Southern Company, TXU to Report to Shareholders on Climate Preparedness

Southern Company, TXU to Report to Shareholders on Climate Preparedness

Responding to shareholder requests for disclosure on how companies are planning for potential constraints on carbon dioxide and other emissions, power giants Southern Co. and TXU have agreed to report publicly on how they are planning for those scenarios. Meanwhile, Houston-based Reliant Energy has agreed to take steps to improve measurement and disclosure of the financial impact of its emissions.

Southern Company and TXU agreed to assess the impacts of and potential responses to a number of policy scenarios, including various proposals in Congress and existing state legislation to limit carbon dioxide and other air pollution responsible for smog, soot, toxic contamination, acid rain, and global warming. Both companies agreed to the shareholders' for board oversight of the report.

Reliant Energy agreed to expand its securities filings' 10-K disclosure to include an assessment of environmental issues, amend the charter of its Board Audit Committee to include an annual formal review of those issues, and establish an area on the corporate website with information about environmental issues. As a result, shareholders have withdrawn resolutions facing the three companies.

The resolutions focused on the potential risks to shareholders posed by the companies' emissions of CO2, the primary pollutant causing global warming. They were filed at all three companies by religious and institutional investor groups. The resolutions were coordinated by CERES, a coalition of investors and environmental groups, and the Interfaith Center on Corporate Responsibility (ICCR), a coalition of 275 religious institutional investors.

The shareholders heralded the agreements, which bring this year's total electric power company agreements to five out of six companies approached, as a victory for uncovering the financial risks associated with pollution and with greenhouse gases in particular.

Southern Co., the second-largest electric power company in the nation and one heavily reliant on coal as a fuel source, is known for its aggressive opposition to controls on CO2 emissions, the major greenhouse gas that comes from the burning of fossil fuels. Yet the company agreed that financial risks should be disclosed, writing in a letter to the shareholders:

We share your position that management and the Board have a fiduciary duty to carefully assess and disclose to shareholders appropriate information on the company's environmental risk exposure . . .

and agreeing to prepare a report that would include:

An evaluation of the actions the company is taking and proposes to take to respond to current and future requirements and an assessment of these current and proposed actions on shareholder value; this will include how these actions affect and will affect the company's total annual emissions of SO2, NOx and mercury and the net emissions of CO2 after accounting for offsets, for the timeframe 2000- 2020.

Similar global warming shareholder resolutions were also filed this year at American Electric Power, Cinergy Corp, and Xcel Energy. The resolutions at AEP and Cinergy were withdrawn by shareholders earlier this year when those companies also agreed to issue risk reports, while Xcel Energy challenged its resolution at the Securities and Exchange Commission and received permission to omit it from the company's proxy statement. The shareholders say that permission signals a need for clarification from the SEC that risks related to climate change should be disclosed routinely in securities filings, leading to standardization of disclosure.

The agreements come on the heels of increasing pressure on the electric power industry to address the issue of coming carbon constraints. Similar resolutions last year garnered the support of Institutional Shareholder Services, a group that advises institutional investors on proxy voting, resulting in record high votes - an average 23% vote in favor- with 27% of shareholders voting for such disclosure at American Electric Power, and 24.7% voting in favor at Southern Co.
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