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September 02, 2009

Record-Breaking Numbers of Resolutions and Engagements on Climate Change are Recorded in 2009 Proxy Season
    by Robert Kropp

Ceres counts 68 climate-related shareowner resolutions filed in 2009, 31 of which were withdrawn following successful engagement with companies. -- The 2009 proxy season was notable for its successes on a number of fronts. Addressing excessive risk-taking by financial institutions, investors filed many resolutions on executive compensation, following which the US House of Representatives passed a bill that would provide shareowners with an advisory vote on executive compensation. The bill is currently awaiting a vote in the US Senate.

Another area where a record number of resolutions were filed, and a record number of successful shareowner engagements with companies were recorded, is climate change. In the 2009 proxy season, according to Ceres, "a record 68 climate-related shareholder resolutions were filed by investors this year, of which 31 were withdrawn after the companies agreed to positive climate-related commitments." In 2008, 61 such resolutions were filed, of which 25 were withdrawn due to successful engagement. spoke with Rob Berridge, Manager of Investor Programs for Ceres, about the trend toward more successful shareowner resolutions relating to climate change.

"Investors are becoming more aware of the reality of climate risk in their investment portfolios, and are ramping up engagement to address that," Berridge said. "This is occurring against a backdrop of pending legislation, which is the source of profound regulatory risk for companies. And climate science continues to get more serious."

Berridge continued, "Greater involvement from some of the big pension funds such as California State Teachers' Retirement System (CalSTRS) is a factor as well. When we have such big investors involved, it helps convince companies to move on the issue."

A prominent success of the 2009 proxy season was a shareowner resolution filed at IdaCorp, requesting that the company establish greenhouse gas (GHG) emissions reduction goals and to report on its plans to meet them. The resolution won 52% of shareowners' votes, the first time that a resolution addressing climate change has ever won a majority vote in the US.

Berridge said of the IdaCorp resolution, "The vote was successful in getting the company to move on the adoption of greenhouse gas (GHG) reduction goals by the end of the year. Since the vote, the company has also issued its first request for proposal (RFP) for a wind farm, and submitted a smart grid proposal to utility regulators."

A resolution filed with Massey Energy, a coal company whose CEO, Don Blankenship, has said, "I don't believe climate change is real," called for the company to report to shareowners on its response to pressure to reduce carbon emissions. The resolution received 45.6% of the vote at the annual meeting.

A successful engagement with a company in a high-impact sector was recorded at Chevron, with whom members of the Interfaith Center on Corporate Responsibility (ICCR) have filed resolutions for years, according to Leslie Lowe, Program Director for Environment and Energy at ICCR.

"Chevron has begun to develop renewable energy alternatives, and is introducing a carbon accounting system for its operations," Lowe said. "A carbon offset program is only compensating for a liability. There has to be a company-wide accounting system that allows for management of its carbon footprint."

"We were encouraged to hear what Chevron is doing in the fields of renewable energy and energy efficiency," Lowe continued. "They have made a significant step this year. That is why we withdrew the resolution. We're hoping good carbon management has a significant uptake, and influences others in the industry to follow suit."

Another successful engagement recounted by Lowe was with Citigroup, who responded to a shareowner resolution by developing a due diligence process for funding the mountain top removal (MTR) mining process used by coal companies. According to the resolution, "The carbon sequestration lost in forests destroyed by MTR each year is roughly equivalent to the annual emissions from two 800 mega-watt coal-fired power plants."

Lowe said, "We filed with Citigroup about funding MTR, and last week they walked us through their new due diligence process. Itís a wakeup call when coal companies find their bankers asking about environmental performance. We're beginning to raise the profile of the environmental liabilities of coal companies."

"That's what investor power is all about," Lowe continued. "Where is capital flowing to, and is it flowing to environmentally responsible activities?"

Another successful engagement was with home builders, according to Berridge. "Pulte, the largest home builder in the US, agreed to establish emissions goals for their operations," he said. "That engagement was led by Laura Schaefer of the Nathan Cummings Foundation, and comes after successes last year with KD Homes and Centex. The most prominent home builders in the US are starting to pay attention to energy efficiency."

In 2009, 27 shareowner resolutions pertaining to sustainability reporting were filed. Walden Asset Management filed a resolution with DENTSPLY International, requesting that the company issue a sustainability report. The company posted its first Corporate Social
Responsibility (CSR) report on its website this winter. Walden negotiated similar withdrawals with Kadant, Middleby, St. Jude Medical, and Stryker.

Berridge noted the importance of companies using a standard format for sustainability reporting. "We always recommend that companies use the Global Reporting Initiative (GRI) process in their reporting," he said. "The GRI process encourages companies to describe their environmental mitigation process, and companies that use the GRI process are going to be providing much better information."

"Responsible investing should increase returns, but we have to force more and better disclosure," said Lowe. "At ICCR, we are looking at the reporting that companies are doing, and pointing out to them how it could be better."

"We are on a significant path to forcing companies to provide greater reporting on climate change," she concluded.

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