American Electric Power, Cinergy agree to report to shareholders(A)

CERES investor members and allies — including Connecticut Retirement Plans and Trust Funds, Christian Brothers Investment Services, Trillium Asset Management, Board of Pensions of the Evangelical Lutheran Church in America, The Pension Boards of the United Church of Christ, the United Church Foundation, and the Presbyterian Church USA — achieved an important victory today with American Electric Power (AEP) and Cinergy, two of the top emitters of carbon dioxide emissions in the electric power sector. AEP and Cinergy agreed to the shareholders’ proposals that the companies report publicly about how they are responding to growing pressure to reduce greenhouse gas and other emissions. Both companies agreed to the shareholders’ requests that a committee of independent directors oversee the report. As a result, the shareholders will withdraw the resolutions facing the two companies. This agreement sends a clear signal that other electric power companies and companies in other key sectors — oil and gas, autos, insurance, etc. — should start responding now to shareholder requests for greater disclosure on climate risks. Shareholders have filed 28 resolutions as part of the 2004 proxy season. This victory opens the door for further discussion with companies and investors about whether the best strategy for companies is continuing the current uncertainty on carbon dioxide standards or to provide certainty through a national mandatory cap on emissions. CERES and the Interfaith Center on Corporate Responsibility are co-coordinating the global warming shareholder campaign that seeks to increase shareholder value by proactively addressing the global warming challenge. If you are a member of the media, please contact Nicole St. Clair (stclair@ceres.org) or 617-247-0700 x20. For additional information on the announcement, please contact CERES Director of Outreach Dan Bakal (bakal@ceres.org) or 617-247-0700 x13. See below for press release and an article that appeared in today’s Wall Street Journal. Additional articles appeared today in the Columbus Dispatch and Cincinnati Enquirer. Note: CNN Headline News will feature this news on Feb. 19 at 2:45 EST and again at 3:40 EST, 4:40 EST, and 5:40 EST).
AMERICAN ELECTRIC POWER, CINERGY AGREE TO REPORT TO SHAREHOLDERS ON RESPONSES TO RISING PRESSURE TO REDUCE GREENHOUSE GAS, OTHER EMISSIONS Both companies assign independent board committees to issue reports on current and possible future regulatory scenarios and potential company responses. Shareholders expect other companies will follow
NEW YORK, N.Y.///February 19, 2004/// In response to shareholder proposals for greater transparency on how companies are planning for potential constraints on carbon dioxide and other emissions, electric power giants American Electric Power and Cinergy have agreed to report publicly about on how they are responding to growing pressure to reduce greenhouse gas and other emissions. The company reports will assess the impacts of and potential responses to a number of policy scenarios, including various proposals in Congress and existing state legislation to limit carbon dioxide and other emissions. Both companies agreed to the shareholders’ request that a committee of independent directors oversee the report. As a result, shareholders will withdraw resolutions facing the two companies. The resolutions focus on the potential risks to shareholders posed by the company’s CO2 emissions, the primary greenhouse gas linked to global warming. They were filed at American Electric Power [NYSE:AEP] by Connecticut Retirement Plans and Trust Funds and co-filed by Christian Brothers Investment Services, Trillium Asset Management, Board of Pensions of the Evangelical Lutheran Church in America, The Pension Boards – United Church of Christ, and the United Church Foundation, and at Cinergy Corp. [NYSE:CIN] by the Presbyterian Church (USA). Similar resolutions have been filed at additional electric utilities and other companies by shareholders associated with the Interfaith Center on Corporate Responsibility (ICCR), a coalition of 275 religious institutional investors and CERES, a coalition of investors and environmental groups. The resolutions’ proponents believe that the public reports to shareholders, which were agreed to by AEP and Cinergy following discussions with the investors, will raise the benchmark for disclosure of and action on climate change risks, and heralded the decisions as precedent-setting. Denise Nappier, Treasurer, State of Connecticut, said: “These landmark agreements are an important milestone for shareholders, one that we hope will be emulated by corporate leaders across this industry, and across many industries. The consequences for companies that do not act responsibly and take steps to assess and mitigate risks posed by climate change can be just as devastating to shareholders as the corporate scandals of the past few years. We look forward to reports that will provide shareholders with essential information we need to make informed investment decisions.” Bill Somplatsky-Jarman, Associate for Mission Responsibility Through Investment, Presbyterian Church, said: “Shareholders have been raising this issue since the early 1990s, so it’s significant that we’re working together to cooperate on an action plan. Cinergy made a forward-looking announcement last year with their pledge to reduce emissions; we’re hoping that this report will also be a leading example of risk assessment and disclosure that can be taken up by other companies.” Both companies expressed their willingness to work collaboratively with the shareholders on addressing the emissions issue. American Electric Power agreed to print the resolution in its proxy, with a statement describing the company’s decision to “accept