Electric Power Companies, Investors, and Environmental Groups Join Forces to Call for Action on Climate Change
An unusual partnership of electric power companies, investors, and major environmental groups today released recommendations for the industry, government and Wall Street on the issue of global warming. Among the recommendations was a call for a mandatory national climate change program to limit greenhouse gas emissions. A national cap on emissions, the participants say, would create business certainty for electric companies and their investors, and would encourage investment in cleaner new technologies.
Convened by CERES, a coalition of investors and environmental groups, the Electric Power/Investor Dialogue recommendations were agreed to by eight electric power companies - including some largely reliant on coal-with approximately $55 billion in annual revenues, nine investment funds representing over $190 billion in assets, two investment advisory firms, and five major public interest and environmental groups.
The report leads with a consensus statement that asserts climate change as a serious "environmental and financial" threat, one that should concern industry leaders and investors. The statement contends that "Many electric companies in the United States emit significant amounts of greenhouse gases, and believe it is in their shareholders' and the public's interest for them to act now to reduce these emissions. But they confront the problem that financial and electricity markets do not reward, and in some cases punish, proactive efforts that anticipate environmental issues, such as climate change."
David Gardiner, CERES Senior Advisor and former director of the White House Task Force on Global Warming under the Clinton Administration, said: "This call for action on global warming for the nation's heaviest emitting industry represents rare agreement between groups that are usually at odds - electric companies, investors, and environmentalists. This coming together of unusual bedfellows should alert both government and Wall Street to take the recommendations seriously and tackle this problem."
The report makes four recommendations that:
- Senior management and directors of electric companies and investors should actively engage in the climate change issue.
- Investors and electric companies should quantify and analyze climate change financial risk.
- Government should enact a national mandatory market-based climate change program to limit greenhouse gas emissions to create certainty for both electric utilities and investors.
- Government must help transform the market for clean energy technologies.
The recommendations are predicated on a major consensus finding of the report: "Greenhouse gas emissions, including carbon dioxide emissions, will be regulated in the U.S. The issue is not whether the U.S. government will regulate these emissions, but when and how."
The statement acknowledges voluntary actions as part of the solution, but stressed that voluntary actions alone are not an effective means of achieving emissions reductions: "Voluntary action is complementary to the achievement of mandatory targets and may be effective in reducing emissions...however, voluntary programs are unlikely to produce large-scale, long-term conversion to low and non-emitting technologies."
Members of the group testified to the Senate Environment and Public Works Sub-Committee earlier in the day, at a hearing on the Bush Administration's proposed "Clear Skies" initiative for the electric power industry. The initiative would not regulate carbon dioxide - the primary pollutant causing global warming - emitted by the industry.
Denise Nappier, Treasurer of the State of Connecticut and principal trustee of the Connecticut Retirement Plans and Trust Funds (CRPTF), testified: "I believe this issue is quickly becoming the leading edge of the next wave of corporate governance issues...I say this as an institutional investor with a fiduciary responsibility. Climate change may well be about our planet's future, but it is also about the financial risks to corporations, and the impact on the retirement savings of millions of Americans."
Douglas Cogan, of the Investor Responsibility Research Center (IRRC), which tracks shareholder resolutions and advises institutional investors on proxy voting, testified: "Today, a corporate CEO typically looks out only three to five years when making a big capital investment. For a long-lived asset like a power plant, the investment planning horizon may extend up to fifteen years, the power plant itself may operate for 30 years, and its carbon dioxide emissions will linger in the atmosphere for another 100 years or more. How is a CEO or corporate director who lasts five years or less in the job supposed to address this gap in governance decisionmaking?"
Investor Groups - Calvert Group, Connecticut Treasurer's Office, Innovest Strategic Value Advisors, Investor Responsibility Research Center, ISIS Asset Management, New York City Comptroller's Office, PAX World Funds, The Presbyterian Church (USA), Social Investment Forum, Trillium Asset Management, and Walden Asset Management
Power Companies - Calpine, Con Edison, Keyspan, Northeast Utilities, PG&E Corporation, PPL Corporation, Public Service Enterprise Group, and Wisconsin Energy Corporation
Environmental and Consumer Groups - Co-op America, Natural Resources Defense Council, Union of Concerned Scientists, World Resources Institute, and World Wildlife Fund
Carbon dioxide, the major greenhouse gas emission that causes global warming, is one of four air pollutants associated with electric power generation, and is not currently regulated. Because carbon dioxide is largely a by-product of the burning of fossil fuels, its regulation has implications for the source of electricity. Cap-and-trade programs, which would limit emissions and allow companies to trade credits to offset their emissions, would help to limit financial risks and create opportunities for companies in the electric power industry and their investors.
For further information on climate risk for the electric power and other sectors, download the CERES/Innovest report "Value at Risk." Also available is the CERES/NRDC/PSEG report, "Benchmarking Air Emissions of the 100 Largest Electric Generation Owners in the U.S. - 2000."