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Shareholders More Active In Forcing Companies To Be Green

Shareholders filed a record 109 resolutions related to environmental and socially responsible behavior with 81 US and Canadian companies this year, withdrawing 45 of them after companies agreed to make changes. Are green issues beginning to dictate where money is invested?

The 2011 proxy season has been the busiest ever for filing shareholder resolutions related to climate change, energy production, water use, and sustainable governance, reports Ceres, a Boston-based investor network focused on environmental and economic sustainability.

Shareholders filed a record 109 such resolutions with 81 U.S. and Canadian companies this year, withdrawing 45 of them after companies agreed to make changes as laid out in the proposals.

Rob Berridge, senior manager of investor programs at Ceres, says that he believes the increased shareholder engagement around environmental issues is a sign that more and more investors consider such issues to be relevant to their portfolios.

“We’ve had a series of events that prove that environmental risks are financially material,” he says, citing the BP oil spill, the Massey Energy coalmine explosion in West Virginia last April, and the collapse of a toxic ash pond in Tennessee in 2008. “Investors take note and then file resolutions asking companies to address their risks.”

Berridge adds that the country’s biggest institutional investors appear to be upping their engagement with companies on climate-related issues, which he says could be another sign that consideration of such risks is becoming more mainstream. The California State Teachers Retirement System (CalSTRS) – the nation’s second-largest public pension fund – filed four resolutions (all asking for better reporting on environmental practices), three of which were successfully negotiated and withdrawn. The New York State Comptroller’s Office filed nine resolutions touching on climate issues (five were withdrawn), the New York City Comptroller’s Office filed six such resolutions, and the Connecticut Treasuer’s Office filed one (ultimately withdrawn). 

The single environmental issue that drew the most investor votes was natural gas hydraulic fracturing, or ‘fracking’ – the process of extracting natural gas by pumping high-pressure fluids into shale formations to fracture rock. Because of allegations that fracking can poison surrounding water supplies and even create earthquakes, it has attracted significant controversy.  

Investors filed fracking-related resolutions with nine oil and gas companies, and the resolutions that went to a vote received substantial support; the average fracking vote attracted 40 percent investor support, up from 30 percent in 2010.

Berridge predicts that the investor focus on fracking will persist, and may even be a headline issue again in next year’s proxy season. 

“I think next year, fugitive emissions of CO2 from fracking wells could be a big topic,” he says. “Cornell just came out with a study saying that fracking wells produce more greenhouse gasses on a life-cycle basis than coal.  There needs to be more research around that, but that could become a very important topic.”

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