Investors Achieve Record Results on Climate Change

Investors filed an unprecedented number of shareholder resolutions in 2010 pressing companies to boost their attention to the risks and opportunities posed by climate change. Key results were achieved, including majority votes at coal mining company Massey Energy (53.1%) and water infrastructure services company Layne Christensen (60.3%).

Investors filed a record 101 climate and energy-related resolutions with 88 U.S. and Canadian companies, which is nearly 50 percent higher than last year.

A record 51 resolutions were withdrawn after the companies agreed to positive climate change and energy-related commitments. A resolution with Ohio-based FirstEnergy was withdrawn after the company committed to use dry coal ash storage, and a resolution with Procter & Gamble was withdrawn after the company agreed to report on the percentage of sustainably sourced palm oil procured on an annual basis, beginning next year. Traditional palm oil production frequently involves burning large areas of rainforest and is a major contributor to global greenhouse gas (GHG) emissions.   

Sixteen of the 42 resolutions that went to a vote achieved 30 percent or greater support, nearly three times the number that achieved that level of support in 2009.

”The BP spill is only the latest reminder of why investors are ratcheting up their attention to climate and other environmental risks across their portfolios,” said Mindy Lubber, president of Ceres, a national coalition of investors and environmental groups that helped coordinate this year’s shareholder filings with the Interfaith Center on Corporate Responsibility (ICCR). “This year’s record results send a powerful message that companies should boost their attention to these issues.”

“If our portfolio companies are to provide long-term shareowner value, they need to be proactive, not reactive, in addressing climate change and other ESG matters,” said CalSTRS CEO Jack Ehnes.  “The excessive focus on short-term profits at the expense of all else has proven disastrous and has led to widespread financial issues. But this proxy season’s record-breaking results is an encouraging sign that investors and companies are paying increasing attention to long-term drivers of value.”

CalSTRS, the nation’s second largest public pension fund, manages $132 billion in assets and filed several resolutions this year, including the ConocoPhillips oil sands proposal and the Chesapeake Energy resolution.

Key highlights of the 2010 proxy season:

• In response to a resolution filed by Domini Social Investments, Procter & Gamble agreed to disclose the percentage of sustainably-sourced palm oil it procures on an annual basis, starting with its 2011 sustainability report. P&G also agreed to improve disclosure regarding its methods to ensure sustainable sourcing.
• First-ever resolutions on coal ash risks, filed by As You Sow, received high votes at CMS Energy (43.1%) and MDU Resources Group (40.5%).
• A resolution with FirstEnergy Corp., filed by Green Century Capital Management, was withdrawn after the company agreed to publicly commit to a long-term strategy to use only dry storage for its coal ash. The company will stop pumping coal ash into its 1,000-acre treatment pond in Pennsylvania and transition to a dry method of waste storage, which limits potential contamination.
• TJX agreed to ramp up its climate and sustainability-related efforts, including producing a full sustainability report by 2011, disclosing its climate risks and creating a U.S. green team whose sole purpose is to improve the MA company’s sustainability performance.  TJX acted in response to several years of dialogue with investors and a resolution filed this year by Newground Social Investment.
• A majority (53.1%) of Massey Energy shares were voted in favor of a measure filed by the New York City’s Comptroller’s Office calling for an adoption of quantitative goals for reducing GHG emissions. The vote was one of the highest ever for a climate-related shareholder proposal, and came after an April mining disaster that killed 29 miners in West Virginia. (Massey reported the vote as 36.8% in favor because it included 20.9 million abstaining votes as votes against the resolution.  The resolution got 25.1 million votes in favor and 22.2 million votes against.)
• A majority of Layne Christensen shares (60.3%) were voted in support of a resolution requesting that the company issue a report on environmental, social and governance (ESG) issues, including water management and its GHG emissions. The resolution was filed by Walden Asset Management.
• A resolution filed by Calvert Investments with grocer Kroger garnered 40.7% support. The resolution asked Kroger to issue a report on how the company will assess and manage the impacts of climate change on the corporation, specifically with regards to its supply chain.  The high vote demonstrates shareholder concern about climate risk even at companies that are not major direct GHG emitters. It also shows that the climate disclosure guidance issued by the SEC in February parallels the type of disclosure investors are seeking from companies.

