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US: Global Warming Activists Claim Big Victory

by Jim LobeInter Press Service
April 23rd, 2003

The season of corporate shareholder meetings is just beginning, but already global warming activists have claimed a major victory in the first of a series of 14 anticipated fights with some of the country's largest companies.

A resolution calling on American Electric Power (AEP), one of the nation's biggest emitters of the greenhouse gases that are believed to contribute to climate change, to take "early action" to reduce emissions garnered almost 27 percent of shareholder support at the company's annual meeting Wednesday in Ohio.

The resolution - and a similar one that was defeated by an undisclosed margin at a meeting of General Electric's shareholder meeting late Wednesday - calls on management to report back on the economic risks and benefits of the companies' past, present and planned future emissions of the major greenhouse gases, which include carbon dioxide (CO2), sulphur dioxide, nitrogen oxide, and mercury.

"This is a stunning result," said David Gardner, a consultant to the Coalition for Environmentally Responsible Economics (CERES), which helps to co-ordinate shareholder challenges to corporate environmental policies and advises a number of significant institutional investors.

"These are much higher numbers than we've seen in the past, especially for a first-time vote by shareholders of a major company on global warming, and clearly shows a sharply rising concern on their part about potential financial implications for companies," he added.

That assessment was echoed by Leslie Lowe of the Interfaith Center on Corporate Responsibility (ICCR) whose member organizations have a combined investment portfolio worth about $110 billion.

Noting that the average vote achieved by global-warming resolutions presented at seven shareholder meetings last year was 18 percent, she said, "the final tally of shareholder support [in the AEP vote] exceeded our most ambitious projections".

"It sends a strong signal to the U.S. utilities industry that you can't just ignore global warming or pay it some kind of token lip service. Religious shareholders and other concerned investors are understandably worried that the value of the stock they possess is being held ransom to the refusal of companies like AEP to come to terms fully with the reality of climate change."

While 27 percent does not constitute a majority of shares in a company, it is an unusually high vote for shareholder resolutions. Until just a few years ago, most of them gained three percent or less on their first run, in part because management often controls a large portion of shares through proxies and direct ownership, and most institutional investors and money managers have traditionally voted automatically with management.

But this has changed in recent years as concerns about corporate governance, especially executive compensation and the independence of the board of directors from management, have escalated.

Precisely because management usually has such a large percentage of shares in its pocket, "getting 10 or 12 percent of the vote is usually considered sending a strong message to management", according to David Schilling, who directs ICCR's Global Corporate Accountability Programme.

But in the last two years, there has been an explosion in resolutions concerning exclusively social or environmental issues, which are also receiving a higher share of the vote.

Last year, for example, more than 31 percent of shares voted at Unocal's annual meeting approved a resolution urging the oil giant's board of directors to implement a company-wide employee policy based on core labor rights as defined by the International Labor Organization (ILO).

Global-warming activists have made among the most spectacular gains in shareholder contests, particularly since the completion of the Kyoto Protocol, an international accord to reduce greenhouse gas emissions that has been signed by virtually all industrialized countries but rejected by the Bush administration.

In the spring shareholder season of 2001, global-warming resolutions averaged a respectable 10 percent, and then almost doubled last year.

Environmental groups have argued that U.S. companies risk losing heavily to foreign rivals in the international marketplace over time if they do not begin to reduce their emissions and their reliance on fossil fuels, whether or not the United States ever ratifies Kyoto.

Studies produced by the World Resources Institute and other respected groups have shown that the failure of companies to assess those risks and take action accordingly will ultimately hurt their bottom line and stock price.

Those studies have had a major impact on institutional investors, particularly pension funds like CalPERS, California's largest public employee fund, which has about $150 billion in assets, as well as their advisers, like Institutional Shareholder Services, Inc, which counseled its clients to vote for AEP's resolution.

Wednesday's AEP vote was the first of two more shareholder contests against the managements of what activists call the "Filthy Five" electrical utilities which, together, produce 10 percent of all U.S. CO2 emissions, or almost three percent of the global total. They include Southern Company and TXU Corporation.

Of the five, AEP is the biggest emitter, primarily because about 70 percent of its electricity is produced by burning coal.

The AEP resolution was sponsored by the State of Connecticut Plans and Trust Fund and Christian Brothers Investment Services, which manages about $3 billion dollars for Catholic organizations. Both are ICCR members.

"This is a material financial issue to the entire electric utility industry, and the kind of disclosure we are seeking should become standard practice on an industry-wide basis," said Julie Tanner of Christian Brothers. "Today, a significant share of AEP shareholders sent a message to management that they are not content to sit by while the company in which they hold stock fails to address this very serious hidden risk to the value of company shares."

Altogether, 14 global-warming-related resolutions have been cleared by the Securities and Exchange Commission (SEC) for votes this season. Besides the electric utility sector, targeted companies include automakers like General Motors and Ford and big oil and gas producers, including ChevronTexaco and ExxonMobil.

Last year, a resolution that urged ExxonMobil to move more aggressively into renewable energy sources garnered 20 percent of shares, up from nine percent the year before.

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