Companies Feel Heat on Global Warming from Investors, Not Washington(A)
Advocates for environmental protection are feeling a chill in Washington, D.C. this winter, and it’s not from the multiple snowstorms that have hit the Capital. A new 2003 report from the Natural Resources Defense Council finds the nation’s environmental laws “under siege” by the Bush Administration, and declares, “America’s environmental laws face a fundamental threat more sweeping and dangerous than any since the dawn of the modern environmental movement in 1970.” An adviser to Senator Democratic leader Tom Daschle of South Dakota had to reach even further back in history, saying, “Not since William McKinley have you seen such a coherent set of principles founded around the idea that big and powerful industries should be able to do whatever the heck they please.”
Similar views from come from the Administration’s friends, not just its critics. Speaking of the new political climate in Washington, said Bill Kovacs, the vice president for environmental policy of the U.S. Chamber of Commerce, said, “”I am very optimistic. I think we’re going to see a lot of changes that are friendly to business.”
In this context, socially responsible investors have emerged as one of the few groups whose power to hold companies accountable and demand more responsible behavior actually seems to be growing. But before talking about how socially responsible investors are flexing their growing muscle, here are a few highlights of what we’re up against.
Over the past year, the Bush Administration has made more than 100 changes to weaken federal rules protecting our air, water, forests, wetlands, public health, wildlife, and wilderness areas. It’s now working to roll back long-established rules that require federal agencies to study environmental impacts before taking important actions, such as allowing logging or oil drilling on public lands. While the Administration talks about empowering local control of decision making, it has moved to block states like California from implementing their own tough environmental regulation of auto makers and other major air polluters.
In the newly convened Congress, key environmental committees are now chaired by staunch foes of environmental protection. Sen. James Jeffords of Vermont, a longtime champion of environmental causes, has been replaced as chairman of the Senate Environment Committee by conservative Sen. James Inhofe (R-Okla.). Senator Inhofe has called the Environmental Protection Agency a “Gestapo” bureaucracy, was the only senator to vote against a plan to restore the health of the Florida Everglades, and received a score of 0 out of a possible 100 last year from the non-partisan League of Conservation Voters. In the House, the chair of the Resources Committee passed to Representative Richard Pombo (R-Calif.), a longtime critic of environmental groups and the Endangered Species Act, who at least managed to gain a score of 9 points out of 100 from LCV. Among the first measures passed by the new Congress is a 2003 Appropriations bill that includes numerous anti-environmental measures. These include provisions designed to pave the way for oil drilling in the Arctic National Wildlife Refuge, to allow more commercial logging in national forests, and to let food companies label meat as “organic” even if their animals had been fed entirely with non-organic grain. (The last provision was too egregious for even agribusiness giant Tyson Foods to support. A Tyson spokesman criticized it for “compromising the integrity of the organic standards” recently issued by the U.S. Department of Agriculture.)
The courts have had a mixed record recently of upholding environmental protections. A federal court recently upheld the Clinton Administration’s protections for remaining wild areas in national forests. On the other hand, federal courts recently rebuffed an effort by the U.S. General Accounting Office to require Vice President Cheney to disclose his meetings with industry lobbyists in developing the Bush Administration’s national energy plan, and the Administration used a recent Supreme Court ruling to dramatically scale back Clean Water Act restrictions on wetlands development.
A recent BusinessWeek article titled, “The Enviros Try an End Run Around Washington,” reports that given this context, “Enviros are making a key shift in strategy. Instead of vainly lobbying lawmakers, they’re increasingly going straight to the public. Their intention is not just to put grassroots pressure on Washington. They also hope to persuade corporations, which have poured millions into GOP coffers in expectation of less regulation, to mend their ways.” Shareholder activism is an increasingly important part of these efforts to hold companies directly accountable for their environmental performance if the government won’t. (As Jerry Garcia of the Grateful Dead once said, “Somebody has to do something, and it’s just incredibly pathetic that it has to be us.”)
The issue of global warming provides a perfect example of how companies are increasingly being called to account by socially responsible shareholders in the face of government inaction. Soon after taking office, President Bush reversed an election campaign promise he had made to require reductions in carbon dioxide emissions and also rejected U.S. participation in the Kyoto Protocol, a UN treaty to address emissions of greenhouse gases that has now been ratified by 100 countries around the world. But while U.S. industry faces little pressure from the Bush Administration besides calls for “voluntary measures” to reduce greenhouse gases, shareholders have weighed in with a vengeance.
The number of global warming resolutions filed with U.S. companies tripled from 2001 to 2002, according to the Investor Responsibility Research Center, an independent research firm that tracks proxy voting, and the average level of support for resolutions doubled to 18.8 percent. This year, the number of global warming resolutions filed with U.S. companies is even higher.
Last year, forty different religious and institutional investors and socially responsible investment firms (including Trillium Asset Management) joined together to co-file a resolution with high-profile global warming skeptic ExxonMobil, calling on the company to invest more in renewable energy sources. The proposal received over 20 percent of the vote from shareholders. The company’s aggressive stance on global warming even earned it rebukes from traditional investment houses. In a September 2002 report on the company, Deutsche Bank’s oil analyst wrote, “being handed a reputation as environmental enemy number one for such a big customer-facing business has to be considered a brand risk.”
Ford and General Motor’s lobbying successes in Washington, D.C., have also brought those companies into the crosshairs of shareholder activists. A coalition of religious investors who are members of the Interfaith Center on Corporate Responsibility filed resolutions with the two companies asking them to measure and report to shareholders on the carbon dioxide emissions produced from their plants and the cars and trucks they make and to commit to significantly reducing those emissions by 2012. These are the first global warming-related shareholder resolutions to be filed at GM and Ford since the companies pulled out of an anti-Kyoto lobbying group called the Global Climate Coalition in 1999 and 2000. According to ICCR, “The resolutions were triggered, in part, by the role that GM and Ford played in fighting both improved federal fuel economy standards and a recently passed California law concerning clean air standards and vehicle emissions.”
As with the ExxonMobil resolution, the shareholder advocates that have filed resolutions with GM and Ford express concerns that climate change may pose a risk to shareholder value as well as the Earth’s ecosystems. Kevin Knobloch, executive director of the Union of Concerned Scientists, noted that “Shareholders have a right to expect GM and Ford to shed their environmental liability by selling cleaner-running vehicles — instead of being stuck in the mud with yesterday’s technology while the Japanese step boldly ahead,” Patricia Daly, executive director of the Tri-State Coalition for Responsible Investment, explained “This is not only about what is good for the environment. It is about what is good for GM and Ford shareholders.”
An overlapping coalition of religious investors and the state of Connecticut is making similar economic arguments in filing climate change-related resolutions with five utilities that top the charts for carbon dioxide emissions in their sector: American Electric Power, Southern Company, Xcel Energy Inc., TXU Corp. and Cinergy Corp. Trillium Asset Management is also raising the issue of economic and environmental risks associated with global warming facing utilities. In partnership with the United Methodist Church General Board of Pensions and Health Benefits, we filed a resolution this fall at Pacific Gas & Electric calling on the company to produce a report on the economic costs associated with its greenhouse gas emissions, and the benefits of reducing them. We are also partnering with Healthlink, a Boston-area community-based nonprofit to raise community health concerns with PG&E at the same time we raise the global issue of climate change.
So while companies may not be feeling the heat on global warming from Washington, D.C., they certainly are from socially responsible investors. Hopefully as a result, we may all feel a little less heat from global warming than we otherwise would.