This year’s climate resolutions were filed by state and city pension funds, foundations, and religious, labor and other institutional shareholders. The filers collectively manage more than $300 billion in assets.

“The robust response from such a wide spectrum of investors is gratifying as it acknowledges the growing urgency to address the role corporate decisions play in alleviating climate change,” said Laura Berry, Executive Director of ICCR.  “By bringing actionable behavior change to the attention of corporations, filers have once again this year lead the way toward real impact on global warming.”

Forty-two resolutions have gone to a vote so far at this year’s corporate annual meetings and achieved an average vote of 24.6 percent, up from 21.7 percent last year. The SEC allowed the omission of three resolutions. Five remaining votes are expected at annual meetings in August and October, including Burger King, Sara Lee Corporation and Smithfield Foods.

"One of the issues that has increasingly resonated with investors is the request for companies to do a CSR or sustainability report and being transparent about their records and challenges,” said Tim Smith of Walden Asset Management, the lead filer of the Layne Christensen resolution and several other proposals. “Resolutions to companies large and small moved to a new level of support with the vote at Layne Christensen reaching a record 60 percent and votes at Gentex and St. Jude in the low 30s and low 40s, respectively. We believe this signals a tipping point for the case for transparency on CSR."

Key High Votes and Share Value of Votes in Favor

Adopt GHG reduction goals

CMS Energy, 35.1%  ($729 million)
ExxonMobil, 27.2%   ($39.7 billion)
Massey Energy, 53.1% ($852 million)
Ryland, 37.4%  ($234 million)

Issue a sustainability report including GHG reduction strategies

Boston Properties, 44.1%  ($3.2 billion)
Chesapeake Energy, 31.5%  ($2.4 billion)
EQT Corporation: 37.4%  ($1.4 billion)
Federal Realty Investment Trust, 44.6%  ($1.4 billion)
Layne Christensen, 60.3%  ($234 million)
St. Jude Medical, 42.8%  ($3.1 billion)

Report on the environmental and health risks associated with coal ash

CMS Energy, 43.1%  ($875 billion)
MDU Resources Group, 40.5%    ($962 million)
The Southern Company, 21.0%  ($2.6 billion)

Report on risks posed by the environmental, social and economic challenges associated with oil sands operations

ConocoPhillips, 27.1%  ($13.8 billion)
ExxonMobil, 26.4% ($38.3 billion)

Corporate governance experts are increasingly supporting climate-related resolutions. Institutional Shareholder Services (ISS) and PROXY Governance, Inc. (PGI) both supported more than 65 percent of the resolutions that went to vote. Glass Lewis supported approximately 15 percent of the climate and energy-related resolutions tracked by Ceres, which is an increase over last year’s support.

In addition to the 34 proposals requesting sustainability reports including climate-related strategies, investors also filed an additional 8 resolutions asking companies to provide company-specific sustainability reports detailing how they are managing ESG issues beyond climate change. The sharp increase in the number and votes for shareholder proposals such as these are a clear indication of investors’ concern with transparency and long-term value.

About Ceres

Ceres is a leading coalition of investors and environmental groups working with companies to address sustainability challenges such as climate change. Ceres also directs the Investor Network on Climate Risk (INCR), an alliance of 90 institutional investors with collective assets totaling about $10 trillion.

About ICCR

For 39 years, the Interfaith Center on Corporate Responsibility has been a leader of the corporate social responsibility movement. ICCR’s membership is a coalition of nearly 300 faith-based institutional investors representing over $100 billion in invested capital. ICCR-member religious institutional investors sponsor over 200 shareholder resolutions on major social and environmental issues annually.