and comply” with the resolution. The proxy statement will also outline the parameters of the company’s report. Cinergy will describe the collaborative effort on the report in the Letter to Shareholders in its 2003 Annual Report. Dale Heydlauff, Senior Vice President, Governmental and Environmental Affairs, AEP, said: “We reviewed their proposal and concluded that their request for an emissions assessment and report was reasonable. We view it as consistent with the hard work we are doing to make environmental improvements while keeping our power plants competitive.” Jim Rogers, CEO, Cinergy, said: “Cinergy has undertaken several initiatives to establish its leadership in social and environmental policy. We are partnering with Environmental Defense on our greenhouse gas emissions reduction pledge and we are delighted to join with the Mission Responsibility Through Investment to produce another effective collaborative process on these crucial public policy matters.” The agreements come on the heels of increasing pressure on the electric power industry to address the issue of coming carbon constraints. Similar resolutions last year garnered the support of Institutional Shareholder Services, a group that advises institutional investors on proxy voting, resulting in record high votes – an average 23% vote in favor- with 27% of shareholders voting for such disclosure at American Electric Power. Although last year’s resolution was successfully challenged at the SEC, Cinergy announced in September, 2002 that it would reduce its greenhouse gas emissions five percent below 2000 levels by 2010 and freeze them through 2012. Mindy Lubber, Executive Director, CERES, said: “This is an historic breakthrough for shareholders who care about corporate governance and good disclosure of long-term risks to their investments. The agreement opens the door for a discussion about the best corporate strategy in creating certainty for companies who will surely be affected by the growing world consensus to limit carbon dioxide emissions.” She continued: “We look forward to working with these and other companies to provide leadership to the electric power and other industries in learning to assess, and mitigate, the enormous challenge of climate change and its associated economic risks.” WALL STREET JOURNALFebruary 19, 2004Page A8 AEP, Cinergy to Disclose Details On Ways to Cut Carbon Dioxide By JEFFREY BALL Staff Reporter of THE WALL STREET JOURNAL In a nod to the notion that U.S. global-warming regulations are inevitable, two of the nation’s major electric utilities say they will disclose what they are doing to prepare for them — including estimates of how those regulations could hit the companies’ bottom lines and consumers’ wallets. The Bush administration opposes calls for restrictions on emissions of carbon dioxide and other gases widely believed to be contributing to global warming. But the announcements by American Electric Power Co. and Cinergy Corp. mark a strategy shift by the two companies amid signs that global warming is becoming a higher priority among both politicians and shareholders. Shareholder activists say they expect the companies’ reports to estimate how AEP’s and Cinergy’s financial performance could be affected by global-warming regulations being considered in Washington. Still, it is far from clear whether the numbers AEP and Cinergy produce will be specific enough to satisfy the companies’ shareholder critics. The companies also are likely to use the reports to bolster their argument that stringent restrictions would impose huge costs. AEP and Cinergy are two of the nation’s biggest carbon-dioxide emitters, both because they produce so much electricity and because they produce most of it by burning coal. Last year, AEP and Cinergy successfully fought shareholder resolutions demanding that they disclose more information about the financial risk they would face if the U.S. implemented any of a number of global-warming regulations under consideration, although at AEP the resolution got a surprising 26.9% of the vote. Cinergy announced Wednesday, and AEP is expected to announce today, agreements to produce public reports detailing what actions they are taking to reduce air emissions, including carbon dioxide and other suspected “greenhouse gases.” In exchange for those pledges, shareholder activists have agreed to withdraw more loosely worded resolutions recently filed against the two. “As we look out, I believe that it’s more likely than not that we’ll live in a carbon-constrained world,” said James E. Rogers, Cinergy’s chairman and chief executive officer. “We think we have a significant risk because we burn so much coal, so we want to start hedging our bets.” These two agreements don’t portend an end to the global-warming fight. Environmental activists say they plan to use the agreements to pressure others to follow suit and to press their case for a global
-warming emissions cap. “What it says is that these companies recognize that they need to prepare for a carbon- constrained world, even if that’s not going to happen tomorrow,” said Dan Bakal, director of outreach for the Coalition of Environmentally Responsible Economies, a Boston-based environmental group that has been coordinating the filing of the shareholder resolutions. But Michael G. Morris, AEP’s chief executive, said his company acceded to the shareholders’ request because AEP believes its report will demonstrate that burning coal is vital to ensuring a continued supply of inexpensive electricity. Coal-fired electricity plants, which provide a big chunk of the nation’s electricity, “are the lowest-cost energy providers to our customers. If C(O2) mandates come down the road, we will live with them.” Both AEP and Cinergy recently pledged voluntarily to reduce carbon-dioxide emissions by specific percentages.