U.S. Companies Red Carded for Climate Risk

A U.S. coalition of investors known as Ceres, that work with companies to address sustainability challenges,  placed nine companies on  a "Climate Watch" list, claiming the long-term competitiveness of the firms could be hurt by their lack of action on climate change. Investors filed shareholder resolutions with eight of the nine companies—and 49 other businesses—aimed at improving their focus and attention to the financial risks and opportunities from climate change. Below I have posted a list of the companies that have been red flagged, and the reasons justifying these concerns.  As environmental, social and corporate governance (ESG) issues become more widely publicized and analyzed, the ability to utilize this information to increase portfolio returns will improve, as an understanding of the material effects on business will become increasingly clear.

Oil Sands

The group also targeted companies investing in Canada's tar sands, including Chevron Corp, which owns part of the Athabasca Oil Sands Project, and Canadian Natural Resources, one of the largest producers in oil sands.

Alberta's oil sands rival Saudi Arabia's conventional oil reserves in size, but environmentalists say mining and processing them releases huge amounts of greenhouse gases.

I have previously discussed Canada's oil sands as a focal point in its climate change policy in a post titled Toxic Alberta, stating that it is imperative that if production of the oil sands is to continue, it must be done in a environmentally friendly manner, taking advantage of the latest developments in technology to avoid significant detriment to the environment. 

Fortunately President Barack Obama understands the necessity for this and has said oil extracted from tar sands in Canada can be made a clean energy source, and the U.S. will work with its northern neighbor to develop the technology.

A joint effort by the U.S. and Canada, its biggest trading partner, on ways to capture and store carbon dioxide underground would “be good for everybody,” Obama said yesterday in an interview with the Canadian Broadcasting Corp. 

When Obama visits Canada's Prime Minister Stephen Harper in Ottawa on Thursday, energy will be a key topic in the talks. About 75 percent of Canada's oil sands output is shipped to the U.S. market. 

As Obama backs slashing emissions of heat-trapping gases to 1990 levels, I hope he takes into account the massive scale of carbon capture and storage which must be implemented to ensure cleaner development of Canada's oil sands. The new president will also have to square his environmental agenda with his call to trim dependence on oil supplies from the Mideast and with the U.S.’s longstanding policy to treat Canada as a commercial and strategic ally.

Although, Obama is aware of the need to implement carbon capture and storage to stave of global warming, it will remain to be seen whether or not this is too little, too late.  "Extraction of oil from oil sands is a risky proposition and will likely in the long term be a disaster for both investors and inhabitants of an increasingly warming planet," said Margaret Weber, board chair of the Interfaith Center on Corporate Responsibility, which coordinates shareholder filings with Ceres.

The Climate Watch companies are as follows:

Chevron: Chevron is named to the Climate Watch List for its extensive investments in Alberta, Canada’s oil sands, and for resisting shareholder requests to disclose potential financial risks associated with the carbon-intensive project that encompasses millions of acres. Greenhouse gas emissions associated with oil sands development is three times higher than conventional oil extraction and refining according to the investors. Chevron owns 20 percent of a major oil sands extraction effort, the Athabasca Oil Sands Project, and is the operator at a large proposed oil sands project at Ells River, yet its public disclosure of potential financial exposure from climate regulations and other project risks pales in comparison to Shell and Suncor. The resolution outlines key risks from the project and asks that the company report on environmental damage resulting from its expanding oil sands operation.   (Green Century contact: Emily Stone, 617-482-0800, and Ceres contact: Andrew Logan, 202-746-0661)

CONSOL Energy: Given that coal combustion accounts for about one-third of all greenhouse gas (GHG) emissions in the U.S. and given the growing regulatory momentum to reduce emissions from power plants, the New York City Pension Funds filed a resolution with the Pittsburgh-based company requesting a report on how the company is responding to growing regulatory and competitive pressure to significantly reduce GHG emissions. CONSOL is the nation’s largest bituminous coal producer. (NYC Comptroller Contact: Laura Rivera, 212-669-2701)

ExxonMobil: ExxonMobil has been unresponsive to investor requests for a decade regarding strategies intended to meet growing demand for diversified clean energy sources. Four climate resolutions filed this year request that: the board develop comprehensive GHG emission reduction goals: that it report on the impact of climate change on emerging markets and on U.S. leadership in achieving energy independence; and that it disclose its plans for developing for renewable energy. The resolutions were filed by the: Tri-State Coalition for Responsible Investment, Jessie Smith Noyes Foundation and Reynolds Foundation, Province of St. Joseph of the Capuchin Order, and Neva Goodwin.  (Tri-State Coalition Contact: Pat Daly, 973-509-8800)

