Climate change shareholder proposals hit record

Mar 05, 2010

2010 proxy climate is heating up for companies

A coalition of institutional investors and environmental groups is promising a surge of climate change-related resolutions in 2010. Ceres, the Interfaith Center on Corporate Responsibility (ICCR) and affiliated investors announced Thursday a record 95 climate change shareholder resolutions with 82 US and Canadian companies. Major targets are coal, electric power and oil producers, house builders, big box retailers and financial institutions.

The 40 percent increase in resolutions filed over last year 'is a first sign of the growing pressure on companies to disclose climate risks and opportunities in the wake of the recent SEC climate disclosure guidance and other recent policy developments,' according to a press release.

'This isn't just another proxy season,' commented Jack Ehnes, CEO of the California State Teachers' Retirement System, a $131 bn pension fund, during a webcast yesterday. 'The volume of resolutions speaks volumes about investor interest in this area. The need for this sort of information will grow every year and investors will be laser focused on this going forward.'

Many of the resolutions aim directly at core materiality issues that were the foundation for the SEC's January 27 interpretive guidance on climate disclosure. For example, resolutions were filed at ExxonMobil and ConocoPhillips asking them to report on regulatory, legal and reputational risks, as well as environmental impacts from their Canadian tar sands operations.

'The legal, regulatory and reputational risks posed by oil sands extraction represent a real long term danger of value erosion to our portfolios,' said Ehnes. 'To date, Exxon and Conoco reporting has fallen short regarding information about the intense environmental and social impact of oil sand extraction activities.'

Ehnes noted that these sorts of risks are all specified in the SEC guidance. 'Our shareholder resolutions underscore why the guidance is so critical,' he said. 'The guidance helps companies define the information they should be reporting to investors and is exactly the kind of information we, as a long term investor, have been seeking for some time.'

Other resolutions seek disclosure from electric utilities, including Southern Company, and coal producers such as Consol and Massey, on their plans for adopting greenhouse gas reduction goals in anticipation of expected carbon-reduction regulations. In addition, the Southern Company received a new type of resolution asking for a report on the hazards of coal waste disposal.

'We believe Southern is particularly exposed to risk because of the company's current ash management practices,' said Larisa Ruoff, director of shareholder advocacy at Green Century Capital Management. The coal ash resolution with Southern is one of five such resolutions this year. Green Century has withdrawn similar resolutions with First Energy and Xcel Energy.

'The key point is companies in nearly every industry should be assessing, managing and disclosing climate-related impacts on their business and supply chain,' added Mindy Lubber, president of Ceres, which helps coordinate shareholder filings. 'Investors don't want a repeat of 2008 and 2009 when weak, poor transparency and disclosure of subprime mortgages and credit default swaps triggered massive losses. Too often investors heard about material, hidden risks only after share prices crumbled. They'd like to avoid that happening again and it could happen with climate change. Investors want to know which companies are prepared for climate change and which are not.'

Ehnes notes that IROs play a large part in getting investor concerns to their boards. 'However this needs to be a very direct conversation with the companies we own and a conversation that happens in the boardroom,' he said.

Sister Barbara Aires of the Sisters of Charity of Saint Elizabeth, a member of ICCR, believes such a conversation would not only be a strong corporate asset but is also a moral imperative. 'Companies are faced with new rules and must be more transparent about risk while at the same time implementing the strategies that we need for our environment and long-term growth in a green economy,' she said.

The Ceres/ICCR press release notes investors have made significant progress with companies, successfully negotiating 28 withdrawals thus far this year after the companies made specific commitments in response to the resolutions.

For example, a resolution seeking a report responding to rising pressure to reduce carbon emissions was withdrawn from the now-merged coal companies Alpha Natural Resources and Foundation Coal – a first-ever withdrawal from a coal company.

Resolutions concerning rainforest sustainability and deforestation issues were withdrawn with International Paper and Weyerhaeuser. A resolution seeking a report on legal and regulatory risks of Canadian First Nations' opposition to a major pipeline project in the oil sands region was withdrawn at Canada's Enbridge.

For a full list of withdrawals, see www.incr.com/resolutions.

By Jeff Cossette