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Who’s Turning Up the Heat?
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There is a graphic connection in biblical imagery of Armageddon to catastrophic natural events – flood, earthquake, whirlwind and fire. Recently these apocalyptic terrors have even been turned into a visually shocking blockbuster Hollywood movie, called The Day After Tomorrow, that is again drawing attention to the consequences of unbridled human activity (alias sin) as ultimate ecological destruction: advanced climate change as ecocide.
Churches of the global North have been calling for radical reduction in the production of greenhouse gas (GHG) emissions by curbing energy consumption and production. In solidarity with peoples of the South they are working to change the way we live and to stop taking the impact of our footprint for granted. In ecological terms they are calling for a revisioning of the sustainability of how we organize our economies and societies. In business terms, we are calling for a recalculation of the risks to the future of the planet of “business-as-usual” patterns; or even “reform-at-a-too-slow-pace”.
Climate Risk and Investment
Recently, the Social Investment Organization (SIO) and KAIROS, with Aberdeen Asset Management and funding from Environment Canada hosted a workshop on Climate Change and Investment Risk. As the federal Minister of the Environment, David Anderson said: “Accurate, credible, up-to-date information on GHG emissions is essential to making the right policy decisions for our economy and for our environment.” An opportunity was needed for institutional investors like churches and pension funds, to learn about developments in risk analysis to help them make more informed investments and ask corporations compelling questions about their climate change policies.
The goal of the workshop was to help raise awareness within the financial community of climate change risk, and to engender greater corporate disclosure on climate change. This included encouraging participants to sign on to the Carbon Disclosure Project, advising institutional investors and pension fund managers to vote their proxies in support of climate change-related shareholder resolutions and using new securities regulations and emerging accounting and financial reporting guidance to assess companies on global warming risk and opportunity.1
Expanding shareholder action is an area that KAIROS has been involved with from the time of the former coalition, the Task Force on the Churches and Corporate Responsibility. Religious institutional investors continue, as they have for many years, to demand that companies consider their ethical, social and environmental responsibilities.
One of the fastest-growing areas of focus for shareholder activism today is indeed climate change.2 From 2001 to 2002, the filings of shareholder resolutions on climate change questions to company annual meetings had nearly tripled, and by late 2003, 87 of the largest institutional investors wrote to the 500 largest publicly traded companies in the world asking for the disclosure of investment-relevant information concerning their greenhouse gas emissions.
In March 2004 the Canadian government made it mandatory that all large greenhouse gas-emitting corporations file annual reports on their emissions. Now what remains to be seen is their level of compliance and the accounting of their actual reductions.
KAIROS addresses Climate Change Risk at the Imperial Oil AGM – April 21, 2004 3
This year two religious congregations of Québec, the Congregation of the Sisters of Sainte-Anne of Lachine, and Fonds Élisabeth Bergeron (Soeurs de Saint-Joseph de Saint-Hyacinthe), proposed two shareholder resolutions at the AGM of the largest oil and gas corporation in Canada - Imperial Oil Ltd., which is 69% owned by the US parent ExxonMobil (better known by the ESSO brand). The proponents designated as spokespersons KAIROS staff, Rory O'Brien and Joy Kennedy.
The proposals called for detailed reporting of the company's evaluation of the market potential for renewable energy, as well as for corporate initiatives to reduce emissions, and to estimate and disclose their climate risk.
Tim Hearn, CEO and President of the Board, spoke glowingly and at length of the financial success of the company over the past several years, and especially of the high rate of return on shareholders' investments. He forecast long-term growth in demand for oil and gas as the developing world continues to industrialize. As for the environment, he maintained, "There is clear evidence that economic growth and higher standards of living lead directly to better environmental performance."
This rosy picture of a future world where the growing population's lifestyle and living conditions would continually improve was not marred by any suggestion that this very oil-based industrialization would undoubtedly have severe environmental, economic and geo-political consequences. Climate change is already having an impact on the human population, as well as on the ecosystems that support us and the many other species that inhabit this planet. This information was tendered only by concerned shareholders during the question and commentary period when the two related shareholder proposals were introduced.
