A new research paper issued last week by London-based Generation Investment Management, Sustainable Capitalism, has some alarming news about just how short-sighted this quarterly capitalism has become.

Take, for instance, FirstEnergy’s recent announcements that it will retire nine of its older coal-fired power plants by September 1, 2012.  In its statements, FirstEnergy blamed the EPA’s Mercury rule for forcing the retirements. Not only is the company blaming the EPA for the retirements, it is also placing potential layoffs and grid reliability issues at the EPA’s door. This decision poses an important question:  if these retirements are because of the EPA rule, why is FirstEnergy retiring the nine plants which are located in Ohio, Pennsylvania, West Virginia and Maryland in 2012, rather than waiting until 2014, when these older plants would actually have to come into compliance?

In their news release, FirstEnergy states:

"We recently completed a comprehensive review of our coal-fired generating plants and determined that additional investments to implement MATS and other environmental rules would make these older plants even less likely to be dispatched under market rules. As a result, it was necessary to retire the plants rather than continue operations."

Upon closer inspection, however, it’s fairly easy to see that this decision wasn’t based primarily on EPA rules; it was based on current economics, including the following:

• These Eisenhower-era plants are on average 58 years old and have rarely been used since 2010. (They have an average capacity factor of 36.5%.)
• A slower economy, energy-efficiency programs and mild weather have reduced demand for power.
• Today’s historically low natural gas prices, which are not expected to increase much any time soon, mean it is more expensive to produce power using coal-fired plants than natural gas plants. (The process of converting a coal plant to natural gas is complex, but is also a project that is fully achievable within the EPA’s timelines.)

So when a plant is already over half a century old, underutilized and inefficient during those occasions when it is used – it probably makes better business sense to retire it rather than making the investments to convert it to natural gas or retrofit it with pollution controls to comply with EPA clean air rules.  Sure, the MATS rule may have played some role in the decision-making process, but these plants were on a clear path toward retirement in the near future.

In contrast, my previous blog post discussed a report that details positive statements made by 30 power companies indicating that early investments in their power plants have put them in a good position to comply with EPA’s new air pollution rules.

The report notes that these companies represent 50% of the nation’s coal-fired power plants, and eleven of the 15 largest coal-based electric power companies. Across the fleet, about 50% of coal plants are very well controlled with scrubbers and other pollution control systems.  So, let’s do the math:

• 70% of the nation’s electric generating facilities are not affected by EPA’s MATS rule because they rely on natural gas, nuclear, or other non-emitting energy sources.
• 15% of the nation’s electric generating facilities are coal plants that are already complying or well on their way to comply with the MATS rule.
• This means that 85% of the nation’s electric generating fleet is unaffected by the rule or ready to comply.

The fact is that coal-fired electricity imposes significant costs on society and these costs need to be incorporated into the cost of doing business. This is precisely what the EPA rule aims to accomplish.

With yesterday’s inclusion of the EPA’s final MATS rule in the Federal Register, we are close to the culmination of a rule that has been anticipated for decades. Petitioners have already begun to file suit against the law, and members of Congress have threatened to force a vote under the Congressional Review Act that would vacate or delay the rule.

But these stall tactics don’t change the basic facts: those companies that have anticipated and prepared for the rules are ready to comply with the rules in a timely fashion.  Those companies that instead choose to close older plants, are evaluating a host of factors, and ought not to use EPA as a scapegoat for decisions that have been informed by many different economic drivers.

A recent analysis by Susan F. Tierney, Why Coal Plants Retire:  Power Market Fundamentals as of 2012, takes a closer look at these market drivers.  Tierney, managing principal of the Analysis Group, is a power industry expert who has conducted numerous studies on electricity reliability.  I’ve put Tierney’s white paper on the top of my weekend reading pile and look forward to having more to say about her findings in my next post.

Dan Bakal is director of Ceres’ Electric Power Program.

Sharlene Leurig is working to find a more sustainable – and profitable – future.

Interview conducted and condensed by Rae Tyson

DailyClimate.org

Editor's note: Climate Query is a semi-weekly feature offered by Daily Climate, presenting short Q&A's with players large and small in the climate arena. Read others in the series here.

