Global Warming Gets Hot; Ford To Issue Climate Report

Environmental issues continue to make inroads into the mainstream of the activist governance set. In fact, in a new survey just released by Mercer Investment Consulting, 73 percent of 190 regional investment management organizations predict that the incorporation of social and/or environmental corporate performance indictors will become mainstream within 10 years, and 65 percent predict that positive or negative screening will be mainstream within 10 years.

Gardener

"In the past, it was just a small group of organizations that were interested in SRI [socially responsible investing], but there are a growing number of mainstream investors who believe these issues can have an impact on long-term investment performance," said Tim Gardener, global leader of Mercer IC. "Investment managers' views are clearly changing."

One company that apparently has noticed the shifting winds is Ford Motor Co., which earlier this month announced that it will issue a report on climate change by the end of the year.

The report will examine the business implications of greenhouse gas emissions, with reference to government policies and regulations, Ford's product and manufacturing facilities actions, and advanced technology development.

"We have long identified climate change as a serious environmental issue, and shareholders are increasingly asking about the risks as well as the opportunities associated with it," said Bill Ford, chairman and CEO, said in a statement. "It's time for a broader, more inclusive public dialogue on the complex and important challenge of climate change; our report will be part of our contribution to that dialogue."

Ford added that it will draft its climate change report in consultation with a wide variety of climate change and policy experts. Among those that will be included are the Interfaith Center on Corporate Responsibility, and the Boston-based Ceres, a coalition of investors and environmental groups that co-founded the Investor Network on Climate Risk. The company has been engaged in dialogue with ICCR, Ceres and other non-governmental organizations for several years.

In addition to getting input from shareholders, the company will solicit input for the report from climate change experts at the Massachusetts Institute of Technology and Princeton’s Carbon Mitigation Initiative. The company also said it will include input from science and environmental organizations such as the Union of Concerned Scientists and the Natural Resources Defense Council.

Lubber

“More companies are looking at this issue,” asserts Mindy Lubber, president of Ceres, an investor coalition that has helped coordinate shareholder resolution filings with oil and gas companies. “Global warming is real, pervasive and getting worse.”

Influencing Institutions

According to the IRRC, there are 211 shareholder resolutions on social and environmental issues pending—as of March 11—submitted for this year’s proxy season. This matches the record number of 210 such resolutions at the same point in 2004.

Altogether, 65 environmental-related resolutions have been submitted this year, including 30 related to global warming, up from 25 in 2004, according to the IRRC.

A number of other related resolutions have been pulled.

According to Tracey Rembert, director of Advocacy and Public Policy at the nonprofit Social Investment Forum, there have already been 18 withdrawals on climate-related issues. Resolutions have been withdrawn at six oil and gas companies, including Apache, Anadarko, ChevronTexaco, and Unocal.

One prime target this proxy season, however, is ExxonMobil, the world’s largest oil company.

Ceres’ Lubber is part of a group that last week announced plans to encourage shareholders to approve three global warming resolutions that will be voted on May 25 at the annual meeting of the world’s largest oil company. They have launched a Web-based campaign (see box at right) to encourage shareholders at the 24 largest mutual funds to urge the funds to support global warming resolutions that will be voted at the company’s shareholder gathering.

ExxonMobil tried to head off this effort. But, late last month, the Securities and Exchange Commission told the company it could not exclude two shareholder resolutions about global warming in the proxy for the company’s annual meeting.

In 2003, more than 22 percent of Exxon shareholders supported a global-warming-related resolution. In 2004, the company tried to buy time when it agreed to issue a report saying it intends "to comply in the most cost-effective manner with whatever regulations and mandates are issued" regarding global warming.

So why is this group targeting ExxonMobil? “Now we can,” is the succinct response from Pam Solo, president of the Civil Society Institute, referring to new rules requiring mutual funds to disclose how they vote on proxy issues. “We want people to speak up and hold mutual funds’ feet to the fire.”

For all this activity, however, no resolutions garnered a majority of votes last year. The most supportive global warming-related measures attracted 37 percent support from Apache shareholders, 31 from Anadarko shareholders and 27 percent from Marathon investors.

Still, many companies have become responsive. As we have reported in the past, several companies have trotted out very detailed, 100-page plus reports on their environment risks and issues, including American Electric Power, Cinergy and TXU. And Southern Co. is expected to finally issue its long-promised report very shortly.

Adds Ceres’ Lubber: “Eighteen months ago institutional investors were not talking about climate change. Now, 15 major pension funds see at as a major issue.”