Shareholders in the US are showing growing concern about their investments in companies exposed to climate change-related risks, according to new data released by Ceres, a US organisation that promotes more sustainable business practices.
The annual round of corporate shareholder meetings – referred to in the US as the proxy season – has recently ended. Ceres says that at those meetings a total of 110 shareholder climate change and environmental sustainability-related resolutions were filed with 94 US-based companies: issues covered by the resolutions included concerns about hydraulic fracturing, flaring and both the environmental and financial risks of further exploitation of fossil fuel reserves.
Some of the US’s largest public pension funds were among those filing resolutions, including the California State Teachers’ Retirement System and the New York State and New York City Comptrollers’ Offices. Ceres estimates that along with other large institutional investors these groups manage funds worth in excess of $500 bn in assets.
“The strength of this year’s proxy season shows unwavering investor concern about how companies, especially energy companies, are managing the profound climate-related risks of fossil fuel production, including traditional and unconventional oil and gas extraction,” says Mindy Lubber, president of Ceres.
“Investors saw especially important progress in tackling flaring, hydraulic fracturing and methane emission impacts, all key contributors to climate change.”
A resolution questioning the activities of Continental Resources, a large oil producer, was withdrawn after the company agreed to reduce or eliminate flaring at its well sites. Similar resolutions filed with three companies involved in the booming hydraulic fracturing industry – EOG Resources, Ultra Petroleum and Cabot Oil & Gas – were also withdrawn after managements agreed to increase disclosure of their activities, including steps being taken to reduce the environmental risks of “fracking”.
“Companies are responding to the growing calls for transparency and accountability,” says the head of a major investment fund. “Without qualitative reporting, shareholders cannot be assured that a company is taking real steps to minimize these risks and protect shareholder value.”
According to Ceres data, the number of investor resolutions relating to climate change and environmental sustainability has increased significantly in recent years – from around 30 a decade ago to more than 100 last year.
While some companies are responding to investor concerns on climate change and the environment, others are more hesitant.
Shareholder resolutions asking two of the US’s biggest coal companies – CONSOL Energy and Alpha Natural Resources – to disclose how their extensive coal reserves might be affected by proposed new carbon regulations were defeated.
Recent analyses have indicated that if targets to limit the rise in global temperature are to be met, then vast amounts of proven fossil fuel reserves need to remain unexploited.
Such reserves can account for between 50 and 80% of the market value of coal, oil and gas companies: if regulations are brought in to support meeting targets on limiting global temperatures, those reserves could become “stranded” underground – having the knock-on effect of exposing companies and investors to significant financial risk.
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