The insurance industry faces a tumultuous future as storms, wild fire, drought, sea level rise and storm surges intensify as humans alter the energy balance of the atmosphere with greenhouse gas emissions. Last year the United States saw 14 separate weather-related disasters causing $1 billion or more each in economic damage, according to the National Oceanic and Atmospheric Administration.

Sharlene Leurig manages the insurance program for Ceres, a nonprofit coalition of investors and environmental groups working to incorporate long-term environmental and social risks into the market. She spoke in the fall at the Society of Environmental Journalists conference in Miami. And as she rattled off the challenges facing the industry, she had veteran reporters scrambling for notebooks. The statistics she offered are not good news for taxpayers.

"The largest insurance company in the state of Florida is the state of Florida," she said. "And the liability that the state holds is so huge that ... the next time the big one rolls in the system will bankrupt itself."

It's not just Florida. Massachusetts, Texas, the Carolinas and other coastal states are starting to self-insure as insurance carriers exit the market in the face of higher risk, she said.

"That's a bleak future," she added. "We don't actually have the money to adapt to climate change – to adapt to more intense droughts and floods and wildfires – because we're burning thru GDP trying to recover from the last disaster just to encounter the next one."

DailyClimate.org caught up with Leurig via phone at her office in Austin, Texas.

How are insurers preparing to cope with the impact of greater weather-related claims?

Insurers have gotten by for 300 years by muddling through. And most insurers think they can simply muddle through climate change.

Given the insurance industry's worldwide investments, how could the industry's response to climate change affect the global economy?

Most people don't realize just how important the insurance industry is as a source of investment capital. Globally, the industry has around $23 trillion in assets - more than the annual GDP of the United States. If weather becomes so volatile that insurers shift investments to cash or short-term treasuries, the result could be the loss of a major source of capital for infrastructure projects.

But insurers discouraged some construction – and encouraged better building design – after Hurricane Andrew hit Florida in 1992. Could they exert similar influence on adapting to climate change?

They need to take a more vital role in this, otherwise we are not going to have any more insurable markets. They have been very tepidly sticking their toes into developing building codes, developing land use plans.

The late Paul Epstein advocated efforts to leverage industry to diminish climate impacts and improve environmental health, particularly in poorer countries. Is there a business opportunity for insurance companies here?

Swiss Re and other companies are very active on this issue. They understand there is a significant risk but they also recognize there are significant opportunities.

Consumers shop for insurance based on price. Won't market pressures force insurers to simply bail from vulnerable locales rather than raise rates?

So far, that has been the way that the insurance industry in the U.S. has approached risk. When a risk gets too high in the area and they cannot increase pricing, they just move out of that area.

Last week regulators in California, New York and Washington said they will require companies to disclose risks their businesses and customers face from severe storms and wildfires, rising sea levels and other consequences of climate change. Your thoughts?

That's a good thing. Finally all of the largest insurers in the U.S. will have to share with their regulators how they are building climate change into their business.

Among those urging extension are some of America’s biggest brands and largest purchasers of wind and other renewably sourced energy. This week, 15 of them, including Starbucks, Staples, Nike, Levi Strauss & Co., Campbell Soup Co. and Yahoo!, wrote to Congressional leaders urging extension of the PTC. Some of these companies already get more than half their energy from renewables; Starbucks’ goal is to source 100% of its energy from renewables in two years.

One successful tool is to turn that obstacle into a stepping stone. Ceres has just published a look at the successes they've had using shareholder resolutions on climate, energy and sustainability to shift company committments to sustainability.

The short report, Proxy Power: Shareholder Successes on Climate, Energy & Sustainabiity, looks at what successes resulted from 233 sustainability-focused resolutions filed by Ceres' network of investors.

Just under half of those resolutions -- 111, or 48 percent -- were wins, where companies agreed to address the investors' concerns and the resolutions were withdrawn.

And once companies agree to address shareholder resolutions, they are good to their word: Analysis of Ceres' data by David Gardiner and Associates found that more than 80 percent of the companies have achieved at least partial fulfillment of their commitments, and 65 percent have completely met their commitments.

