Green Investors Wield Their Might

110 shareholder resolutions related to addressing climate change and embracing sustainable supply chain policies yielded noteworthy victories during the 2013 proxy seasons, reports advocacy group Ceres.

Environmental and social shareholder proposals accounted for 40% of all resolutions filed with US companies this year, up from 30% three years ago, according to Ernst & Young.

Some of the nation’s largest pension funds and institutional investors representing more than $500 billion in assets were behind these resolutions, including the California State Teachers Retirement System (CalSTRS), the New York State and New York City Comptrollers’ Offices, Calvert Investments, Trillium Asset Management and Walden Asset Management.

“Investors are ever more mindful of escalating environmental and social risks and want answers on how companies are dealing with them,” says Mindy Lubber, president of Ceres, which helps coordinate the filings. “This year’s proxy results showed strong progress on wide-ranging sustainability challenges such as water availability risks, supply chain vulnerabilities and greenhouse gas emissions.”

Here are some of the most notable areas of progress:

Greenhouse Gas (GHG) Reduction Goals – Medical equipment manufacturer Stryker agreed to begin measuring its GHG emissions and start cutting them.

Natural Gas Flaring – Continental Resources, the largest oil producer in North Dakota’s Bakken region, agreed to reduce or eliminate flaring at well sites to “as close to zero as possible.”

“While our concerns over the environmental impacts of unconventional oil and gas development remain, we see Continental’s increasing disclosure and goal-setting as a clear step in the right direction,” says Pat Zerega, director of shareholder advocacy at Mercy Investment Services, which filed the resolution. “Continental’s strong goal shows that there is agreement between the domestic oil industry, investors and advocates that allowing billions of cubic feet of natural gas to go up in flames is not good for business.”

Fracking – EOG Resources, Ultra Petroleum and Cabot Oil & Gas all agreed to increase public disclosure on risk exposure and mitigation steps they are taking to reduce environmental impacts from fracking.

Several other oil and gas companies were not responsive to similar shareholder proposals related to disclosure of fracking impacts, reports Ceres. But those resolutions all received strong investor support when they were brought to a vote: Exxon (30%), Chevron (31%) and Pioneer Natural Resources (32%).

Fossil Fuel Asset Risks – First-ever resolutions focused on fossil fuel reserve valuation risks were filed with two of the five largest US coal companies, CONSOL Energy in Pennsylvania and Alpha Natural Resources in Virginia. These proposals – which received 22% and 18% investor support, respectively – asked the companies to describe how their extensive coal reserves might be impacted or stranded as a result of impending carbon regulations.

Why is this such a big deal? 2013 analyses by the Carbon Tracker Institute and the International Energy Agency (IEA) find that government regulations limiting global warming to less than 2 degrees Fahrenheit would require roughly two-thirds of proven fossil fuel reserves remain underground. These reserves account for as much as 50-80% of the market value of coal, oil and gas companies – exposing the companies and investors to significant financial risks.

Fugitive Methane Emissions – Methane emissions have a 100-year Global Warming Potential (GWP) – 25 times that of carbon dioxide, according to IEA. This inspired shareholder resolutions with three natural gas producers – Spectra Energy, ONEOK, and Range Resources – requesting reports on how they measure and mitigate methane emissions. These resolutions received strong support: 35%, 38% and 21%, respectively.

"With the President’s Climate Action Plan and the International Energy Agency emphasizing the need to dramatically reduce methane emissions, now is the time for the companies to get ahead of the regulatory risk and implement strong programs that leads to operational efficiencies and stop the release of damaging greenhouse gases," says Trillium Asset Management Vice President Natasha Lamb.

Responsible Palm Oil Sourcing – Approximately 50% of all packaged food products in supermarkets use palm oil, a rapidly growing source of GHG emissions; it accounts for 65% of produced and traded vegetable oils globally, according to the World Wildlife Foundation (WWF). Trees are cultivated primarily on plantations in Indonesia and Malaysia.  Global demand has prompted the clear-cutting and burning of precious carbon-storing rainforests and peat lands, and threatens rare species such as orangutans.

As a result of shareholder pressure this year, Dunkin Brands, Kroger (among the top five largest grocery chains in the US) and Starbucks agreed to source 100% certified sustainable palm oil to reduce GHG emissions and protect workers, rainforests and species.

Sustainable Supply Chains – High-profile companies including The Gap, Nike, Target, Kohl’s, EMC, Texas Instruments, Best Buy, Xerox and Bed Bath & Beyond have pledged to work far more closely with their suppliers to stay on top of worker safety issues and environmental practices – and require reporting from their partners.

The disastrous fire and building collapse in Bangladesh brought new urgency to this issue, and it became a major focus for New York City Comptroller John Liu. His office filed a number of related resolutions.

“We’re encouraged that more companies agreed to increase the sustainability and transparency of their suppliers as we expanded our efforts beyond the technology sector to include major retailers,” says Comptroller Liu. “The risk they face from suppliers’ human and worker rights abuses was made clear by the tragedies in Bangladesh. More needs to be done, particularly in Bangladesh, but sustainability reporting is an important component.”

Read our article, Investors Hold Corporations Feet to Fire on Political Spending, Fossil Fuels.

Consult this website for more details on 2013 shareholder resolutions:

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