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May 04, 2004
Three More Companies Address Climate Risk, So Shareowners Withdraw Resolutions
    by William Baue

Shareowners withdrew climate change resolutions at Southern Company and TXU, which agreed to issue reports, and at Reliant, which agreed to expand disclosure.

Following the example set by American Electric Power (ticker: AEP) and Cinergy (CIN), three more electric companies facing a shareowner campaign on climate change have agreed to address the issue, resulting in the withdrawal of shareowner resolutions. Southern Company (SO) and TXU (TXU) have agreed to report on the potential impacts and responses to various climate change policy scenarios, including proposed legislation in Congress and existing state laws regulating greenhouse gas (GHG) emissions.

Reliant Energy (REI) took a different tack: it agreed to expand disclosure of environmental issue assessment in its 10-K securities filings and amend its Board Audit Committee charter to annually review these issues as well. It also agreed to post this environmental information on its corporate website.

These developments bring the number of companies cooperating with the shareowner action campaign to five out of the six targeted. The campaign is being coordinated by the Coalition for Environmentally Responsible Economies (CERES) and the Interfaith Center on Corporate Responsibility (ICCR).

"For these companies to move from total opposition to shareholder requests to agreement to work together is an historic breakthrough for shareholders who are worried about how global warming will affect their portfolio value over the long-term," said Mindy Lubber, executive director of CERES.

Xcel (XEL), the lone electric company opposing the campaign, requested and received permission from the US Securities and Exchange (SEC) to omit the resolution from its proxy. The SEC decision seems to fly in the face of the growing consensus that climate change represents a material risk that fiduciary duty requires companies to address, assess, and disclose to their shareowners.

Indeed, this is exactly the sentiment expressed by Southern Company in a letter to the campaigners.

"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," states Southern in the letter.

The company agreed to prepare a report that will 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 [sulfur dioxide], NOx [nitrogen oxide] and mercury and the net emissions of CO2 [carbon dioxide, the principal pollutant associated with global warming] after accounting for offsets, for the timeframe 2000-2020."

Campaigners express cautious optimism about Southern's commitment.

“If the company performs this analysis in an unbiased way, it could indeed create a roadmap to being part of the solution to global warming," said Becky Stanfield, senior policy advisor for Clear the Air, a coalition promoting clean air by reducing coal-fired power plant emissions. "However, that’s a big IF when you are talking about Southern Company."

Southern Company is the second largest coal-based power generator in the US, with 66 percent of its energy mix devoted to coal, according to Innovest Strategic Value Advisors. This makes Southern the second most polluting electric company in the country, according to Clear the Air. As an example, Southern's Bowen plant in Georgia emits as much CO2 as all of the plants in Delaware, Connecticut, Maine, New Hampshire, and Rhode Island combined, according to Clear the Air.

"It owns and operates dozens of other plants just like that one," said Ms. Stanfield. Clear the Air has been coordinating the "Clean Up Southern Company" project advocating for pollution reductions in Southern's plants for the past three years.

Southern is also renowned for opposing environmental regulation, according to Ms. Stanfield.

"Not only has Southern Company buried its head in the sand on global warming, they've persuaded important policymakers to keep their heads in the sand too," said Ms. Stanfield. "Southern was most notorious for being the architects of the Bush Administrations rollbacks of the Clean Air Act new source review rules."

However, Ms. Stanfield tempers cynicism with hope.

"A breakthrough of any kind with Southern Company is a rare achievement and one to take note of," she said. "Over the next year we will know whether this breakthrough signals a change in direction for Southern Company or if it is simply another attempt to pass off public relations as environmental analysis."


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