Getting companies on board with sustainability commitments prior to shareholder meetings is one way of making change at those companies. But when resolutions come to a vote it can offer a higher-profile chance to raise awareness within the company and the public about the issues at hand, even if the resolutions aren't successful.

The chart below shows the trends in sustainability-focused shareholder resolutions over the past 11 years, and highlights how resolutions are picking up speed quickly, even if successes aren't keeping the same pace.

Whether through successful withdrawals or shareholder votes, these resolutions are affecting the dialogue and shifting company behavior in significant ways. The Proxy Power report offers a few examples of big wins in the last three years.

Among the notable examples:

• When As You Sow filed a resolution in 2009 targeting Idaho-based energy company Idacorp's sustainability commitments, the resolution got 52 percent approval from shareholders, and resulted in a commitment from the company to reduce their emissions by 10 to 15 percent by 2013, as well as the launch of its first wind-energy projects and research into solar generation.
• Through shareholder resolutions across a range of companies, investors convinced Hershey and General Mills to commit to sourcing 100 percent certified sustainable palm oil, and Avon to purchase certified sustainable palm oil offsets. Ceres president Mindy Lubber wrote about the commitments for GreenBiz back in 2010.
• Ceres investors targeted KB Homes, one of the nation's largest home builders, to improve the energy efficiency of their homes. Between 2006 and 2010, the company raised the efficiency of new homes by about 15 percent over 2004 models, with 90 percent of its 2010 homes earning Energy Star certification.

The new report from Ceres offers other case studies in environmental hot spots, including oil and gas industries' fracking policies and utility companies' investments in coal-fired power plants.

The report comes as Ceres announces its next round of shareholder resolutions, including 10 electric power companies and 18 oil and gas companies to disclose their strategies for managing the risks posed by climate change and new legislation around greenhouse gas emissions.

The full report, Proxy Power: Shareholder Successes on Climate, Energy & Sustainabiity, is available for download from GreenBiz.com.

The letter calls on Congress to include an extension of the PTC in this week’s payroll tax-cut extension legislation. A ‘no’ vote on the extension will immediately threaten over 400 wind manufacturing facilities in 43 states that risk layoffs and shutdowns for lack of orders.

The letter was signed by 15 companies, many of them members of Business for Innovative Climate & Energy Policy (BICEP). Some of the companies signing the letter, including Starbucks and Staples, get over half of their US electricity from wind and other renewable energy sources.

“The PTC has enabled the wind industry to slash wind energy costs – 90 percent since 1980 – a big reason why companies like ours are buying increasing amounts of wind energy,” the letter states. “Failure to extend the PTC for wind would tax our companies and thousands of others like us that purchase significant amounts renewable energy and hurt our bottom line at a time when the economy is struggling to recover.”

The PTC provides a tax credit of 2.2 cents per megawatt hour of generated electricity for wind developers, which translates to lower delivered cost of the resource. Since the PTC was enacted seven years ago, wind power capacity has increased by 47,000 megawatts, a seven-fold increase.

The companies warned Congress that “eliminating the PTC will sharply increase prices for wind energy and particularly affect the many large and influential companies that are already committed to buying and using wind energy.“

It will also shut down much of a thriving U.S. manufacturing sector, one of the fastest-growing sources of factory jobs even in the depths of the economic slowdown.

Corporate leaders across diverse industries are rapidly increasing their use of wind energy.  Wind energy serves to bring down the marginal costs for electric power, enabling large power purchasers to incorporate wind power into their energy portfolios at a competitive price, making them better prepared to handle volatility in the market.

“We’re proud to be one of the nation’s largest purchasers of American wind energy,” said Ben Packard, VP Global Responsibility at Starbucks. “We’re committed to renewable energy. Our goal is to make renewables account for 100 percent of our energy portfolio in the next two years.”

