January 17, 2003
Global Warming Shareowner Resolution Filed at "Filthy Five" Electric Companies
by William Baue
A coalition of institutional investors has filed a shareowner resolution calling on five electric
power producers to report on the business risk of their greenhouse gas emissions.
Following the dictum that there is strength in numbers, a coalition of institutional investors has
filed a global warming shareowner resolution at the five largest carbon dioxide (CO2) emitters in
the U.S. electric power industry. Dubbed the "filthy five," these companies include American Electric
Power (ticker: AEP), Southern Company (SO), Xcel Energy Inc.
Corporation (TXU), and Cinergy Corporation (CIN).
The Connecticut Retirement Plans
and Trust Funds (CRPTF) led the initiative, with coordinating support from the Coalition for Environmentally Responsible
Economies (CERES) and the Interfaith Center on
Corporate Responsibility (ICCR). The resolution asks the companies to report
on the business risk of their greenhouse gas emissions and on the potential economic benefit of
curtailing those emissions.
"Investors need the full picture to assess companies'
long-term investment value," said State of Connecticut Treasurer Denise Nappier, the principal
fiduciary of CRPTF's $17 billion portfolio. "Air pollutant emissions are some of the most
measurable, relevant, and significant indicators of risk for this particular industry, and it's our
responsibility to ask what the company's plans are to address that risk." CRPTF filed the
resolution at AEP.
Ms. Nappier noted that AEP itself has acknowledged climate change as a
risk factor in its SEC filings. AEP is also a founding member of the Chicago Climate Exchange (CCX). According to Ms.
Nappier, the fact that AEP helped found CCX further substantiates the company's recognition that
its CO2 emissions pose a long-term material financial risk that must be managed. CCX is a
voluntary program, which launches today, that enables companies to trade greenhouse gas emissions
"What [AEP has not] done, and what most utility companies haven't done, so far,
is present to their shareholders a comprehensive assessment of these risks [from greenhouse gas
emissions] and how they plan to address them," said Ms. Nappier at yesterday's news conference
announcing the resolution initiative.
The resolution calls on the companies to assess the
economic risks of past, present, and future emissions of carbon dioxide, sulfur dioxide (SO2),
nitrogen oxide (NOx), and mercury (Hg). All of these emissions are known public health risks that
contribute to global warming. The resolution notes that U.S. power plants create one-tenth of all
global carbon dioxide emissions. The U.S. electric industry generates two-fifths of the domestic
carbon dioxide emissions, two-thirds of the sulfur dioxide emissions, one-quarter of the nitrogen
oxide emissions, and one-third of the mercury emissions.
"We believe that taking early
action on reducing emissions and preparing for standards could better position companies over their
peers, including being first to market with new high-efficiency and low-emission technologies," the
resolution states. "Changing consumer preferences, particularly those relating to clean energy,
should also be considered. Inaction and opposition to emissions control efforts could expose
companies to reputation and brand damage, and regulatory and litigation risk."
resolution notes that governmental regulation of greenhouse gas emissions is inevitable, and hence
electric companies need to prepare for the financial implications of such regulation. The Bush
Administration has been widely criticized for failing in last year's Climate Action Report to
recommend mandatory reductions of greenhouse gas emissions. In the absence of federal regulation,
however, states such as Massachusetts and New Hampshire are legislating caps on power plant
emissions of carbon dioxide and other pollutants, and other states are poised to follow suit.
"We need to know now where a utility will stand down the road when there are federal
regulations in place," said Jim Newland, chairperson of the Mission Responsibility Through
Investment Committee of the Presbyterian Church,
U.S.A., which filed the resolution with Cinergy. "If the company has not made the right amount
of progress toward investing in alternative sources, it will be extremely expensive and detrimental
to stockholder return to adapt at that point."
CERES Executive Director Robert K. Massie
summed up the business case for a forward-looking approach regarding climate change and greenhouse
"Ignoring the writing on the wall is just not good corporate governance,"
Mr. Massie said.