Investors lean on Southern Co. to tackle business risks of climate change

Dive Brief:

  • Southern Co. shareholders yesterday narrowly defeated a proposal for the company to report on its business plan for a carbon-constrained future, with 46% in favor of the measure. Essentially the proposal would request Southern Co. to align its business operations with a 2 degree Celsius global warming scenario, the limit outlined in the Paris Climate Accord.  
  • The shareholder proposal was filed by the Interfaith Center on Corporate Responsibility (ICCR), a coalition of Catholic institutional investors.
  • Shareholders are ramping up pressure on utility companies to address the business risks of greenhouse gas emissions. Last week, 57% of shareholders in Pennsylvania utility PPL Corp. voted in favor of a similar non-binding resolution.

Dive Insight:

Shareholders concerned with environmental justice and climate change are putting increasing pressure on companies through votes at annual meetings. And the trend appears to be accelerating. According to ICCR, shareholder resolutions addressing climate change rose from 2 last year to 9 in 2017.

Though the proposal was not adopted, Mary Beth Gallagher, executive director at Tri-State Coalition for Responsible Investment, said in a statement that the vote “shows investors want enough disclosure to evaluate their risk as shareholders from the regulatory, technology and market impacts of the low-carbon transition."

The proposal would have asked Southern Co. to issue a report on the company's "strategy for aligning business operations" with goals related to the United Nations Paris accord, which seeks to limit global warming to 2 degrees Celsius.

“Companies unprepared for the low-carbon transition are at a high risk of stranded assets, write-downs, and loss of market share; Southern Company needs to present their strategy,” Gallagher said.

Southern's Board of Director's had recommended against the report, though it acknowledged that "it may likely be
operating in a future regulatory environment that includes carbon mandates." The company said that it is researching and developing "a portfolio of new, hardened, lower emitting technology options."

It's unclear how much support such a resolution would garner in the future from Southern Co. stakeholders, especially considering CEO Tom Fanning's stance on the role of carbon dioxide contributing to climate change.

Asked during a CNBC appearance if he believed carbon dioxide was a primary cause for climate change, Fanning said "No, certainly not. Is climate change happening? Certainly. It's been happening for millennia."

On another front, PPL shareholders voted in favor of a similar non-binding resolution, with a desire to understand how policies related to the U.N. climate accord could impact profits. Noting that coal is about 60% of PPL's power mix, the proposal expressed concern the utility "is not properly accounting for the risk of its current high reliance on carbon-intensive generation."

It remains unclear if the United States will maintain its commitment to the Paris Climate Agreement, a decision that will be made by President Trump. Axios reported a group of conservative Senators plan to send a letter urging Trump to exit the Paris climate deal. 

While Trump has expressed a desire to leave the deal, his daughter Ivanka Trump and Secretary of State Rex Tillerman want to maintain a "seat at the table."

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Filed Under: Generation
Top image credit: Southern Company