“Wind producers, business customers, investors – even conservative Republicans and liberal Democrats – all agree: the PTC for wind power is working,” said Mindy Lubber, president of Ceres, which coordinates the business network, Business for Innovative Climate & Clean Energy (BICEP). “America is on the verge of establishing a world-leading wind industry that will give U.S. companies a powerful and permanent competitive advantage: a cheap, clean, and inexhaustible supply of electricity that is immune to global fuel price shocks and the international crises that cause them.”

The Production Tax Credit for wind has been in place without interruption since 2005 and has led to 47 GW of new wind capacity, equal to about 94 power plants, spurring nearly $70 billion in private investment, according to the American Wind Energy Association.  Largely owing to the PTC, wind energy accounted for 35% of new electrical generation capacity installed in the past four years, and now supplies 20% of electricity needs in states like Iowa and South Dakota. Nationwide the wind energy industry supplies close to 4% of electricity nationwide and on track so far to make 20% of all of America’s electricity by the year 2030, as projected by the George W. Bush administration.

The deadline for including an extension of the wind PTC in comprehensive payroll tax cut legislation is midnight February 29th, 2012, but action could come as soon as tomorrow as House and Senate conferees wrestle with the details.

BICEP is an advocacy coalition of businesses committed to working with policy makers to pass meaningful energy and climate legislation enabling a rapid transition to a low-carbon, 21st century economy – an economy that will create new jobs and stimulate economic growth while stabilizing our planet’s fragile climate. BICEP is a project of Ceres. www.ceres.org/bicep

Ceres is an advocate for sustainability leadership. It leads a national coalition of major investors, environmental organizations and other public interest groups working with companies to address sustainability challenges such as global climate change and water scarcity. Its mission is integrating sustainability into day-to-day business practices for the health of the planet and its people. www.ceres.org

On tap is Southern Nevada Water Authority’s proposal to pump 41 billion gallons of water a year to a thirsty Las Vegas from rural Nevada. A study commissioned by SNWA puts the project’s price tag at an estimated $7 billion, plus another $8 billion for financing costs. The study forecasts that the 300-mile long pipeline will nearly double water bills for southern Nevada businesses and homeowners.

These estimated costs for residents and businesses assume they will use water in large quantities, no matter the cost they are paying for water. That, however, is not likely. If water prices go up, research has continually shown, people will modify their behavior and use less.

Most of the resolutions press companies for information that will help investors assess the companies’ readiness for complying with the Environmental Protection Agency’s Mercury and Air Toxics Standards, which goes into effect in 2014.  Electric utilities will need to replace aging coal-fired power plants with cleaner generation sources like natural gas or renewables, or retrofit older plants with pollution control technology, to comply with the new standard.

“Leading electric utilities are expanding energy efficiency programs, adding renewable energy generation, and switching from coal to natural gas to diversify their strategies for providing cleaner electricity,” said Mindy Lubber, president of Ceres and director of the Investor Network on Climate Risk, which helps coordinate the resolutions.  “Investors want to know which companies are ahead of the curve in making this shift, which will help them comply with the new mercury standard and eventual climate regulations.”

The New York State Comptroller’s Office filed resolutions with DTE Energy, CMS Energy and Ameren--each of which relies on coal for more than three quarters of its power generation--asking the companies to assess actions to build shareholder value and reduce greenhouse gas emissions (GHGs) and air pollution via comprehensive energy efficiency and renewables programs for customers.   The Comptroller filed a similar resolution last year with FirstEnergy, which recently announced that it would retire six old coal-fired plants in Pennsylvania, Ohio and Maryland in order to reduce emissions.

Other resolutions filed in the electric power, homebuilding and natural gas sectors in recent years have achieved significant improvements as detailed in Proxy Power: Shareholder Successes on Climate, Energy & Sustainability.

“Reducing pollution is not just an imperative for the world, it’s a necessary step for companies to remain at the cutting edge of this industry,” said New York State Comptroller Thomas P. DiNapoli.  "Working with Ceres, we are urging companies to find ways to be transparent, sustainable and profitable in the context of our current regulatory environment."

Ameren received an additional resolution from the shareholder advocacy group As You Sow, asking it to report on plans to reduce company exposure to coal-related costs and risks, including progress toward achieving goals to minimize commodity risk, emissions other than GHGs, costs of environmental compliance, and construction risk.  Duke Energy and FirstEnergy, and Empire District Electric Company, received similar resolutions.

