Climate change shareholder actions hit record high

The number of climate change-related shareholder actions has soared 40 per cent during the 2010 proxy season to a record 95 resolutions, according to new figures from sustainable investment lobby group Ceres.

The flurry of shareholder resolutions, many of which call on companies to provide more detailed information on the risks they face as a result of climate change and imminent carbon regulations, are expected to increase further after the Securities and Exchange Commission (SEC) recently released new guidance detailing how climate change can represent a material risk to a firm's operations that should be disclosed to investors.

"We want our companies to closely look at the impact climate change legislation and regulation have on them, to realistically assess those risks, and to consider the indirect consequences of climate change-driven regulation and business trends on their activities," said Jack Ehnes, chief executive of CalSTRS, a pension fund which manages $131bn dollars in assets. "The SEC's interpretive guidance outlines exactly the kind of action we have been asking our portfolio companies to take with regards to the issues raised by climate change."

The resolutions targeted some of the biggest names in corporate America, including ExxonMobil, ConocoPhillips, Chevron, Apple, American Express and JPMorgan Chase. They were largely instigated by investors in the Investor Network on Climate Risk (INCR), an alliance of over 80 institutional investors with collective assets totaling more than $8trn.

Many of the resolutions have proved successful with 28 being withdrawn before going to a vote after the companies involved pledged to take specific actions to address shareholders concerns.

A number of resolutions have also drawn attention to controversial carbon-intensive projects, most notably in the form of two resolutions calling on ConocoPhilips and ExxonMobil to disclose the long-term risks associated with their growing investments in North American oil sands projects.

The new figures came just a day after a group of over 50 institutional investors wrote an open letter to the SEC praising its new guidance on reporting climate change risks, in a move designed to strengthen the commission's hand in the face of Republican calls for it to withdraw the guidance.

Late last month, Republican senator John Barrasso tabled a bill that would block the SEC requirement that firms report on climate change risks. "It's clear that the SEC should focus on its core mission of protecting American investors and maintaining fair markets," Barrasso said in a statement. "Instead, the SEC now wants to devote time and resources to climate change. This is absurd."

The SEC's original decision had also split along party lines with the two Republican SEC commissioners expressing fierce opposition to the move.

However, the letter from 56 investors managing assets totaling $2.1trn sprang to the defence of the SEC, arguing that the commission's guidance on climate change risks is entirely in line with what is required by investors.

"The SEC was founded on the principle that the purchase and sale of securities should be an honest bargain based on full and fair disclosure," the letter states. "The climate change disclosure guidance carries that tradition and legal requirement forward to a pressing challenge facing businesses in this century… Corporate assessments of the regulatory, physical and litigation risks from climate change are critical in understanding the value of our investments. "

One of the letter's signatories, Maryland State Treasurer Nancy Kopp, said that political debates surrounding climate change science were irrelevant to the SEC's guidance.

"Investors have little interest in debating climate science, but do have a strong interest in business trends that will affect companies in their investment portfolios," she said. "Climate change is such a trend... Ensuring that investors are getting timely, material information on climate-related impacts, including regulatory and physical impacts, is absolutely essential."