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May 14, 2004
Shareowner Resolution Withdrawn as JP Morgan Chase Addresses Environmental Risks
    by William Baue

A group of socially responsible investment advocates withdrew a shareowner resolution from JP Morgan Chase when the company established an office of environmental affairs.

High votes on shareowner resolutions do not always convince companies to implement requested changes. However, the withdrawal of a shareowner resolution almost always signals success, as the filers and management have reached agreement on ways to transform corporate practice and policies through dialogue. Late last month, a coalition of socially responsible investment (SRI) advocates withdrew a resolution from JP Morgan Chase (ticker: JPM) when the giant financier agreed to enhance its environmental risk management.

"The days when just being willing to dialogue would get a resolution withdrawn are gone," John Wilson, director for SRI at Christian Brothers Investment Services (CBIS), the lead filer of the resolution, told "Now, we expect that companies will actually take some concrete steps."

"We recognize the importance of the issues reflected in the shareholder proposal and have steps underway to address them," said Amy Hayes Davidsen, whose appointment to a newly-established position as director of environmental affairs at JP Morgan Chase represents one step.

Other steps include the establishment of an office of environmental affairs and of a firm-wide committee on environmental issues, which will be accountable to the public policy committee of the Board of Directors. JP Morgan Chase outlined these changes in its 2003 Community Partnership Report.

"Like many large financial institutions, JP Morgan Chase has been involved in financing companies and projects in environmentally and/or socially sensitive sectors such as dam building, oil drilling, and logging," said Steve Lippman, senior social research analyst at Trillium Asset Management, which co-filed the resolution with Domini Social Investments. Other shareowners in the dialogue group included environmental nonprofit Friends of the Earth and members of the Interfaith Center for Corporate Responsibility (ICCR), a shareowner activist consortium.

The resolution cited a number of environmentally sensitive projects that JP Morgan has financed, exposing itself to risk.

"For example, JPMC was a lead manager for a $400 million loan for Iceland's National Power Company (2003), a project criticized for environmental, geological, economic and legal impacts and risks," the resolution stated. "The bank also was the mandated arranger for the refinancing of the Kumtor mine (2002), which has a dangerous environmental and safety record with three toxic spills, including one that spilled two tons of cyanide into local drinking water supplies."

The resolution also pointed out that many of JP Morgan Chase's competitors are taking a more proactive stance on environmental risk mitigation. For example, Citigroup (C) has signed the Equator Principles, a framework for banks to manage environmental and social issues in project financing. Citigroup has also entered into an agreement with Rainforest Action Network (RAN), an environmental nonprofit, to adopt environmental policies that set the standard for the sector.

"We want to congratulate JP Morgan Chase and at the same time encourage them to move ahead, since they are behind the commitments that Citigroup has made," said Julie Tanner, Corporate Advocacy Coordinator for CBIS. "That said, there are still several large banks, including Goldman Sachs [GS], that do not have in place what JPMC is developing in terms of having the skeleton outline of an environmental report, a senior-level person responsible for environmental affairs, and board level responsibility for environmental issues."

"We see this as an important beginning and recognize that in the years to come the company will need to explain its programs in greater detail and report on the implementation of these commitments," Ms. Tanner told


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