"Due to a changing regulatory landscape and increased market pressures from low-cost natural gas and alternative energy sources, electric utilities reliant on coal are exposed to significant financial risk," said Corinne Bendersky, As You Sow’s Energy Program Manager. "We want companies to report on plans to minimize coal-related risks, demonstrating to investors that they are prepared to meet these challenges and protect shareholder value."

Other resolutions filed include:

• The New York City Comptroller John C. Liu filed resolutions with GenOn and Dynegy asking the companies to report on plans for setting GHG reduction goals.
• FirstEnergy and Southern Company also received resolutions from Green Century Capital Management asking them to report on plans for managing the environmental financial, legal, and reputational risks associated with coal ash disposal. Ameren received a similar proposal from the Midwest Coalition for Responsible Investment.
• The New York State Comptroller filed a resolution with Duke Energy (which is merging with Progress Energy) seeking disclosure on actions the company could take to expand energy efficiency and renewable energy programs.

The resolutions filed with electric power companies are part of a broader investor initiative challenging companies to address climate and sustainability risks. The resolutions were filed by some of the nation’s largest public pension funds, foundations, and religious, labor and other institutional investors. Many of the investors are members of Ceres’ Investor Network on Climate Risk (INCR), which has 100 members managing over $10 trillion in assets.

Thus far in the 2012 proxy season, investors coordinating with Ceres have filed 86 resolutions with 69 companies, including businesses with direct exposure to climate change, such as oil and gas companies, and companies with indirect but significant exposure through their supply chains or products, such as food, clothing and telecommunications firms.  For the complete list, see http://www.ceres.org/files/press-files/shareholder-resolutions-tracked-by-ceres/. These resolutions are a subset of the hundreds of sustainability-focused resolutions filed this year.

Ceres is an advocate for sustainability leadership. It leads a national coalition of investors and public interest groups working with companies to address sustainability challenges such as global climate change and water scarcity.

“The common thread of these resolutions is stronger management focus on environmental and social challenges that will have real bottom line impacts,” said Mindy Lubber, director of the Investor Network on Climate Risk (INCR) and president of Ceres, which helps coordinate the filings.  “These investors are telling companies they expect to see real progress on climate change, clean energy and other sustainability fronts, despite the policy paralysis in Washington.”

Most of the resolutions with oil & gas firms are associated with financial risks from hydraulic fracturing—called “fracking”— for natural gas.  Resolutions filed with EOG Resources, Chevron, Penn Virginia, Anadarko Petroleum, Range Resources, Chesapeake Energy, Noble Energy, Ultra Petroleum, Exxon Mobil, and Stone Energy seek detailed financial accountings of how the companies are addressing the risks associated with community concerns, regulatory changes and drilling moratoriums.

“As community opposition and regulatory risks for fracking operations grow, investors are likewise concerned about how businesses are managing their exposure to these risks,” said Larisa Ruoff, Green Century Capital Management, which filed resolutions with Chesapeake Energy, Chevron, EOG Resources, Noble Energy and Ultra Petroleum, and coordinates efforts to press companies on fracking risks along with the Investor Environmental Health Network.

The resolutions come as public opposition to the controversial extraction technology continues to grow.  They follow other resolutions filed in recent years that have achieved significant improvements in the homebuilding, electric power and other industries, as detailed in Proxy Power: Shareholder Successes on Climate, Energy & Sustainability.

“Shareholder resolutions that promote transparency and disclosure are potent weapons to ensure that companies are operating safely and in the long-term interest of investors,” said New York State Comptroller Thomas P. DiNapoli, whose office manages the $146.9 billion Common Retirement Fund. "Oil and gas companies that are held by the Common Retirement Fund must operate in a manner that promotes long-term sustainability, especially when dealing with natural gas, a critical part of our nation’s energy supply."

