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Investors probe oil and coal companies on potential for 'stranded assets' as climate policies, efficiency standards and clean energy take hold
BOSTON, Feb. 12 /CSRwire/ - On the heels of the Investor Summit on Climate Risk at the United Nations, a half-dozen investors today announced the filing of shareholder resolutions with 10 fossil fuel companies, including Exxon Mobil, Chevron, Southern Company, Hess, Anadarko, Devon, Kinder Morgan, Peabody Energy, FirstEnergy and CONSOL Energy seeking an explanation of their strategies for competing as the world moves toward a low-carbon global economy.
The resolutions are especially focused on potential carbon asset risk, or the possibility that these companies’ present and future fossil fuel-related assets will lose value as various market factors – such as energy efficiency, renewable energy, fuel economy, fuel switching, carbon pollution standards, efforts to curb air pollution and climate policy – increasingly threaten demand for fossil fuels and related infrastructure.
Citing an HSBC report estimating that the equity valuation of some oil producers could drop by 40 to 60 percent under a low-carbon scenario, the shareholder resolutions filed with Anadarko and Devon ask the companies to conduct an “…analysis of long and short term financial and operational risks to the company” posed by climate change.
Resolution filers include the Connecticut State Treasurer’s Office, the New York State Comptroller’s Office, Arjuna Capital, As You Sow, First Affirmative Financial Network, and the Unitarian Universalist Association. These shareholders believe that fossil fuel companies are not sufficiently disclosing these risks to their investors, even after a coalition of investors managing over $3 trillion of collective assets sent letters last fall to 45 of the world’s largest fossil fuel companies urging them to report on this very same concern.
“Climate-related trends such as carbon-reducing regulations and clean energy growth are a real threat to fossil fuel companies’ future profitability, but most firms have relegated it to the ‘someday’ pile when it comes to corporate priorities,” said Mindy Lubber, president of the sustainability advocacy group, Ceres, and director of the Investor Network on Climate Risk – which helped coordinate the filing of these resolutions.
"Investors have repeatedly engaged fossil fuel companies on climate change, but the results have fallen short given the threat it poses to the entire global economy," said New York State Comptroller Thomas P. DiNapoli, whose office manages more than $160.7 billion in assets and filed shareholder resolutions with Devon, an oil and gas producer based in Oklahoma and FirstEnergy based in Ohio. "The energy companies we invest in need to go back to the drawing board to determine the long-term financial risks that climate change poses to their business plans."
The letters and resolutions are part of the Carbon Asset Risk Initiative, coordinated by Ceres and Carbon Tracker, with support from the Global Investor Coalition on Climate Change, through which investors are addressing the growing concern that demand for fossil fuels will be less in a low-carbon future and that no more than one-third of proven reserves of fossil fuels can be consumed prior to 2050 if the world is to achieve its goal of limiting average global temperature increases to 2°C, as outlined by the International Energy Agency. As part of this initiative, investors have asked fossil fuel companies to assess – under both a business-as-usual scenario and a low-carbon scenario – the viability of capital expenditure plans, the risk of stranded assets, physical risk to operations from climate change impacts, and the affect of these risks on the workforce.
"These resolutions are making tackling climate change real for investors and the companies they own - this will start to align capital expenditure with reducing emissions, which is essential to avoid stranded assets," said James Leaton, Research Director at Carbon Tracker.
“The likelihood that fossil fuel companies will experience a significant threat to their valuation grows each year,” said Danielle Fugere, President and Chief Counsel of As You Sow. “These companies are producing the vast majority of climate-changing emissions and now is the time for them to reduce risk. If they are not preparing to survive in a carbon-constrained future, we expect shareholders will sit up and take notice.”
Since launching the Carbon Asset Risk Initiative in October, investors have engaged fossil fuel companies regarding their business plans and their climate risk assessment processes. Investors have requested detailed responses from the companies by the time of their next shareholder meetings in 2014. Read more about the initiative at www.ceres.org/files/investor-files/car-factsheet.
Ceres is a nonprofit organization mobilizing business and investor leadership on climate change, water scarcity and other sustainability challenges. Ceres directs the Investor Network on Climate Risk (INCR), a network of over 100 institutional investors with collective assets totaling more than $11 trillion. Ceres also directs Business for Innovative Climate & Energy Policy (BICEP), an advocacy coalition of nearly 30 businesses committed to working with policy makers to pass meaningful energy and climate legislation. For more information, visit www.ceres.org or follow on Twitter @CeresNews.
About Carbon Tracker Initiative
The Carbon Tracker initiative is a non-profit company established by its directors to align the capital markets with efforts to tackle climate change. Carbon Tracker has demonstrated the incompatibility of current capital expenditure plans in the energy sector with delivering emissions reductions to improve air quality and prevent climate change. This was captured in its 2013 report: ‘Unburnable Carbon: Wasted Capital and Stranded Assets’ Learn more at www.carbontracker.org or follow on Twitter @CarbonBubble.
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