Shareholders Focus On Energy Companies

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The number of climate and energy-related shareholder resolutions filed with energy companies is the highest ever, says the Ceres' Investor Network on Climate Risk (INCR). Investors have filed 66 climate and energy related shareholder resolutions with 41 coal, electric power and oil companies in the 2011 proxy season. The surge in resolutions represents a 50% increase over the 44 resolutions filed with 31 coal, oil and electric power companies last year.   The announcement comes a day after the consulting group Mercer released a report finding that climate change could increase portfolio risk by 10% over the next 20 years. A total of 96 climate and energy-related resolutions have been filed so far with U.S. companies, including businesses with less direct exposure to climate-related business trends such as building, real estate, financial services and food firms.  (See a complete list of resolutions filed by clicking here .

The resolutions press companies on a wide range of issues, including the risks and opportunities from oil sands extraction in Canada, hydraulic fracturing in the U.S., global water scarcity, sustainable palm oil sourcing, overall greenhouse gas (GHG) emissions and usage of renewable energy. For the first time ever, investors have also filed 11 resolutions requesting that executive compensation be directly linked to sustainability metrics. 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 INCR, which has more than 90 members managing over $9 trillion in assets.

Electric Power and Coal The electric power sector saw the largest increase in resolutions filed. Investors filed 29 resolutions with 19 electric power companies, including Dominion, Dynegy, Southern and Xcel. Eleven resolutions were filed with eight power companies last year.  With the U.S. Environmental Protection Agency moving forward with plans to issue greenhouse gas rules targeting the electric power sector, many of the resolutions ask the companies to set GHG reduction goals. Others focus on the financial risks of water-scarcity concerns, usage of renewable energy and risks from mountain top removal.

Oil Sands and Hydraulic Fracturing Investors filed resolutions with ConocoPhillips and ExxonMobil calling on the companies to address and reduce the business and environmental risks from their significant investments in oil sands production in Canada. Investors want the oil companies to report on the environmental damage caused by oil sands operations and to examine the impact that environmental rules, such as low carbon fuel standards in the U.S., or lawsuits in Canada will have on them.  A resolution was also filed with Royal Bank of Canada, asking the bank to report on the financial risks of oil sands investments.

Executive Compensation and Sustainability On the heels of major financial losses from last year's BP oil spill and Massey Energy coal mine explosion, investors filed over a dozen resolutions aimed at improving corporate governance of environmental and social challenges. Investors focused especially on executive compensation, bolstered by the U.S. Securities and Exchange Commission's recent Say-on-Pay rule. Resolutions were filed with Hess, Marathon Oil, Chevron and Lowe's and seven other companies requesting that executive pay include sustainability-related metrics.

Sustainability Reports Shareholders have also filed 18 resolutions requesting a sustainability report including climate change or GHG reduction strategies. Such resolutions have been gaining traction with investors seeking to analyze companies' environmental, social, and governance (ESG) risks, and have received record-high votes in support, including a 34% vote with Emerson Electric this proxy season, the first such resolution this year to come to a vote. Companies receiving this type of resolution include CONSOL Energy (withdrawn), SunTrust Banks, and Tesoro.

Climate and Energy Resolutions Filed in the 2011 Proxy Season Of the 96 resolutions filed thus far, investors have successfully negotiated 12 withdrawals after the companies made specific commitments in response to the resolutions. For example, in response to Varian Medical Systems' commitment to develop Global Reporting Initiative ( GRI )-based reporting and assign board oversight of sustainability issues, Walden Asset Management withdrew its resolution. The Teamsters withdrew a resolution with Covanta Energy after the company issued its first GRI-based sustainability report. Among the resolutions this year currently expected to go to vote: Agriculture / Food / Forestry: RR Donnelley ( RRD ), Yum! Brands ( YUM ) Buildings / Real Estate / Energy Efficiency: AMB Property Corporation ( AMB ), Boston Properties ( BXP ), CB Richard Ellis (CBG), Equity Residential (EQR), Lennar (LEN), Lowe's (LOW), The Macerich Company (MAC), MGM Resorts International (MGM), The Ryland Group (RYL), Standard Pacific Corp. (SPF) Coal: Alpha Natural Resources (ANR), International Coal Group (ICO), Massey Energy (MEE), Peabody Energy (BTU) Electric Power: Ameren (AEE), Berkshire Hathaway (BRK-B), CMS Energy Corporation (CMS), Dominion (D), Duke Energy (DUK), Dynegy (DYN), Entergy Corp (ETR), FirstEnergy (FE), Genon, NRG Energy (NRG), Portland General Electric (POR), PPL Corp (PPL), Public Service Enterprise Group (PEG), SCANA Corp (SCG), Sempra Energy (SRE), Southern Company (SO), Xcel Energy (XEL) Finance: Royal Bank of Canada (RY), SunTrust Banks (STI) Oil & Gas: Anadarko (APC), Cabot Oil & Gas Corporation (COG), Carrizo Oil and Gas (CRZO), Chevron (CVX), ConocoPhillips (COP), El Paso (EP), Energen (EGN), ExxonMobil (XOM), Hess Oil (HES), Marathon Oil (MRO), Occidental Petroleum (OXY), Southwestern Energy Company (SWN), Tesoro (TSO), Ultra Petroleum (UPL), Valero Energy (VLO) S&P 500 / Other: Amazon (AMZN), C.R. Bard (BCR), Freeport-McMoran (FCX), Nordstrom (JWN), St. Jude Medical (STJ), Time Warner Inc. (TWX) Small Cap: Gentex Corp (GNTX), Layne Christensen Company (LAYN) Canadian: Great-West Lifeco (GWO), Scotia Bank (BNS)


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

Copyright © 2010 Charter Financial Publishing Network Inc. All Rights Reserved.


This article appears in: Financial Advisor Center , Business

Referenced Stocks: AMB , BXP , GRI , RRD , YUM

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