Air Date: Week of June 6, 2003

Investors have been sponsoring measures to convince companies to be more open about greenhouse gas emissions and what the corporations are doing to reduce them. Doug Cogan, an analyst with the Investor Responsibility Research Center, explains the trend to host Steve Curwood.

Transcript

NAPPIER: 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.

CURWOOD: That’s Denise Nappier, treasurer for the State of Connecticut, testifying before Congress about why global warming poses a threat to the $18 billion dollar pension fund she’s responsible for. Ms. Nappier is not alone. Investors are increasingly using shareholder resolutions at annual meetings to convince corporations to be more open about their greenhouse gas emissions and explain how they plan to reduce them. Doug Cogan is the climate change specialist with the Washington, D.C. based Investor Responsibility Research Center. He says this rise in investor interest in global warming is in part motivated by President Bush’s inaction on the issue.

COGAN: In a strange way, I think the fact that the Bush administration has decided to pull back from the Kyoto Protocol raises the question: well, what will we do then as a nation, and what will our corporations do to control emissions? And are there risks that these companies face financially as they look forward, if we are going to be charting a different path than much of the rest of the world in terms of addressing climate change? So, they would like to see more statements from management with respect to how they intend to address the issue, and fundamentally, what kind of risk shareholders have as they make efforts to control their emissions.

CURWOOD: Doug, could you please give me some examples of some of the most striking shareholder resolutions about climate change that you’ve seen this year?

COGAN: The one that stands out is at Chevron-Texaco, which had a resolution on providing more renewable energy. That resolution got 32 percent support in the annual meeting that just took place a few weeks ago. Now to give you some context for that, no-- well, I take that back-- one social issues resolution in the 32 year history of the movement has gotten a 50 percent support level. Very rarely do we see votes that break into the 30s or frankly, even the 20 percentiles. But with the case of Chevron-Texaco and the 32 percent vote, it is the second highest vote ever on an energy-related proposal, and certainly the highest vote at a company of that size.

Similarly, at Exxon-Mobil, a resolution there encouraging that company to do more with renewables got 21 percent support. There also, with respect to electric utilities, have been three very high votes. The average support level at those three companies was about 25 percent support. And really, you only need maybe eight or ten percent support on a resolution like this to get the attention of management.

CURWOOD: Now just a few years ago, the climate change resolutions got an average of what-- six, seven, eight, nine percent? Why the sudden jump?

COGAN: The number of resolutions filed in the last couple of years really grew. It doubled in 2002 to over 20 resolutions that were filed, and in the 2003 proxy season we had over 30 resolutions filed. That number of resolutions coming forward and appearing on a proxy ballot leads these institutions to say, “Gee, this is not a subject that appears to be going away. We’re voting and we’re seeing it coming at more and more companies in our portfolios. Let’s put a policy in place.”

So I think a lot of this has to do with the fact that the number of resolutions has really increased, and the filers are not just individuals anymore or small religious investors. There are some large sponsors of these resolutions, as well, including the State of Connecticut, which has $17 billion dollars in assets to back its activities.

CURWOOD: This is their pension fund?

COGAN: Yes. Teachers, firemen, state employees in Connecticut.

CURWOOD: What’s getting the attention of these pension fund managers? What’s motivating them?

COGAN: I think the concern is that the climate change issue is not going away. We’ve had in the last 15 years, 10 of those 15 years have been the warmest on record. 2002 was the second warmest on record. So the evidence of global warming is accumulating, so that’s putting the issue on the radar screen. The synergy here is between the length of time it will take to address this issue and the concerns that environmental problems that may develop over time, and the long term nature of the investment holdings of these institutions. These are really the ones that have to be looking long over the horizon to see what’s coming down the pike, and there’s very alarming trends and concerns about climate change that they feel they have a fiduciary duty to address.

CURWOOD: Now even if one of these resolutions gets the majority of shareholder votes, it doesn’t necessarily mean there will be action. These aren’t legally binding. So how do corporations react to these shareholder votes?

COGAN: Well, you raise an important point. These are, in legal terms, called precatory proposals, which means they are not binding on management, and management has every opportunity to ignore these proposals if they wish. And on a number of corporate governance issues, dealing with executive compensation or annual election of directors, a number of governance issues, those issues are now routinely getting a majority vote and are being ignored by management.

However, on the social issues side, I think that there is growing recognition that this is a reputational issue that is developing with these companies, and to ignore it is to do so at their own peril. And in response to that, I think you will see, and in fact, we have seen in some instances, companies that have been more forthcoming with disclosure information, elaborating on their climate change policy statements and environmental reports that they issue for shareholders, and there has been an ongoing dialogue that occurs between shareholders and environmental groups that may be working with the shareholders and management of these companies to help move the process forward and to develop more progressive policies on climate change.

CURWOOD: Doug Cogan is deputy director of the Social Issues Service for the Investor Responsibility Research Center in Washington. He recently testified at a Congressional hearing on President Bush’s Clear Skies proposal. Thanks for taking this time.

COGAN: It’s been a pleasure, Steve.

[MUSIC: Junior Communist Club “Ultrabollywood” Freedom of Speed Sugar Free (1999)]