Investors Demand Carbon-Risk Disclosure

Shareholders in Avis Budget, Home Depot, Chevron, and other companies want more information on the corporate risks of climate change

By Rachael King

As Avis Budget Group (CAR) stockholders prepare for the company's annual meeting in Wilmington, Del., on June 12, they're facing unfamiliar terrain. For the first time since the formation of the company three years ago, shareholders are being asked to vote on a shareholder proposal on greenhouse gas emissions. At issue: Should Avis Budget prepare a report on whether it makes sense to cut emissions from the company's rental cars?

Investors in U.S. and Canadian companies have filed 67 global warming-related resolutions during the 2009 proxy season, up from 57 last year, according to Ceres, a national network of investors, environmental organizations, and public interest groups. The increase reflects growing concern among shareholders over the corporate risks of climate change. Some investors fret that if companies don't police themselves, the government will do it for them. Others are concerned over the possible impact of natural disasters or global warming on operations. Many are motivated by a combination of such concerns.

A recent resolution filed with IdaCorp (IDA) passed with 52% of the vote. But green-proposal backers often don't get what they ask for. On May 28, a proposal asking Home Depot (HD) to assess and set targets for reducing its companywide energy consumption failed to pass, with 23% voting in favor, according to a preliminary count by Home Depot. In filings, the company said it already assesses energy usage and has taken steps to reduce energy consumption.

Playing "Chicken" with Investors

Some companies make concessions before proposals are submitted to a vote. Just before Chevron's (CVX) annual shareholder meeting on May 27, the company agreed to track and report on the carbon content of its products, prompting a group of faith-based investors led by the Sisters of St. Dominic in Caldwell, N.J., to withdraw its resolution asking the company to adopt long-term goals for reducing greenhouse gas emissions. Chevron says it annually sets a greenhouse gas emissions goal, and that it's met the goal every year since 2004. The company also says it has tracked emissions voluntarily from its products in the past. "We informed the Sisters that we intend to continue reporting emissions from our operations and products and to improve our methodology for doing so," says Chevron spokesman Morgan Crinklaw.

So far, 27 of the 67 shareholder resolutions have been withdrawn because the companies have agreed to take action, a record number, Ceres says.

Some investors have discovered that they can be more effective by banding together. One such effort is the Carbon Disclosure Project, which began in 2002 with the support of 35 institutional investors. The founders realized that climate change was going to have a serious impact on the economy and that investors didn't really have any place to go for information on how it would affect their portfolio companies, says Zoe Riddell, head of investor relations at the Carbon Disclosure Project. The Securities & Exchange Commission currently doesn't require companies to disclose financial risks related to climate change, although some investors, state officials, and environmental groups have started asking for the requirement.

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