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US companies start to bite bullet on climate change

June 2004

Energy sector companies in the US are beginning to respond to investor pressure on climate change as the annual meeting season moves into full swing.

Two businesses, Southern Company and TXU, have agreed to issue reports on their climate change impacts in return for a withdrawal of shareholder resolutions on the subject, while a third, Reliant, has said it will increase its disclosure in exchange for a resolution being dropped. All three have said they will begin to create strategies to manage their carbon emissions.

The companies, which are in the electricity business, are following the lead of two of the nation’s largest electric utilities, American Electric Power and Cinergy, which earlier this year said they would take similar action. Of six electricity businesses targeted by shareholder activists this season only one, Xcel, has held out. It succeeded in getting the Securities Exchange Commission to invalidate a shareholder resolution on the topic.

The Coalition for Environmentally Responsible Economies, which is co-ordinating shareholder action on the issue, said movement shown by Southern Company has been particularly significant, given that it is the second largest coal-based power generator in the US and had previously been considered a leading corporate sceptic on global warming.

In contrast to its previous position, Southern said in a letter to shareholder activists that it now believed its board members ‘have a fiduciary duty to carefully assess and disclose to shareholders appropriate information on the company’s environmental risk exposure’.

Ceres and its partners believe that behind-the-scenes talks such as those held recently are the shape of things to come.

Leslie Lowe, director of energy and environment at the Interfaith Center on Corporate Responsibility, one of the main architects of shareholder activism on climate change, said: ‘This year’s proxy season is really critical in terms not of the votes but what happens before votes.’

Thirteen US pension funds – including the New York State Common Retirement Fund – have now requested the SEC to make disclosure of climate change risks a listing requirement.




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