As early as 2004, publicly traded companies were beginning to assess their risks Vis à vis climate change. At that time, 13 U.S. public pension funds, managing a total of nearly $800 billion in assets, called on the U.S. Securities & Exchange Commission, or SEC, to mandate public companies disclosing climate change risks to shareholders in their securities filings.
The ongoing economic turmoil of 2008 temporarily obscured that agenda, but on March 2 of 2009, Deloitte, a professional services firm, issued a white paper highlighting the growing importance of corporate board's attention to climate risk factors in dictating a company's direction.
The paper is based on a survey of 220 directors at U.S. companies which have $1 billion or more in revenue, and highlights such concerns as emerging regulations, increased reporting requirements, increased pressure from shareholders, and market demands for green products and technologies.
The survey concluded that at least one-half - and up to 79 percent - of directors believe that corporate responsibility and sustainability (CR&S) is integrated into business strategy and risk management.
In spite of that, 59 percent of companies have no set goals for reducing greenhouse gas emissions, and 40 percent of directors don't think shareholders care about climate change.
The reverse is actually true. According to Chris Park of Deloitte's Enterprise Sustainability group, who took his figures from a Ceres report, 57 climate-related shareholder resolutions were filed with U.S. companies in 2008, half of which were subsequently withdrawn when the companies agreed to forward-thinking climate-related commitments. These included a shareholder resolution which drew more than 39-percent support, directed against CONSOL Energy, a coal company. This particular vote is the biggest majority ever on a global warming shareholder resolution. Ceres (pronounced "series") is a national network of investors, environmental organizations and other public interest groups which work with companies and their investors to deal with sustainability issues.
Park expects that trend to continue upward. In addition to shareholder pressure, climate change risk reporting is also being spurred by more stringent state and federal regulations, and SEC regulations.
For example, New York Attorney General Andrew Cuomo (with the support of former U.S. Vice President Al Gore) recently pursued action against - and reached settlements with - Xcel Energy Inc. and Dynegy Corporation arising out of their operations as coal-fired electricity generators. Under the deal, Xcel agreed to publicly disclose future potential costs tied to climate change as a result of its operations in Minnesota, Colorado, Michigan, Minnesota, New Mexico, North Dakota, South Dakota, Texas, and Wisconsin. Dynegy agreed to similar reporting to the U.S. Securities and Exchange Commission.
Xcel Energy, the fifth largest emitter of greenhouse gases among US utilities in 2006, operates two nuclear power plants in Minnesota, and coal-fired plants in various other states. Two of Minnesota's coal-fired plants have undergone retrofitting to gas-fired plants, but the legacy costs of burning coal remain an issue in Minnesota. In Colorado, proposed shutdowns of the Arapahoe and Cameo generating stations leave additional, lingering legacy costs.
Kate Smolski, senior legislative coordinator at Greenpeace (U.S.), was not the only representative to chide Xcel Energy, but was perhaps the most effective in stating her opposition to Xcel's policies.
"Some in the business community have taken a lead and some are lagging behind. Xcel is still talking about a coal-burning power plant (the Comanche 3 in Pueblo, Colo.), and you cannot solve climate change and build a coal-burning power plant. Period."
Dynegy, which owns power plants in 11 states, has been labeled the "king" of coal-fired generation in the U.S. by the National Environmental Trust, an environmental-related public relations firm and offshoot of various foundations including the Pew Charitable Trusts and the W. Alton Jones Foundation.
Gore described the reporting deals as "a key step in the effort to solve the climate crisis". Cuomo noted that shareholders have the right to know all the financial risks associated with coal-fired generation, and added that inquiries were still pending against other offenders like Dominion Resources Inc., Peabody Energy Corp., and AES Corp., all of which received subpoenas in 2007.
In the latest move to hold public companies accountable for shareholder risk as a result of climate change, a December, 2008 letter to President Barack Obama - endorsed by such entities as Investor Network on Climate Risk (INCR), the Investor Environmental Health Network (IEHN), and the Interfaith Center on Corporate Responsibility (ICCR) - and signed by no less than the Office of the Comptroller of the City of New York, noted shareholder advocates Robert A.G. Monks and Amy L. Domini, the Calvert Group, Domini Social Investments, Trillium Asset Management Corporation, Boston Common Asset Management, and Catholic Healthcare West, asks the President to reverse a five-year pattern in which the SEC has blocked shareholders from using proxy resolutions to demand better disclosure on climate risks as faced by individual companies. The letter requests action within the first 100 days of Obama's administration.
Obama has moved to limit CEO pay, but continued economic decline has put the proxy resolution request on the back burner. Hopefully, this issue will be addressed in the near future, before the economically timid and climate-risk fearful withdraw completely from Wall Street, leaving nothing but an address and the statue of a bull to mark the place where America's business fell to its knees.
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