC in September, asking for permission to exclude Green Century’s proposal from the company’s 2022 proxy ballot. Costco argued that the proposal constituted micromanagement, and could therefore be excluded.

“Costco asserted that the requested targets were ‘arbitrary,’ raising concerns about the company’s awareness of investor expectations and regulatory developments,” said Green Century Shareholder Advocate Thomas Peterson. “Far from arbitrary, there is scientific consensus that these targets must be met in order to limit warming to 1.5 degrees Celsius, a goal endorsed by nearly every government. Costco argued that adopting the targets requested in the proposal ‘would require a wholesale departure from Costco’s carefully considered approach,’ suggesting that the company’s current plans are not in line with global goals.”

Costco’s withdrawal means that shareholders will get the opportunity to vote on the proposal and thereby offer their perspective on whether the company’s current climate action plan is sufficient.

“The need for companies to set greenhouse gas targets aligned with the global push for net zero is of obvious current interest to investors.” said Sanford Lewis, director of the Shareholder Rights Group, who drafted Green Century’s response to Costco’s challenge. “Fortunately, the new guidance issued last week shows that the SEC also recognizes this need and so it was a natural outcome for the company to withdraw its challenge.”

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About Green Century Capital Management

°Green Century Capital Management, Inc. (Green Century) is the investment advisor to the Green Century Funds (The Funds). The Green Century Funds are the first family of fossil fuel free, responsible, and diversified mutual funds in the United States. Green Century Capital Management hosts an award-winning and in-house shareholder advocacy program and is the only mutual fund company in the U.S. wholly owned by environmental and public health nonprofit organizations.

*As of September 30, 2021, Costco Wholesale Corporation comprised 1.16%, 0.00% and 0.00% of the Green Century Balanced Fund, the Green Century Equity Fund and the Green Century International Index Fund. As of the same date, other securities mentioned were not held in the portfolios of any of the Green Century Funds. References to specific securities, which will change due to ongoing management of the Funds, should not be construed as a recommendation by the Funds, their administrator, or their distributor.

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