Other resolutions filed this year with oil & gas firms request that they:

• Set greenhouse gas reduction goals or report on climate change risks to the company (ConocoPhillips, Exxon-Mobil). The Exxon-Mobil resolution builds on similar a resolution filed last year that received 26.5% shareholder support. Companies that voluntarily disclose their greenhouse gas emissions and carbon reduction strategies have been found to have higher stock value, according to a recent study from the UC Davis Graduate School of Management.
• Link executive compensation packages to company environment, social and governance performance. They also request that companies add board members with specific environmental expertise. Resolutions were filed with Cabot Oil and Gas, Chevron, Range Resources, Southwestern Energy Company, Occidental Petroleum. Linking executive pay to company performance on accident risk mitigation or greenhouse gas emissions reductions helps to ensure that management gives these issues the attention they deserve, and reduces incentives for excessive risk taking.
• Report on business and environmental risks from oil sands extraction in Canada (filed with Exxon-Mobil). Investors want the company to report on possible long-term risks to the company’s finances and operations posed by the environmental, social and economic challenges associated with the oil sands, including environmental regulations, lawsuits and growing public opposition to oil sands development.

The resolutions filed with oil and gas companies are part of a broader investor initiative challenging companies to address climate and sustainability risks.  Thus far in the 2012 proxy season, investors coordinating with Ceres have filed 86 resolutions with 69 companies, including businesses with direct exposure to climate-related business trends such as electric power and coal, and companies with less direct though still significant exposure through their supply chains or products, such as food, clothing and telecommunications firms. For the complete list, see: http://www.ceres.org/files/press-files/shareholder-resolutions-tracked-by-ceres/.

Ceres is an advocate for sustainability leadership. It leads a national coalition of investors and public interest groups working with companies to address sustainability challenges such as global climate change and water scarcity.

Up until this point, those states required about a third of larger insurers to turn over the information in a survey; for all others it was voluntary.

“Our experience and other states’ experience as regulators is you get a far better response rate if you require response to be provided than if you just allow companies to decide when and how they will respond,” said Dave Jones, the California commissioner. “Our goal is to have the most complete, best and accurate information possible for investors, the insurance industry, regulators and the broader public.”

California, which has the ninth-largest economy in the world, has led the way on this push to make a traditionally backward-looking industry anticipate and respond to the business liability presented by a changing climate. These new state regulations will focus attention on the insurance industry’s role in mediating the country’s response to climate change.

“We are asking insurers to share their views of the risk of climate change so that we can be sure that the industry and regulators are appropriately prepared,” said Robert H. Easton, a lead insurance regulator in New York.

Last year’s level of natural disasters was unprecedented, according to an August report by the A. M. Best Company, which rates the financial strength of insurers. By late June, the estimated $27 billion in losses suffered by the American industry exceeded the 2010 total.

Many insurance companies, particularly large international reinsurance firms, have been grappling with the issue of assessing risks that are not reflected in the historical record of insurance payouts.

“Global warming presents unique risks, and it is vital that our insurance industry adequately account for the impacts of climate change,” Benjamin M. Lawsky, superintendent of New York’s Department of Financial Services, whose portfolio includes insurers, said in a statement. “We look forward to working with the industry to address these important and growing risks.”

The disclosure survey will be mandatory for companies writing policies worth more than $300 million nationwide. It was created by Ceres, a Boston-based nonprofit group that leads a coalition of investors and environmental groups in gathering information about business responses to climate change, and prods them to do more.

Andrew Logan, the director of Ceres’s insurance program, said Wednesday that the insurance industry “is distinguished by poor disclosure on this issue.” He added, “To me it is a continuing surprise that an industry that is so obviously affected by this talks so little about it.”

Robert Hartwig, president and economist at the Insurance Information Institute, an industry trade group, sharply disputed this point. “No industry discloses more about the impact of climate on its earnings and its ability to operate,” he said. “Look at any quarterly earnings report and you’ll see it’s full of the impact of weather on earnings.”

He added, “If insurers have shown anything over the course of the centuries in which they have oared it is that they are capable of managing changes in the weather on both the micro and the macro scale.”