Rory O’Brien pointed out that the finite resources of oil and gas will run out in the future, and that renewable energy sources will be the only remaining viable options. But long before that, in dealing with the onset of climate change, the government will necessarily impose regulations to curb the use of fossil fuels. Others are already moving aggressively into the rapidly expanding renewables market. Does Imperial expect to easily 'buy in' to this market at some later date? At what cost?
Joy Kennedy, speaking to the second motion, reiterated the widespread concern that Imperial Oil, in dragging its feet on climate change, is increasingly being seen as socially irresponsible by consumers of its products, with potential negative consequences. The problem of risks associated with a 'business-as-usual' stance include possible legal liability for inaction. But the strongest likelihood of corporate risk comes from an increasingly stringent regulatory environment, with the Canadian government’s ratification of the Kyoto Protocol, and its implementation plan.
While the proposals may have received only limited support, these shareholders will continue to be vocal in advocating for accelerated action on climate change.
For sister Céline Dupuis, who is in charge of this file at the Congrégation des Soeurs de Sainte-Anne, “what mattered most to us was not the vote, but rather the opportunity to express our point of view as a socially concerned shareholder.”
“There’s more to this than profits, which is what Imperial Oil’s officers suggest when they flaunt the company’s strong earnings. It’s also important to avoid making these profits at the expense of the environment and of the population as a whole,” added Sr. Dupuis.4
The following is the text of the resolutions:
RESOLUTION # 1
Be it resolved that the board of Imperial Oil Limited prepare a
report by September 2004 (at reasonable cost and omitting proprietary
information) to describe how the company has evaluated market opportunities
in wind, solar, and other renewable sources of energy.
The vote for this proposal received 3.5% of the total voting shares, (including those voted by the company) and 18.4% of the minority (publicly-traded) shares. This is a respectful showing that passed the 3% threshold for a first-time submission, which allows this shareholder resolution to be resubmitted next year, if necessary.
RESOLUTION # 2
Be it resolved that Imperial Oil Limited annually issue a report
to shareholders that has been verified by credible third party auditors
on: specific emission reduction initiatives undertaken by the company
to address risks and liabilities arising from climate change, including
targets and actual emissions.
This proposal received 4.1% of the total voting shares, and 21.2% of the minority shares. While this did not meet the 6% threshold for a second-time proposal to be resubmitted, the proponents were pleased to know that the federal government, through its mandatory emissions reporting regulation, has essentially indicated its support for the principle behind the resolution, that of taking concrete steps to deal with the problem of climate change.
Final Note on Other Shareholder Actions
Apart from Imperial Oil, there were two other Canadian companies that voted on climate change-related proposals. In April, 20.7% of Petro-Canada shares were voted in favour of a proposal for a report on emissions reduction and climate change liabilities, and 20.4% in favour of a report on market opportunities for renewable energy. Both proposals were co-filed by Real Assets Investment Management and the Ethical Funds Company. In May, a vote on a proposal for a report on climate change liabilities was supported by 5.0% of the shares of Nexen Inc. Real Assets submitted the proposal.
The heat is on…
Joy Kennedy is the Coordinator for the Ecological Justice Program of KAIROS; with files from Rory O’Brien, KAIROS’ past Corporate Social Responsibility Coordinator.
1. Climate Risk: Best Practices for Canadian Pension Funds and Institutional Investors, Report of the one-day workshop, Climate Change and Investment Risk, March 11, 2004, Toronto, ON, Social Investment Organization, with KAIROS and Aberdeen Asset Management www.socialinvestment.ca
2. Value at Risk: Climate Change and the Future of Governance, CERES Sustainable Governance Project Report (prepared by Innovest Strategic Value Advisors), April 2002.
3. See Report on the two environmental shareholder resolutions proposed at the Imperial Oil AGM – April 21, 2004, by Rory O’Brien, Corporate Social Responsibility Coordinator, KAIROS website www.kairoscanada.org
4. “Imperial Oil rebuked for
its environmental balance sheet by two Quebec religious congregations,”
BY MARTIN VALLIÈRES, English translation of an original French
article from La Presse business section, Montréal, QC, re
the Imperial Oil AGM, April 22, 2004.
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