Leading U.S. investors filed shareholder resolutions with
Exxon-Mobil, Chevron, Chesapeake Energy, ConocoPhillips and 14 other oil and gas companies, pressing them to disclose their plans for managing risks associated with greenhouse gas (GHG) emissions and natural gas fracking.
"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," says Mindy Lubber, director of the Investor Network on Climate Risk and president of Ceres, which coordinates the filings.
Investors want detailed financial accounting for how natural gas firms are addressing risks associated with fracking: community concerns, regulatory changes and drilling moratoriums.
Resolutions were filed with: EOG Resources, Chevron, Penn Virginia, Anadarko Petroleum, Range Resources, Chesapeake Energy, Noble Energy, Ultra Petroleum, Exxon Mobil, and Stone Energy.
Public concern about the environmental and social impacts of fracking operations are growing across the country and can have real business implications for the companies involved.
"Bans and moratoria are denials of companies’ social license
to operate and impose a wide range of costs on companies, ranging from the costs of delays to complete loss of access to valuable resources where sunk costs must be written off," says Larisa Ruoff, Director of Shareholder Advocacy for Green Century Capital Management, one of the filers.
"Right now, companies are not providing investors, or the communities in which the companies operate, sufficient information on the steps they are taking to address and mitigate the risks associated with hydraulic fracturing operations so shareholders are demanding increased transparency," she
says.
"This year’s effort builds on the remarkable success
achieved by investors last year, when similar proposals received an average 40% vote. These high votes send strong messages to companies that significant portions of their shareholders require increased disclosure on this issue," says Richard Liroff, Executive Director of the Investor Environmental Health Network, which
coordinates investor engagements with companies on fracking with Green Century.
"Concern about water sources, toxic chemicals, and wastewater has led to new regulations in several states and proposed federal legislation. Explosions, contamination incidents, and millions of
dollars in fines demonstrate that things can and do go wrong," says Michael Passoff, Senior Strategist for As You Sow, another filer.
"In order to maintain their social license to operate, companies must fully disclose the steps they are taking to minimize risks, to acknowledge their challenges and failures, and to clearly define the methods they will use to continually improve operations,"
says Laura Berry, Executive Director of ICCR, another filer.
Other resolutions filed this year with oil & gas firms ask them to:
- Set greenhouse gas reduction goals or report on climate change risks to the company (ConocoPhillips,
Exxon-Mobil).
Last year, a similar resolution with Exxon-Mobil received 26.5% shareholder support, and is expected to attract a higher vote this year.
Companies that voluntarily disclose their GHG emissions and carbon reduction strategies 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. Add board members with specific environmental expertise. (Cabot Oil and Gas, Chevron, Range Resources, Southwestern Energy Company, Occidental Petroleum)
Linking executive pay to company performance on accident risk mitigation or GHG emissions reductions ensures these issues get the attention they deserve, and reduces incentives for excessive risk taking.
- Report on business and environmental risks from tar sands extraction in Canada (Exxon-Mobil).
Investors want the company to report on potential long-term risks to its finances and operations posed by the environmental, social and economic challenges associated with tar sands, including environmental regulations, lawsuits and growing public
opposition to tar sands development.
These resolutions are part of a broader investor initiative that challenges 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.
In January, for the first time, institutional investors asked corporations they hold shares in to completely refrain from making donations on political campaigns.
2011 was a record year for shareholder resolutions on climate change, fracking, water risk and other sustainability issues. A record 109 shareholder resolutions were filed with 81 U.S. and Canadian corporations.
Read the Ceres tar sands report, which elucidates the environmental and financial risks of producing tar sands oil in Canada.
In recent years shareholder resolutions have achieved significant improvements in the homebuilding, electric power and other industries, as detailed in Proxy Power: Shareholder Successes on Climate, Energy & Sustainability:
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