General Motors: Investors have a long, unsuccessful history of filing shareholder resolutions with General Motors and engaging with the company on climate-related business strategies. The resolution filed by the Tri-State Coalition for Responsible Investment asks General Motors to set GHG reduction goals from its products and operations, as other U.S. and foreign automakers have already done. The resolution cites GM’s ongoing litigation to stop California’s clean car standards from being adopted and its lackluster response compared to Ford in developing a business model that accounts for climate change. (Tri-State Coalition Contact: Pat Daly, 973-509-8800)

Massey Energy: The Virginia-based coal company continues to resist shareholder resolutions requesting the company to develop and disclose a strategy for responding to climate change. Thirty percent of shareholders voted in favor of the resolution last year. Given that coal combustion accounts for about one-third of all GHG emissions in the U.S., the New York City Pension Funds filed a resolution, for the third consecutive year, requesting a report on how the company is responding to growing regulatory and competitive pressure to reduce GHG emissions. Massey is the nation’s 4th largest coal producer. (NYC Comptroller Contact: Laura Rivera, 212-669-2701) 

Standard Pacific: Unlike other leading homebuilders, Standard Pacific has opposed shareholder requests the past three years to disclose its strategies and performance on energy efficiency and other climate-related issues. The resolution filed by the Nathan Cummings Foundation asks the CA-based homebuilder to adopt quantitative goals for boosting energy efficiency and reducing greenhouse gas (GHG) emissions from its products and operations. Homebuilders have an important role in mitigating climate change because 40 percent of GHGs come from building energy use, and building energy efficiency is one of the most cost effective means of reducing global warming pollution. (Nathan Cummings Foundation Contact: Lance Lindbloom, 212-787-7300, and Ceres contact: Betsy Boyle, Ceres 617-247-0700 X143;)

Canadian Natural Resources Ltd: One of the largest and most established producers currently active in Canada’s oil sands, the Calgary-based company has refused to date to meet with investors on the issue of climate change, and, unlike other oil companies, it has not made any renewable energy investments. Ethical Funds filed a resolution with Canadian Natural Resources in 2007 requesting that it disclose its climate risks, but the company has not responded to the resolution. CNQ is the only oil company opposing the recommendations of the Government of Alberta’s Cumulative Environmental Management Association Multi-stakeholder process. (http://www.cemaonline.ca/ ) (Ethical Funds Contact: Robert Walker, 604-714-3833)

Southern: The nation’s largest electric power producer, which emits more than 160 million tons of CO2 emissions a year, has balked at shareholder resolutions the past several years asking it to set GHG reduction targets. In filing the resolution, the Sisters of Charity of St. Elizabeth cited the company for its adequate climate risk disclosure, but weak action to mitigate that exposure by reducing GHG emissions. Thirty-seven percent of the company’s industry peers, including American Electric Power, Duke Energy and Exelon, disclosed absolute GHG reductions targets in the Carbon Disclosure Project’s most recent annual survey released in 2008.  Atlanta-based Southern opposes mandatory federal limits to reduce GHG emissions. (Sisters of Charity of St. Elizabeth, NJ contact: Sr. Barbara Aires, 973-290-5402)

Ultra Petroleum: Houston-based Ultra has resisted shareholder requests the past three years to disclose its strategies for addressing climate change, despite relatively strong shareholder voting support. While Ultra has a relatively small market capitalization (about $5 billion), its resistance to acknowledging climate change risks puts it out of step with its peers. The resolution filed by the Nathan Cummings Foundation asks the company to report on its plans to address climate change. (Nathan Cummings Foundation Contact: Lance Lindbloom, 212-787-7300, Ceres contact: Andrew Logan, 202-746-0661)

In addition to the Climate Watch companies, investors filed resolutions with the following other businesses. The list of investors filing resolutions with each of the companies can be found at http://www.ceres.org/resolutions or http://www.iccr.org.

Auto/Transportation: Avis/Budget, Hertz

Banks: Ameriprise, Citigroup, Fifth Third Bancorp, State Street

Building and Big Box Companies: Bed, Bath & Beyond, Boston Properties, General Growth, Home Depot, Las Vegas Sands, Lennar, Pulte Homes, Ryland

Coal: Alpha Natural Resources, Foundation Coal, International Coal

Electric Power: Dominion, Dynegy, Idacorp, Mirant, NV Energy (formerly Sierra Pacific)

Forestry:  International Paper, Meredith, RR Donnelly

Oil & Gas: ConocoPhillips, Haliburton, Noble Energy, Oneok, Range Resources, South Jersey Industries, Spectra

Other S&P 500 Companies: Apple, Aqua America, Assurant, Broadcom, Denbury Resources, Dover Corporation, Flowserve, Kadant, MetLife,  Middleby, Novell, SanDisk, Southwest Airlines, St. Jude, Stryker, Valmont. 

