by Robert Kropp
Organizations that have filed resolutions addressing oil sands operations, quantitative greenhouse gas emissions reduction targets, and coal ash waste disposal, express strong support for SEC guidance on climate change disclosure.
Undeterred by Senate inaction on climate change legislation, investors have filed a record 95 shareowner resolutions, with 82 companies, relating to climate change. The number of resolutions increased by 40% over the number filed last year.
At a press conference held yesterday to publicize the resolutions, Mindy Lubber, President of Ceres and Director of the Investor Network on Climate Risk (INCR), said, "We are focused today on the financial impact of climate change. Investors have a compelling interest in the business trends that will affect their portfolio companies. Climate change is such a trend." INCR is a coalition of more than 80 institutional investors, with collective assets totaling more than $8 trillion.
Lubber continued, "That is why the SEC, in response to a formal request from investors, recently issued guidance on the material information that companies should be disclosing on climate impacts."
In January, the Securities and Exchange Commission (SEC) issued guidance on disclosure of climate change risks and opportunities at publicly traded companies. The guidance states, "This interpretive release is intended to remind companies of their obligations under existing federal securities laws and regulations to consider climate change and its consequences as they prepare disclosure documents to be filed with us and provided to investors."
The SEC provided a number of topics that could trigger corporate disclosure requirements. They include legislative and regulatory developments, treaties or international accords relating to climate change, business trends that could create risk factors such as impacts on corporate reputations, and the potential effect on business operations of the physical impacts of climate change.
In a letter sent on March 3rd to Mary Schapiro, Chairman of the SEC, 56 signatories representing approximately $2.1 trillion in assets expressed their strong support for the guidance issued by the SEC. The letter stated, "Many of us have worked for years to improve corporate reporting related to climate change."
"However," the letter continued, "Few companies disclose sufficient information about these issues in SEC filings to allow us to make more informed investment decisions."
"Measures to protect investors by exposing hidden risks and improving transparency are essential to keep the US capital markets competitive," the letter concluded.
In the press conference, Lubber said, "The global clean energy race is underway, led by China, whose investments of $12 million every hour will result in trillions of dollars of business in the future."
"Of course the science of climate change is irrefutable, despite the stall tactics of lobbyists and protectors of the status quo," Lubber continued. "Companies in every industry should be assessing, disclosing, and managing climate related risks."
Three other speakers at the press conference described some of the shareowner resolutions relating to climate change that have been filed by their organizations.
"As a very large institutional investor, CalSTRS has a long investment horizon," said Jack Ehnes, CEO of California State Teachers' Retirement System (CalSTRS). "The SEC's interpretive guidance outlines exactly the kind of action we have been asking our portfolio companies to take with regards to the issues raised by climate change."
Ehnes described resolutions filed at ConocoPhillips and ExxonMobil, regarding the companies' oil sands operations in Alberta, Canada. The destructive environmental impacts of oil sands development, which requires environmentally damaging strip mining of large tracts of land for the extraction of oil from Canadian tar sands, has led to litigation from the Province's indigenous people, which according to Ehnes, "Could stop oil sands extraction in its tracks."
Sister Barbara Aires of the Sisters of Charity of St. Elizabeth, a member of the Interfaith Center on Corporate Responsibility (ICCR), said "For faith-based and social investors, the SEC guidance is a monumental win. Climate change will be regulated in the US, and companies can no longer under-report on climate-related risks."
The Sisters of Charity of St. Elizabeth has re-filed a shareowner resolution with Southern Company, asking that the company report on quantitative greenhouse gas (GHG) emissions reduction targets.
"Coal-burning power plants emit 80% of all the CO2 emissions by power plants in the US," Sister Aires said, "And Southern Company is the second largest emitter of CO2 by coal burning plants."
Larisa Ruoff, Director of Shareholder Advocacy at Green Century Capital Management, spoke about Green Century's shareowner resolutions, filed with five companies including Southern, regarding the companies management of coal ash, a waste product of the coal burning process that contains arsenic, mercury, lead, and other toxins filtered out of smokestacks by pollution control equipment. Coal ash is usually stored in landfills, impoundment ponds, or abandoned mines.
A December 2008 dam breach at a Tennessee Valley Authority (TVA) coal ash pond released 1.1 billion gallons of coal ash sludge over more than 300 acres in eastern Tennessee.
"The coal ash spill in Tennessee engulfed homes and damaged waterways," Ruoff said. The cost for the cleanup of the spill has been estimated at $1.2 billion by the TVA. That amount does not include the extensive legal claims that have been filed.
Green Century withdrew similar resolutions with First Energy and Xcel Energy. Its engagement with First Energy led to a public commitment by the company to stop disposing of coal ash in large ponds.
"A hazardous waste regulation can cost companies billions of dollars," Ruoff said, underscoring the risks to investors in companies that fail to develop strategies for addressing such potential risks.
In addition to the interpretive guidance issued by the SEC, other regulatory actions undertaken by the Obama administration include an endangerment finding on GHG emissions published by the Environmental Protection Agency (EPA) in December. Citing a 2007 decision by the US Supreme Court that, based on the Clean Air Act, the Agency has the authority to regulate GHG emissions, the Agency determined that the six primary GHGs threaten the public health and welfare of the American people.
In reaction to the EPA endangerment finding, the US Chamber of Commerce, claiming "lapses in EPA's process," asked a federal court to review the EPA ruling. The Chamber's position on climate change has led to several high-profile defections of companies from its ranks, as well increased attention to lobbying expenditures by trade associations. The Chamber spent more than $144 million on lobbying efforts in 2009, far more than any other organization.
A spreadsheet detailing the 95 shareowner resolutions on climate change can be found here.