Roughly 25 percent of the industry’s large property, casualty and life insurance companies participated in an earlier version of the survey sent out by California and five other states last year. A rule change, combined with California’s partnership with New York and Washington, will mean that 300 of the larger insurers will have to comply. Companies that do not complete the survey could face fines, although it is highly unusual for companies to ignore such directives.

The climate risk survey made its first appearance in California in 2008 — a period which Mr. Hartwig described as “the post-‘Inconvenient Truth’ period,” a reference to the climate-change documentary featuring the former Vice President Al Gore.

The survey’s contents, Mr. Logan said, “are pretty basic. What the regulators are trying to get a sense of is whether companies have thought about the cost implications for their businesses.”

He added: “The big takeaway from the survey last year is that there is a high level of concern among insurers about the impacts of climate change that is not matched by concrete plans to deal with those impacts. There is a real gap between the risk that’s been identified and plans to address it.” Eleven of the 88 companies surveyed last year, he said, reported having formal policies to manage climate change.

Another group that might benefit from such disclosures, said California’s insurance commissioner, Mr. Jones, are investors in the insurance industry.

Jack Ehnes, the chief executive of the California State Teachers’ Retirement System, which has $148 billion in investments, some in insurance, echoed this statement.

“If we feel insurance or energy companies are not incorporating climate risk into their analyses and their boards of directors are not recognizing it,” he said, “that failure to do so endangers the value of that investment.” The result, he said, would not be disinvestment but “engagement with those companies,” because “they are not caretaking their business very well.”

Mr. Hartwig, however, said that an insurer’s portfolio “should not be subject to criticism based on the holding of securities of companies that some people may in fact object to.”

That’s starting to change. At a recent Wall Street meeting of 100 investor members of the $10 trillion Investors Network on Climate Risk sustainability leadership was the buzz.

The Financing Sustainable Water Infrastructure report, is the product of a meeting convened by The Johnson Foundation, in collaboration with American Rivers and Ceres, which brought together a group of experts to discuss ways to drive funding toward the infrastructure needed for the 21st century.

Largely built on systems developed during the 19th and early 20th centuries, U.S. water infrastructure faces profound problems of aging components, outdated technology and inflexible governance systems ill-equipped to handle current consumption, environmental and economic problems.

Presently, about 6 billion gallons of expensive, treated water is being lost in the U.S. each day due to leaky and aging pipes — some 14 percent of the nation’s daily water use. This pervasive water waste is underscored by the fact the American Society of Civil Engineers gives the nation’s water systems a D-, the lowest grade of any infrastructure including roads and bridges.

The report concludes that rebuilding and operating our water systems as they are presently built would be enormously inefficient. One major problem is the very nature of the systems themselves – where drinking water, storm-water and waste-water are built, financed and operated as entirely distinct units rather than as more efficient, interconnected systems. Another major problem is myopic, inflexible water-pricing systems that fail to distinguish between various water uses and generally undervalue water.

In order to achieve more sustainable, resilient and cost-effective freshwater systems, the report recommends bold new approaches for financing and operating public water systems, including:

• Local water solutions that can improve efficiencies, including green infrastructure, closed-loop systems and water recycling
• Flexible water pricing and revenue structures that distinguish between drinking water and various other types of water, such as lawn water and toilet water
• System-wide, full-cost accounting of water services and financing mechanisms
• Less reliance on state and federal funding and more reliance on private, market-based financing mechanisms that can support local, customer-supported solutions.

“While the deteriorating state of the nation’s water infrastructure is not a secret, we have lacked workable strategies and policies to finance the changes needed,” said Lynn Broaddus, Director, Environment Programs at The Johnson Foundation. “This report addresses the critical linkage between financing and sustainability that was initially raised by the Charting New Waters consensus report in 2010. It’s not enough to pay for new water infrastructure: we need the financing to actually drive a new, sustainable water infrastructure that will take care of generations to come.”

Jeffrey Odefey, Director of Stormwater Programs at American Rivers, said, “Clean water and resilient ecosystems are absolutely vital to our health, our communities, and economy. This timely report lays out clear directions to ensure that our communities grow into the future with safe, reliable water supplies and healthy rivers and streams.”

