BOSTON – Investors engaging with U.S. companies on the financial risks and opportunities from climate change achieved breakthrough results during the 2008 proxy season. A record 57 climate-related shareholder resolutions were filed with U.S. companies, of which nearly half were withdrawn after the companies agreed to positive climate-related commitments. Remaining resolutions that went to a vote received record high average voting support of 23.5 percent, including 39.6 percent support for a resolution filed with coal company CONSOL Energy, the highest vote ever on a global warming shareholder resolution.
The ’08 proxy season was marked by several major victories, including Ford Motor Co.’s detailed plan for reducing greenhouse gas emissions from its vehicles by 30 percent. Two major homebuilders, Centex and KB Home, also announced major commitments to increase the energy efficiency of the homes they build beginning in 2009. These actions will dramatically reduce direct and indirect greenhouse gas emissions from the millions of vehicles and homes that the three companies make each year.
“Growing investor pressure is prompting more companies to see the value of making environmentally sound products,” said Mindy S. Lubber, president of Ceres, a leading coalition of investors and environmental groups that helped coordinate the shareholder filings. “By re-thinking their strategies with high energy prices and climate change in mind, these companies will have a distinct competitive advantage in the years ahead.”
“We are encouraged by the steady, progressive steps taken during the 2008 proxy voting season to address the momentous challenge posed by climate change,” said Connecticut State Treasurer Denise L. Nappier, principal fiduciary of the state’s $26 billion pension fund which filed resolutions with Ford and several other companies. “Our interest is all about protecting the long-term value of our investment portfolio and the retirement security of millions of American workers. It’s imperative that our companies plot a course for sustaining business profitability and investment success in a carbon-constrained society.”
“As concerns about climate change and energy prices continue to grow, so too will the demand for energy efficient products,” said Lance E. Lindblom, president and CEO of the Nathan Cummings Foundation, which filed half a dozen resolutions with homebuilders this year. “As an investor, we’re pleased to see both Centex and KB Home positioning themselves to take advantage of this trend.”
“Companies in all sectors need to get ready now to prosper in a world of higher energy costs and carbon constraints. The crisis in the auto industry has shown how quickly business models can become obsolete,” said Leslie Lowe, director of the Energy and Environment Program at the Interfaith Center on Corporate Responsibility (ICCR), an association of 300 faith-based institutional investors who have been actively engaging companies on climate change for nearly two decades.
Shareholders also filed first ever resolutions with oil companies on the far-reaching environmental impacts from Canada’s tar-sands oil extraction project. Resolutions with ConocoPhillips and Chevron received strong support of 27.5 percent and 28.6 percent, respectively.
The 2008 global warming resolutions, seeking emission reductions and greater disclosure from companies on their strategies to address climate-related business trends, were filed by state and city pension funds and labor, foundation, religious and other institutional shareholders. The filers collectively manage more than $300 billion in assets.
Of the 57 global warming resolutions that were filed, 25 were withdrawn after companies responded positively to the filers’ requests and 26 went to a vote at corporate annual meetings. The remaining five resolutions were omitted by the SEC or withdrawn by the filers due to technicalities. (One resolution, at Meredith Corporation, has not yet gone to vote.)
This year’s climate resolutions also received the highest ever support from proxy voting advisory firms. Risk Metrics Group supported 19 of the 26 resolutions that went to vote, representing 73 percent support, up from 67 percent n 2007. Proxy Governance Inc. supported 15 of the 26 resolutions, a 5 percent increase in support from 2007.
In stark contrast, Glass, Lewis & Co. recommended support for only one of the resolutions this year, after supporting three resolutions last year. Investors are concerned that Glass, Lewis is not responding to the growing investor concern about climate change governance at leading companies.
In addition to the 57 climate-specific resolutions, 26 other resolutions were filed asking companies to provide a sustainability report to investors which would include information about how the company is managing climate risk, among other social, environmental and governance issues. A record 80 percent of these resolutions were withdrawn after the companies agreed to issue a sustainability report to shareholders or committed to produce an in-depth report on sustainability policies and performance. The constantly growing shareholder support for sustainability reporting was shown by the 28 percent average support for the five resolutions that went to a vote.
Below are highlights from the 2008 global warming proxy season:
Ford – After many years of shareholder engagement, Ford became the first U.S. auto company to provide a detailed plan of how it plans to reach the goal of reducing by at least 30 percent the greenhouse gas (GHG) emissions from its new vehicle fleet by 2020. As a result of this announcement, the resolutions filed at Ford by the Sisters of St. Dominic of Caldwell, NJ and the Connecticut State Treasurer’s office were both withdrawn.