Canadian Companies: Great-West Life & Annuity

Drought in China Diminishes Wheat Crops

I apologize for the lack of posts this month, as I have been extremely busy so far in 2009. I am currently preparing many articles and working on additions to this blog, to improve access to resources and events focused on SRI.

Climate scientists working for the United Nations' Intergovernmental Panel on Climate Change (IPCC) have forecast more catastrophic weather events in the near future: more floods, hurricanes, tornadoes, wildfires, and droughts. Mainstream media worldwide have already reported on the significant increased unpredictable and extreme weather events linked to global warming

Let's take a very brief glimpse at China’s water problems associated with climate changed-induced extreme weather events in the past two years:

• Begun on May 26, 2008, the 20-day torrential rains, floods, and landslides in the 15 provinces of eastern and southern China left more than 200 dead or missing and forced 1.3 million people to evacuate. The damages were estimated at $2.2 billion.
• In the first three months of 2008, China suffered a devastating drought in Liaoning Province, which left nearly 700,000 people without drinking water; approximately 66 reservoirs dried up, and 1,700 new wells were drilled in a desperate search for drinking water, according to Reuters and Xinhua. Also affected were 19.4 million hectares (48 million acres) of land and 3.3 million hectares (8.15 million acres) of cropland. Water is a serious problem in China: annually about 30 million rural and 20 million urban Chinese face drinking-water shortages.
• In mid-2008, Shanxi Province was also hit with drought: 560,000 people had no drinking water, according to Xinhua news agency.
• In mid-2007 in Liaoning, the worst drought in 30 years left more than 8 million people without water; nearly 90 reservoirs dried up and 25,000 wells could no longer supply enough water, and 1.4 million hectares of crops were damaged, according to Xinhua news agency. In Inner Mongolia Province, 870,000 people and 1.5 million livestock had no water (and many livestock died of hunger and thirst).
• In August 2008, Sichuan Province suffered the worst drought in 50 years, with no rain for more than 70 days: more than 10 million people had no drinking water, and economic losses totaled at least 9.9 billion yuan. Two-thirds of lakes and rivers dried up, and more than 200 reservoirs were extremely low; the Chongqing section of the Yangtze River was lowest in 100 years.

Today, I came across this news clip on Reuters titled 'Rare Drought Hits China'. In light of China's already severe water issues, I fail to understand how this drought is classified as 'Rare', but I believe it highlights the trends pointing towards an elevated price for wheat, due to a increasing uncertainty in supply from climate change induced weather events and water shortages.

Greening the Stimulus Packages

Global economies are currently at a juncture in their approach to combating climate change and preserving the environment. In the face of the economic crisis and low fossil fuel prices, the investments needed now in clean energy are being threatened. On a global basis, the biggest contributor to CO2 emissions is power generation (33%). In Europe, Germany is the largest carbon polluter, with some 40% of the country's CO2 emissions coming from the power generation sector, while the lion's share (55%) of power assets is fueled by coal and lignite - the dirtiest means of electricity production. Over the next 25 years, German generation capacity will decline by over two thirds, which is similar situation to many other European countries, as in the US. Until then, approximately, 60 per cent of the lignite and 50 per cent of coal plants will have reached the end of their operating lives and will be retired. Capacity replacement decisions clearly represent both a big opportunity, and a big risk for the companies and investors involved. This particular example highlights the perils facing the clean energy sector, but fortunately public spending plans from governments could turn the tide in favour of a sustainable future. Barack Obama, the chief proponent of a green stimulus, has pledged $150b of in investment in low carbon infrastructure and his kill two birds with one stone approach is being followed.

In the UK, Lord Mandelson commits to a £2.3 billion rescue for Britain’s carmakers with all funds tied to investment in low carbon initiatives to produce lower-emission cars.

California Scheming

Clean Technology: As Obama prepares to take office, Silicon Valley is sensing a change to land backing for an array of project that us IT to boost green energy and help create jobs.