Sharlene Leurig, Senior Manager of Water and Insurance Programs at Ceres, said, “This report makes clear that our nation's water infrastructure system is broken and dramatic changes are needed. Rethinking how we finance and operate our vast water systems is not a choice, it's a must. We have the engineering and land use tools we need to ensure our water systems can stand up to 21st century challenges. The key will be partnerships and cooperation between business, government and public interest groups to finance these new tools.”

The Johnson Foundation is releasing this report as part of its work with Charting New Waters, an effort it formally launched in 2010 dedicated to catalyzing new solutions to U.S. freshwater challenges. Charting New Waters is composed of a diverse group of leaders from business, agriculture, academia and environmental organizations that have publicly committed to improving U.S. freshwater resources by advancing the principles and recommendations of the group.

The initial phase of work led to the release of Charting New Waters: A Call to Action to Address U.S. Freshwater Challenges, a consensus report issued on Sept. 15, 2010.

As part of its ongoing Charting New Waters effort, The Johnson Foundation is also hosting a series of Regional Freshwater Forums that convene experts to examine freshwater challenges, successes, innovations and potential solutions that can bridge geographies and inform national policy. The first Forum took place in Denver, Colo., in October 2011.

Charting New Waters is actively engaging new organizations to join the effort. If you are interested in making a commitment please click here.

The Johnson Foundation at Wingspread is dedicated to serving as a catalyst for change by bringing together leading thinkers and inspiring new solutions on major environmental and regional issues. For additional information about Charting New Waters, or to learn more about The Johnson Foundation at Wingspread, please visit www.johnsonfdn.org.

American Rivers is the leading organization working to protect and restore the nation’s rivers and streams. Rivers connect us to each other, nature, and future generations. Since 1973, American Rivers has fought to preserve these connections, helping protect and restore more than 150,000 miles of rivers through advocacy efforts, on-the-ground projects, and the annual release of America’s Most Endangered Rivers®.

Ceres is an advocate for sustainability leadership. It leads a national coalition of investors and public interest groups working with companies to address sustainability challenges such as global climate change and water scarcity. Ceres also directs the Investor Network on Climate Risk (INCR), a network of 100 institutional investors with collective assets totaling about $10 trillion.

(Click ad to enlarge)

Business for Innovative Climate & Energy Policy (BICEP), a coalition of major American businesses, is saluting California’s efforts to accelerate nationwide adoption of innovative clean cars policies through a new ad campaign (click ad to enlarge). These policies will drive job creation, save consumers billions at the pump and cut pollution more than 25 percent by the year 2030.

BICEP, along with a group of other top California businesses and business organizations, has launched the advertising campaign supporting strong standards in advance of the California Air Resources Board’s vote this week to renew California’s landmark Clean Cars Program.

“No one ever won a race by throwing things into neutral or reverse,” said Anne Kelly, Director of BICEP. “California’s new Clean Cars Program will drive innovation and investment forward and create new opportunities for business. And that means economic growth and good new jobs for the people of California.”

Joining BICEP in the ad campaign are California businesses and organizations including Applied Materials, the California Ski Industry Association, Patagonia, Silicon Valley Leadership Group, and Small Business Majority.

“As business people, we know that constant improvement is key to success,” said Bruce Klafter, Managing Director-Worldwide Operations and Head-Corporate Responsibility & Sustainability, Applied Materials. “California is leading the way on Clean Cars yet again, and its actions will ensure that the state – and America - continue to grow our slice of the fast-growing, worldwide, multi-billion dollar clean energy sector.”

BICEP, a project of Ceres, is a coalition of leading consumer brand companies committed to working with policy makers to pass meaningful energy and climate legislation that will enable a rapid transition to a low-carbon, 21st century economy that will create new jobs and stimulate economic growth while stabilizing our planet’s fragile climate.

Ceres is a non-profit organization that leads a national coalition of investors, environmental organizations and other public interest groups working with companies to address sustainability challenges such as global climate change and water scarcity.

These major financial players see opportunity in clean energy and efficiency. Take it from Alan Salzman, CEO of Silicon Valley-based VantagePoint Capital Partners.