Cleared land designated for a palm oil plantation in Pelalawan, Indonesia in 2010. A big topic in 2013 is sourcing sustainable palm oil, as much of the tropical deforestation that contributes to climate change is driven by palm oil production, according to Kron. Photo: Dimas Ardian / Bloomberg

By Avery Fellow
25 February 2013

(Bloomberg BNA) – Shareholders are filing resolutions asking companies to disclose physical risks posed by climate change for the first time this proxy season, according to representatives of sustainable investor groups.

Shareholders also are continuing to file an increasing number of sustainability related resolutions asking companies to set greenhouse gas emission reduction goals, publish sustainability reports, pursue energy efficiency, and disclose information about hydraulic fracturing operations.

Although shareholder resolutions on sustainability rarely receive a majority vote, they can still prompt companies to take action to avoid risk to their reputation or address investor concerns, said Jonas Kron, director of shareholder advocacy at Trillium Asset Management. In addition, investors often are engaged in discussions with companies that lead to resolutions being withdrawn before they go up for a vote.

BNA spoke to experts in the socially responsible investment community to get a view of the current landscape for environment shareholder resolutions in 2013—what issues are getting the most attention, what are some of the key trends in recent years, and what actions are companies taking in response to resolutions.  Resolutions are an effective tool for getting companies to change, according to Kron and other sustainable investor experts.

The proxy season is when companies hold their annual shareholder meetings, which is usually in the spring.  Shareholders vote on issues related to the company, including issues raised through shareholder resolutions. Over the past few years, sustainability resolutions have made up a larger portion of all resolutions submitted to companies and are receiving higher numbers of votes, Kron said.

Environmental and social resolutions accounted for more than 40 percent of all shareholder resolutions submitted in 2012, up from 30 percent in 2011, according to Allie Rutherford, associate director of the corporate governance group at Ernst & Young LLP.  The resolutions also accounted for the largest proportion of resolutions withdrawn due to discussions with companies or corporate commitments, she said.

Of the approximately 600 shareholder resolutions Ernst & Young is tracking so far for 2013, 44 percent are focused on environmental or social topics, Rutherford said.

“Among the most common proposals we are tracking are proposals calling for sustainability reports, some of which focus on sustainability reporting across the supply chain,” she said.  The largest proportion of sustainability resolutions address corporate political spending, which became an issue after the U.S. Supreme Court decision in Citizens United v. Federal Election Commission, according to sustainable investor experts. […]

Asking companies to set greenhouse gas reductions goals is another big topic for shareholder resolutions in 2013, as it has been in recent years, said Rob Berridge, senior manager of investor programs for Ceres. Specific reduction goals help investors know whether a company is on a low-carbon path or not, he said. If an electric utility company has not set a greenhouse gas emissions reduction goal, for example, it may be considering building a coal plant, which could expose it to potential climate change regulations, Berridge said.

A new category in 2013 resolutions is disclosure of physical risks from climate change, as investors want to know if oil and gas companies plan to move or fortify their coastal refineries due to sea level rise, and how much that will cost, Berridge said.

“There was a shift this year in the realization that we are locked into some significant warming, sea level rise, ocean acidification, and more extreme weather,” he said, partly due to Hurricane Sandy and widespread U.S. drought in 2012. After the number of sustainability resolutions flattened following the financial downturn, “we’re now beginning to see renewed interest in the actual financial risks from climate change,” Berridge told BNA. [more]

Investors Demand Climate-Risk Disclosure in 2013 Proxies



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