WASHINGTON, D.C., January 16, 2003 — In an unprecedented move, the five largest carbon dioxide (CO2) emitters among U.S. electric power companies – American Electric Power (AEP), Southern Co., Xcel Energy Inc., TXU Corp., and Cinergy Corp. – are simultaneously facing global-warming and other pollution-related shareholder resolutions during the same annual meeting season.
The actions were announced Thursday by a coalition of shareholders that included the State of Connecticut Plans and Trust Fund and members of the Interfaith Center on Corporate Responsibility (ICCR) including the Presbyterian Church, USA.
The coordinated action reflects a growing concern among pension funds about the “hidden risks” involved in industries that contribute to global warming.
The shareholder resolutions focus on the potential risks to shareholders posed by the five utilities’ production of CO2, the primary greenhouse gas emission linked to global warming.
The resolutions ask that the companies report to their shareholders on “(a) the economic risks associated with the company’s past, present, and future emissions of carbon dioxide, sulfur dioxide, nitrogen oxide and mercury emissions, and the public stance of the company regarding efforts to reduce these emissions and (b) the economic benefits of committing to a substantial reduction of those emissions related to its current business activities (i.e. potential improvement in competitiveness and profitability).”
Resolution filers also included The Sinsinawa Dominicans, Sisters of Charity of Elizabeth, NJ, and Sisters of St. Dominic of Caldwell, NJ at Southern Company, Brethren Benefit Trust, Inc. at Xcel Energy, Benedictine Sisters at TXU, and Christian Brothers Investment Services at AEP.
The simultaneous filings were coordinated by ICCR and CERES, a coalition of investors, environmental organizations, and public interest groups. Connecticut filed at AEP and the Presbyterian Church USA at Cinergy.
State of Connecticut Treasurer Denise Nappier explained her fund’s interest in disclosure and reduction of portfolio company emissions: “Investors need the full picture to assess companies’ long-term investment value. Air pollutant emissions are some of the most measurable, relevant, and significant indicators of risk for this particular industry, and it’s our responsibility to ask what the company’s plans are to address that risk. We’re also concerned about the risks to investors global warming itself may bring, and think it’s important that our portfolio companies are not contributing to the problem.”
The global-warming resolutions filed at the five companies read, in part, as follows: “We believe that taking early action on reducing emissions and preparing for standards could better position companies over their peers, including being first to market with new high-efficiency and low-emission technologies. Changing consumer preferences, particularly those relating to clean energy, should also be considered. Inaction and opposition to emissions control efforts could expose companies to reputation and brand damage, and regulatory and litigation risk.”
Jim Newland, chairperson of the Mission Responsibility Through Investments Committee of the Presbyterian Church USA, said: “We need to know now where a utility will stand down the road when there are federal regulations in place. If the company has not made the right amount of progress toward investing in alternative sources it will be extremely expensive and detrimental to stockholder return to adapt at that point. This information is all part of the company’s financial risk picture and it’s important for shareholders to have.”
The filers say that the issue is not particular only to the five companies targeted this season. “This is a material financial issue to the entire electric utility industry, and the kind of disclosure we are seeking should really become standard practice industrywide,” Newland said.
The 2003 proxy season resolutions come at a time of deepening controversy over regulation of the four pollutants emitted during electric power generation.
All four types of emissions – including sulfur dioxide (SO2), nitrogen oxide (NOx), and mercury (Hg) – are known public health risks, and, as the source of 10 percent of worldwide carbon dioxide emissions, the U.S. electric power sector is one of the biggest greenhouse gas generators on Earth.
Mercury and carbon dioxide are not currently regulated, though current proposals in Congress would seek to reduce those emissions.
The Bush Administration backtracked on a campaign pledge to regulate CO2 from the electric power industry and, in a controversial decision, recently announced a rollback of Clean Air Act provisions requiring companies to upgrade aging power plants to reduce currently regulated emissions.
Today, there is a split in the utility industry about the regulation of CO2. Some largely coal-burning utilities are fighting to stave off CO2 regulation, while others complain of business uncertainty generated by putting off such rules.
Some of the latter group of companies support versions of four-pollutant, or “4P”, legislation that would regulate carbon dioxide in addition to the other three emissions.
Meanwhile, individual states have begun to take action to regulate CO2 and other emissions in the absence of federal action.
In July 2002, 11 Attorneys General -including Connecticut Attorney General Richard Blumenthal- wrote to President Bush, outlining their concern over the U.S. Climate Action Report’s failure to recommend mandatory reductions of greenhouse gas emissions.
They declared that states are being forced to fill the federal regulatory void through state-by-state regulation and litigation, increasing the ultimate costs of addressing global warming, and urged a reconsideration of his regulatory position, and adoption of a “comprehensive policy that will protect both our citizens and our economy.”
Massachusetts and New Hampshire have enacted legislation capping power plants emissions of carbon dioxide and other air pollutants, while the governors of New England states have banded together to set regional targets for local power plants.
The filers and their supporters expressed concern over companies’ competitive stances and ability to move to reduce CO2 emissions in the absence of federal policy.
CERES Executive Director Robert K. Massie said: “The failure of the U.S. government to set standards is already creating a climate of business uncertainty. It creates a situation where the companies are vulnerable to the whims of state regulation, or even litigation costs as suits are brought against the largest emitters. Those companies that haven’t invested in renewables and other cleaner technologies will be hit the hardest.”
Massie added: “This is an industry with 50 – 75 year infrastructure investments. It makes no sense for companies to invest millions in cleaning up old technologies now and then have to reinvest to change over again in just a few years. Ignoring the writing on the wall is just not good corporate governance.”