Can Corporate Sustainability & Economic Growth Coexist?
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With record 109 resolutions filed, investors achieve strong results on natural gas "fracking," water, coal ash disposal and oil refinery safety at annual shareholder meetings
Submitted by: Ceres
Posted: Jun 23, 2011 – 11:14 AM EST
BOSTON, Jun. 23 /CSRwire/ - Investors achieved noteworthy victories during this year's shareholder proxy season, with a record 109 shareholder resolutions filed with 81 U.S. and Canadian companies on climate change, unconventional fossil fuel production and related sustainability risks and opportunities.
Key shareholder successes include majority and near-majority votes with water infrastructure services company Layne Christensen (92.8%, sustainability reporting), oil company Energen Corporation (49.5%, fracking), electric utility Ameren (52.7%, coal ash) and oil company Tesoro (54.3%, oil refinery risk).
Investors also withdrew 45 resolutions after the companies made positive climate change and energy-related commitments on resolutions concerning natural gas fracking, water scarcity, coal ash disposal and oil refinery risk management.
Filers of the resolutions include some of the nation's largest public pension funds, such as the California State Teachers' Retirement System (CalSTRS); state treasurers and comptrollers acting on behalf of state retirement funds, such as the Connecticut Treasurer and New York State and New York City Comptrollers; and religious, labor and other institutional shareholders. Collectively the 35 lead filers manage over $500 billion in assets. For a complete list of the resolutions and lead filers, see the 2011 Resolution Tracker.
"The strength of this year's proxy season shows unwavering investor concern about how companies are managing the environmental risks of fossil fuel sourcing and the ongoing shift to a clean, low-carbon global economy," said Mindy S. Lubber, president of Ceres, which coordinates the shareholder resolutions along with the Interfaith Center on Corporate Responsibility (ICCR). "Investors want stronger assurances companies are effectively navigating these key market trends."
Recent research by the Pew Charitable Trusts, for example, shows clean energy investment and finance worldwide has grown six-fold since 2004, with Europe and China seeing $94 billion and $54 billion, respectively, in such financing in 2010, and the US trailing with $34 billion.
Natural Gas Fracking
Investors filed resolutions with nine oil and gas companies pressing them to disclose their plans for managing water pollution, chemicals use and other risks associated with fast-growing natural gas hydraulic fracturing.
Resolutions that went to a vote received substantial support, including 43.7% at Carrizo Oil & Gas, 40.5% at Chevron, 49.5% at Energen Corporation, 28.2% at ExxonMobil and 41.7% at Ultra Petroleum, which was double last year's vote. Overall, the average fracking vote was 40%, up from 30% in 2010. The resolution receiving the lowest vote, ExxonMobil, was the only fracking resolution not supported by proxy advisory firm Glass Lewis.
Resolutions were withdrawn with Anadarko Petroleum, Cabot Oil & Gas, El Paso Corporation and Southwestern Energy in response to the companies' agreements to provide better disclosure on the potential consequences of fracking activities.
"Hydraulic fracturing can potentially poison local water supplies, pollute the air and leave us with a waste management nightmare," said Thomas P. DiNapoli, New York State Comptroller, who filed resolutions with Carrizo and Cabot as trustee of the $140.6 billion New York State Common Retirement Fund. "Shareholders and the public need to be assured that companies fully appreciate the regulatory, legal, environmental and reputational risks at stake. Natural gas is a crucial part of the nation's energy supply, but it has to be extracted the right way."
Fracking resolutions were coordinated by the Investor Environmental Health Network (IEHN) and Green Century Capital Management, with assistance from Ceres. For details on the resolutions, see http://www.iehn.org/resolutions.shareholder.php.
Investors filed a record 28 resolutions with 18 electric power providers. In response to pending EPA regulations requiring additional pollution reductions from utilities, many of the resolutions sought information from power companies on the risks and opportunities from coal-based power production.
Several resolutions were withdrawn after companies committed to provide stronger disclosure to shareholders on how they are managing these and other pressing issues. For example, water-availability focused resolutions were withdrawn from Dominion and Southern Company; resolutions on the financial risks of reliance on coal-fired power plants were withdrawn from Entergy and Xcel; and an air emissions resolution was withdrawn from FirstEnergy.