Centex – In the wake of several years of climate-related resolutions filed by the Nathan Cummings Foundation, Centex announced it would implement its Energy Advantage Program in all new homes beginning January 1, 2009. The program is expected to make the company’s homes up to 22 percent more efficient than those built to the most widely used code, the 2006 International Energy Conservation Code. As part of the Centex Energy Advantage Program, all homes will be equipped with a power monitor allowing homeowners to track how much energy they use.
KB Home – KB Home responded to a resolution from the Nathan Cummings Foundation and informed the foundation of its intent to publish a sustainability report including extensive information on climate change. Accordingly, Nathan Cummings withdrew the resolution. In its sustainability report, released in July, KB Home also took a leadership position within the homebuilding industry by adopting a company-wide standard that all its homes will meet ENERGY STAR certification requirements beginning with new communities opening in 2009.
ConocoPhillips & Chevron – Trillium Asset Management filed the first ever resolution at an oil company calling for disclosure on the risks associated with oil extraction from tar sands in Alberta, Canada. This resolution received 27.5 percent support from ConocoPhillips shareholders. In addition, a resolution was filed by the Presbyterian Church (USA) encouraging ConocoPhillips to set GHG reduction targets for operations and products. This resolution received 29.4 percent support. Similar resolutions were also filed at Chevron by Green Century (28.6%) and Sisters of St. Dominic of Caldwell, NJ (10.4%).
ExxonMobil – Four resolutions were filed with ExxonMobil this year. One resolution – receiving 30.9 percent support, representing shareholders owning over $120 billion of company stock – requested that the company adopt quantitative goals for reducing GHG emissions from its products and operations. Another resolution, requesting a policy for research and development of renewable energy, received 27.5 percent support. The Rockefeller family publicly supported all four of the resolutions at ExxonMobil.
El Paso – Leading to the withdrawal of a resolution filed by Catholic Health East, El Paso agreed to discuss as part of its sustainability report the company’s GHG emissions inventory, efforts to reduce and address GHG emissions and the company’s position on emissions reduction public policy.
Kroger – The Nathan Cummings Foundation filed a resolution with Kroger, the grocery retailer, requesting a report on the company’s climate change strategy and GHG emission reduction targets. For the second year in a row, this resolution received near record high support, with 38.3 percent of shares voted supporting the request. Other companies, such as Standard Pacific and Ultra Petroleum, also continue to receive repeated high votes (in the low- to mid-30s) on climate resolutions, but have failed to respond to the resolution requests.
Electric Power & Coal – Five electric power companies – Allegheny Energy, Alliant Energy, Dominion Resources, FirstEnergy and Southern Company – agreed to report on their strategies to significantly boost energy efficiency as a way to reduce greenhouse gas emissions. Each of the five utilities generates much of its electricity from coal-fired power plants that will be especially vulnerable to carbon-reducing regulations due to their high CO2 emissions.
Investors also filed directly with coal companies this year. The New York City Comptroller’s Office filed a resolution with CONSOL Energy calling for a report on the company’s response to rising pressures to reduce carbon emissions. This resolution received 39.6 percent support at the annual meeting. A similar resolution filed with Massey Energy received 30.8 percent support. The Unitarian Universalist Church filed a similar resolution with Foundation Coal and it received 22.4 percent of the vote.
Canadian Companies – Four Canadian companies received climate resolutions for the first time. Bank of Montreal, Scotiabank, and Russel Metals made commitments satisfactory to the filer, Ethical Funds, and the resolutions were withdrawn. The banks agreed to disclose how their companies are evaluating the credit risk inherent in climate change and Russel Metals pledged to respond to the Carbon Disclosure Project. The resolution at Encana proceeded to a vote and received 8.6 percent of the vote, comparable to other first-time resolution results.
Airlines – Calvert filed resolutions with three airlines calling for sustainability reports including GHG emissions reduction strategies. The resolution was withdrawn from Continental after the company agreed to disclose the steps it is taking to minimize the effects of global climate change within a sustainability report by the end of 2008. The resolution received 25.6 percent support at Southwest Airlines and 21.9 percent support at US Airways.
To see more results from investor actions regarding climate change, please visit www.ceres.org.
Ceres is a leading coalition of investors and environmental groups working with companies to address sustainability challenges such as global climate change. Ceres also directs the Investor Network on Climate Risk, an alliance of 72 institutional investors with collective assets totaling $7.3 trillion. For more information, visit www.ceres.org and www.incr.com.
For 35 years, the Interfaith Center on Corporate Responsibility 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, 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 www.iccr.org.