Barack Obama has expressed support for a 'smart grid' to optimize electricity transmission and save power. It should be capable of carrying power from the place where it can be created - the windy centre of the US, the sunny south-west and the geothermal hot spots in the Rockies - to the coastal cities where it is most needed. I am currently investigating the technology and processes behind 'smart grids' and geothermal power plants, and will hopefully have a synopsis of both up shortly.


California Scheming

By Richard Waters in San Francisco

Published: January 14 2009 19:58 | Last updated: January 14 2009 19:58

A new Silicon Valley is being born. The northern Californian region that brought the world microprocessors, personal computers and Google now has its sights set on another technological revolution: one founded on photovoltaic solar cells, sources of biofuel such as algae and the application of information technology to improve energy efficiency.

Yet this new green technology industry needs help. As Barack Obama prepares to take office as US president next week, Silicon Valley has sensed that a turning point is at hand. It has been working overtime to convince the incoming administration of the strategic importance of these developments – and their need for financial backing.

To hear Valley notables describe it, the answers to some of the biggest issues facing the US can be found there. These range from climate change and America’s lack of energy independence to the need to create jobs and ensure long-term competitiveness in the next big strategic industry, the one geared to weaning the world from its reliance on fossil fuels...MORE

A Year of Hope

The world is currently is struggling with the consequences of over-valuing its financial assets in wake of the credit crunch. There however looms a more pressing crisis ahead, as the under-valuing of environmental assets, which serve as the basis of all life and prosperity shall result in an ecological credit crunch as human demands on natural capital reach unsustainable levels. In the past three decades, one third of the planets resources, its “natural wealth” has been consumed. Fortunately, I believe that the winds of change are upon us, and one of the positive effects of the global credit crisis has been to cause investors to take a long hard look at the credit crunch, and the short-termism practices that caused it, and decide they can benefit from a more comprehensive analysis of investment risk, one which incorporate environmental, social and governance issues (ESG). In November alone, owners representing more than $1,500bn (£914bn, €1,160bn) of assets signed up to the United Nations six principles of better long-term equity ownership, which brought the total above $18,000bn. This practice continues to gain traction in light of the broader acceptance of climate change as an environmental threat, which brings with it previously unidentified risk and opportunities.

I believe 2009 is the beginning of a new hope for the world as we must tackle the challenges facing us or reap the consequences of our actions, as Al Gore reminds us, “Nature does not do bailouts.” Although I remain optimistic about the future, I should remind you of a quote by Edmund Burke, "All that is necessary for the triumph of evil, is for good men to do nothing.” The onus is on all to ensure we start acting and investing sustainably. Speaking of hope, President-elect Barack Obama comes to mind, who wants to spend $150 billion over the next decade to promote alternative energy sources, a proposal, he says, that would create millions of "green collar" jobs. He has also called for an 80 per cent reduction in greenhouse gas emissions by 2050 through a cap-and-trade program. Although policies and measures are increasing worldwide to combat climate change, I only hope that the scale of investment and action will be sufficient at this critical juncture. The unraveling of debt-heavy investment banking firms and the demise of Wall Street icons Lehman Brothers and Merrill Lynch, means that financing for large-scale renewable energy projects has gotten harder and more expensive. Sector-wise, wind farms will most likely be hit the hardest by the squeeze in credit as they are more mature along with solar and geothermal projects. Although companies that require public markets for financing have less attractive options, the private equity side of the business has showed much less sign of distress. Companies that require late-stage financing could have trouble going from product development to commercialization, and rather than trying to tap public markets or investment banks for capital, clean-tech companies may look to other sources like hedge funds, private equity firms or large corporations. Additionally, money allocated to bailout plans has possibly reduced the amount that would have been invested by governments into adopting cleaner energy sources. This has also not been helped by the deep slump in oil prices, which makes fossil-fuel energy look more attractive. In general though, long-term trends point to demand for clean technologies and supportive government policies.

Voluntary action remains a major driver in tackling the climate crisis, and fortunately in a recent UNEP survery, nearly 90 per cent of young people across the globe said they urge world leaders to do, "whatever it takes" to tackle climate change. If you are looking to take action I ask that you consider that the loss of natural forests around the world contributes more to global emissions each year than the transport sector, and curbing deforestation is a highly cost-effective way to reduce emissions. Seven billion trees - to be planted by the end of 2009 -are the target of UNEP’s Billion Tree Campaign. More than 4,319,593,340 trees have already been pledged and 2,599,045,202 planted. The worldwide campaign encourages people, communities, business and industry, civil society organisations and governments to enter tree planting pledges online in a call to further individual and collective action.