Several of the resolutions that went to a vote received high votes, such as 52.7% and 36.1% support on coal ash resolutions at Ameren and FirstEnergy, respectively, and a vote of 31.4% for a first-time resolution relating to risks from reliance on coal at FirstEnergy.
"The strong votes on coal ash disposal demonstrate that a significant portion of shareholders require increased transparency on the companies' efforts to reduce the environmental and health hazards associated with coal combustion waste," said Larisa Ruoff, Director of Shareholder Advocacy for Green Century Capital Management and lead filer on the resolutions with FirstEnergy and Southern.
In response to shareholder requests, Dominion, Southern Company and PPL Corporation agreed to significantly expand reporting and disclosure on water availability risks and plans for mitigating those risks. Power plants account for 40% of the nation's freshwater withdrawals. Growing water scarcity, exacerbated by climate change, is creating challenges for electric power producers in many parts of the U.S.
Southern Company agreed to prepare a comprehensive "water action report," in response to a resolution filed by the Connecticut Treasurer's Office, as fiduciary of the Connecticut Retirement Plans and Trust Funds. The report will describe the company's water management philosophy, water use and consumption by generation type, water discharges, and emerging risks, including water risks in its fuel supply chain. One of the nation's largest electric generators, Southern is based in water-strapped Atlanta, Georgia, where a federal judicial order may reduce the city's water withdrawals by as early as 2012, and credit rating agency Fitch has recently warned of downgrading the municipal government’s bond ratings over water concerns.
Investors persuaded Virginia-based Dominion to commit to respond to the Carbon Disclosure Project's water survey, which asks companies to report their water use and risks associated with changing water availability. Pennsylvania-based PPL agreed to report on the water intensity of its generation, its water resources and cooling system types and water rights of major facilities.
Oil Refinery Safety
Two first-time resolutions with oil and gas companies on oil refinery safety received high votes: 54.3% at Tesoro and 43.3% at Valero Energy. In addition, an identical resolution, filed at Sunoco, was withdrawn after the company agreed to adopt new disclosure and safety practices. Filed by the AFL-CIO Reserve Fund, the resolutions call on the companies' boards of directors to disclose the boards' oversight of process safety management, staffing levels, and the inspection and maintenance of refineries and other equipment. The resolutions come in the wake of a string of deadly incidents in the refinery industry during the past year that led to 19 deaths and 25 serious injuries.
Investors filed nearly two dozen proposals requesting a sustainability report, the majority of which asked that the reports include climate or greenhouse gas (GHG) reduction strategies. Among the highlights, Walden Asset Management re-filed a resolution with Layne Christensen this year after the company resisted producing a sustainability report, even after a record-breaking 60.3% vote on the resolution last year. This year, the company took the unusual step of recommending a vote "FOR" Walden's resolution, leading to the remarkably high 92.8% vote. The company also published its first sustainability report.
Comprehensive sustainability reports, issued on a regular basis, provide valuable information that allows investors to evaluate companies’ environmental, social, and governance (ESG) risks and opportunities. In addition, the reporting process frequently has a transformative impact on companies as they begin to measure and comprehensively manage risks and opportunities from energy and water use to waste management to stakeholder concerns and emerging risks in supply chains.
Proxy Advisory Support
Proxy advisory firm support remains strong. ISS supported approximately 70% of the resolutions, while Glass Lewis supported about 18% of the Ceres-tracked proposals.
For a complete list of the resolutions and lead filers, see the 2011 Resolution Tracker: www.incr.com/resolutions.
Ceres leads a coalition of investors and NGOs that works with companies to address climate change, water scarcity and other sustainability challenges. Ceres directs the $10 trillion Investor Network on Climate Risk. For further information visit http://www.ceres.org.
About Interfaith Center on Corporate Responsibility (ICCR):
For nearly 40 years the Interfaith Center on Corporate Responsibility (ICCR) has been a leader of the corporate social responsibility movement. ICCR's membership is an association of 275 faith-based institutional investors, including national denominations, religious communities, pension funds, foundations, hospital corporations, economic development funds, asset management companies, colleges, and unions. Each year ICCR-member religious institutional investors sponsor over 200 shareholder resolutions on major social and environmental issues. For more information, visit http://www.iccr.org.
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