Record Number of Shareholder Actions Target Climate Change

Record Number of Shareholder Actions Target Climate Change

Charging bull -- CC licensed by Flickr user David Prior

Although legislation has yet to be passed in the U.S., investors are turning up the pressure on public companies to disclose the risks and opportunities they face from climate change.
They filed 95 shareholder resolutions (PDF) during the 2010 proxy season so far -- a 40 percent increase over the year before -- seeking more information about how companies are measuring and managing their carbon footprints, preparing for risks, and moving to take advantage of potential opportunities.

The resolutions were filed before the U.S. Securities and Exchange Commission issued guidance in late January that clarifies what public companies need to tell investors about climate change risks, which may include physical, financial, regulatory or reputational risks. 

"The key point is companies from nearly every industry … should be assessing, managing and disclosing climate related impacts on their businesses and their supply chains," Mindy Lubber, president of the nonprofit Ceres, told reporters during a conference call Thursday.

The announcement comes a day after 56 investors managing $2.1 trillion in assets sent a letter of praise (PDF) to the SEC for its climate change guidance. A week earlier, Sen. John Barrasso (R-Wyo.) introduced legislation that would prevent the disclosure requirment.

"It's mystifying why politicians would be trying to strip away disclosure guidance that leading U.S. investors have been pushing the SEC to provide," Ceres Spokesman Peyton Fleming said in a statement provided to "On the heels of the subprime mortgage fiasco that has left our economy in shambles, you'd think politicians would be more sensitive to investors wanting improved corporate transparency and disclosure on material risks such as climate change."

Shareholders have long sought more environmental information from companies to help them make investment decisions. While their cries have grown louder in recent years, their successes have also been stacking up. Twenty-eight of the resolutions filed in the 2010 proxy season have been successfully withdrawn, meaning that companies took action or made commitments in response.

For example, Costco agreed to produce a sustainability report that includes greenhouse gas emissions reduction strategies and water use information, while Suncor will now respond to the Carbon Disclosure Project and tell its shareholders how it has incorporated the potential costs of carbon into its long-term business planning. Chevron agreed to track the carbon content of its products and McDonald's promised to promote responsible pesticide use in its potato supply chain.

A wide range of industries ended up in investors' crosshairs, including oil and gas, coal, electric power generation, IT, finance, food producers, pulp and paper, retail and hospitality. Several utilities, for instance, including Southern Co., CMS Energy and MDU Resources, are feeling investor heat over coal ash management practices that could expose them to environmental and regulatory risks.

Several big-name retailers such as Safeway, Target and Lowes also received shareholder resolutions from investors wanting them to adopt climate change principles. Others, including ExxonMobil and ConocoPhillips were asked to disclose the reputational, legal and regulatory risks from their operations in the Canadian tar sands.

There is typically considerable discussion between investors and the company in question before a resolution is filed, according to Jack Ehnes, CEO of the California State Teachers' Retirement System (CalSTRS), the country's second largest public pension fund, who said it is "done after a significant lag in responsiveness at the company or some change in direction."

CalSTRS, he said, seeks to work with companies not as an adversary but as a constructive owner. The SEC's interpretative guidance has had an impact on the tone of the conversations now with "the backdrop being compliance."

"Before it was about information we'd like to have," Ehnes said. "Now it's about information we have to have."