Shareholders Laud Hertz For Addressing Fleet Fuel Economy; Urge Avis Budget Group to Follow Suit at its Annual Meeting on June 12
Lauding Hertz (NYSE: HTZ) for its commitment to report to investors on its plans for improving the fuel economy of its fleet, shareholders called on Avis Budget Group (NYSE: CAR) to follow suit and develop a comprehensive greenhouse gas reduction plan for its rental car operations. Avis Budget faces a shareholder vote on the matter at its June 12 annual meeting in Wilmington, Delaware.
The Avis resolution is filed by the California State Teachers’ Retirement System (CalSTRS) and the Florida State Board of Administration, who together manage $230 billion in assets. It also has the support of the proxy advisory firm PROXY Governance and other investors in the $7 trillion Investor Network on Climate Risk (INCR). The resolution asks the company to adopt quantitative goals based on current and emerging technologies for reducing the company’s greenhouse gas emissions (GHG) from its rental car operations; and to provide a report on these goals to shareholders.
The resolution comes in the wake of Hertz’s recent commitment to set goals around its fleet fuel economy and take key steps in sustainability reporting within the next year. Hertz’s pledge prompted Calvert Investments to withdraw a resolution similar to the one filed with Avis Budget.
“Hertz’s decision to report on the fuel economy metrics and goals of its vehicles is a strong indicator of the company’s commitment to sustainability,” said Rebecca Henson, sustainability analyst at Calvert Investments. “Hertz’s decision raises the bar for others in this industry, and for this we applaud them.”
Hertz stands to gain competitive advantage over other rental car companies as consumer appetite grows for fuel-efficient vehicles. A February 2009 survey by the Consumer Federation of America found that motorists want more fuel-efficient cars, even with lower fuel prices. News stories have also reported that both Hertz and Avis sold out of fuel-efficient Toyota Prius hybrids at Los Angeles Airport in July 2008.
“Companies without sufficient inventory of highly efficient vehicles may suffer competitive disadvantage. We urge Avis Budget to adopt a long-term strategy for reducing GHG emissions and meeting consumer demand for more fuel efficient vehicles,” said Jack Ehnes, CalSTRS Chief Executive Officer.
Rental car companies are also major providers of used cars, typically selling their vehicles within one or two years of buying them. With an active fleet of over 400,000 passenger vehicles, Avis Budget buys several hundred thousand new vehicles a year. As the Obama administration moves to tighten fuel economy standards, consumer demand for fuel-efficient cars will grow stronger, making it more difficult for Avis Budget to resell cars that are not highly fuel efficient.
“Rental car companies like Avis Budget must offer their customers more fuel-efficient vehicles if they are to thrive in the emerging low carbon economy. Quantitative reduction goals provide the clearest signal to investors that companies are preparing for a carbon constrained future,” said Mindy Lubber, president of Ceres and director of the Investor Network on Climate Risk.
In its recommendation for a “yes” vote on the resolution, PROXY Governance wrote:
“Given that a significant fraction of domestic GHG emissions come from automobiles, PROXY Governance believes that car rental companies are exposed to significant financial and competitive risks associated with possible GHG regulation. While the company has taken certain steps to reduce emissions from its vehicle fleet and operations, we believe shareholders will be best served if the company more explicitly discloses its feasibility planning for future GHG emissions reductions.”
The Florida State Board of Administration issued the below statement in support of the resolution:
“The Florida State Board of Administration co-sponsored this proposal because it is important for investors to know how the company plans to respond to changing regulatory and consumer pressures concerning GHG emissions. Avis Budget Group is in a position to respond early and potentially gain by being prepared to meet these challenges in a way that benefits consumers and Avis Budget alike.”
The resolution filed with Avis Budget is one of a record 68 global warming resolutions filed with 58 U.S. companies and 4 Canadian companies as part of the 2009 proxy season. The shareholder filings are coordinated by the Ceres investor coalition and the Interfaith Center on Corporate Responsibility (ICCR), a group of faith-based investors.
Transportation sources produce close to one-third of all GHG emissions in the U.S. An active fleet the size of Avis Budget Group’s emits over one million tons of CO2 each year.
Calvert Investments is a leader in Sustainable and Responsible Investments (SRI), offering investors among the widest choice of SRI strategies of any investment management company in the United States. By integrating proprietary sustainability research and corporate engagement from Calvert with the asset class expertise of our in-house money managers and premier institutional subadvisors, the three proprietary Calvert SRI approaches are managed for competitive long-term, risk-adjusted returns and to influence corporate responsibility.
The California State Teachers' Retirement System, with a $117.6 billion portfolio, is the second largest public pension fund in the United States. It administers retirement, disability and survivor benefits for California's 833,000 public school educators and their families from the state's 1,400 school districts, county offices of education and community college districts.
Ceres is a leading coalition of investors, environmental groups and other public interest organizations working with companies to address sustainability challenges such as global climate change. Ceres directs the $7 trillion Investor Network on Climate Risk.