Two coal-heavy utilities will disclose climate risks after faith-based shareholder pressure

Shareholders target WEC Energy Group and CMS Energy for their greenhouse gas emissions.

CREDIT: Michael S. Williamson/The Washington Post via Getty Images
CREDIT: Michael S. Williamson/The Washington Post via Getty Images

Faith-based shareholder activists claimed victory Wednesday after two major coal-burning electric utilities in the Midwest agreed to publish assessments of the long-term business impacts on their companies of limiting global warming to under 2 degrees Celsius.

The two companies, Wisconsin-based WEC Energy Group and Michigan-based CMS Energy Corp., were facing shareholder resolutions calling on them to address how their operations impact climate change. The shareholder groups withdrew the resolutions after the companies agreed to their demands.

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But the shareholder activists said they plan to monitor the implementation of the agreements to ensure the companies follow through on their commitments.

Seventh Generation Interfaith, a Wisconsin-based coalition of faith-based institutions and asset managers, had targeted the electric utilities because they are high emitters of the greenhouse gases that are responsible for climate change. The coalition is a member of the Interfaith Center on Corporate Responsibility, a group of shareholder advocates who view the management of their investments as an agent for social change.

Frank Sherman, executive director of Seventh Generation Interfaith, described CMS Energy and WEC Energy Group as climate leaders in response to their decision to agree to the demands of the shareholder activists. “They recognize that market forces and their customer base are pushing them to exceed federal climate regulations and state renewable portfolio standards,” Sherman said Wednesday in a statement.

CMS Energy, whose primary subsidiary is Consumers Energy, was the 21st largest emitter of carbon dioxide among power generators in the United States in 2015. The company has made progress in emissions reductions by recently retiring seven of its 12 coal plants.

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WEC Energy Group, whose primary subsidiaries are We Energy in Wisconsin and Peoples Gas Light and Coke in Chicago, is the 22nd largest energy utility in the nation but the 13th largest emitter of CO2 by intensity. WEC Energy Group has a 2030 greenhouse gas reduction target but does not currently provide sufficient information on its long-term strategy or plan to decarbonize in ways that are consistent with a 2-degree scenario.

In filing the resolution, the investors were registering their concern that WEC is not properly accounting for the risk of its current high reliance on carbon-intensive generation.

In 2015, the Financial Stability Board — originally established in 2009 by the G20 nations — launched its climate task force. As an important first step to curbing global warming, the group recommended that companies use scenario analysis and disclose their climate risks and opportunities. And last year, the Financial Stability Board’s Task Force on Climate-related Financial Disclosures published recommendations on how companies can disclose climate-related information in their financial filings.

Utilities are increasingly being pushed to evaluate the impacts climate change on their business. Last spring, about 57 percent of shareholders voted in favor of the non-binding resolution at PPL Corp.’s shareholder meeting to publish a report on how climate change policies and technological innovations will affect the company’s bottom line. The vote — a first for the power sector — followed a similar decision by shareholders of Occidental Petroleum, which was supported by about 66 percent of shareholders.

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Shareholder resolutions filed at other electric utility companies, including AES Corp., DTE Energy, Duke Energy, and Southern Co., received a high percentage of shareholder support in 2017, but not more than 50 percent. Shareholder proposals are generally not binding, but those that receive high vote totals often lead to corporate policy changes or discussions between the companies and the shareholders who filed the resolution.

In the case of CMS Energy and WEC Energy Group, the shareholder groups had requested in their resolutions that the companies publish an assessment of the long-term impacts of climate change on the company’s fuel mix and capital expenditure plans aligned with the 2-degree Celsius warming scenario, as adopted by nations in the Paris climate agreement.

Ruth Geraets of the Sisters of the Presentation of the Blessed Virgin Mary in South Dakota, led the filing of the resolution at CMS Energy. As long-term shareholders in the company, Geraets said her congregation believes having a strategy in place to meet climate challenges will improve CMS Energy’s competitive position over the long term.

Tim Dewane of the School Sisters of Notre Dame Central Pacific Province, filed the resolution at WEC Energy Group. “We were pleased that WEC retained their commitment to 2030 GHG reduction targets even after the EPA abandoned the Clean Power Plan, and we are heartened by management’s commitment to undertaking a 2-degree scenario analysis,” Dewane said.

In the WEC Energy Group resolution, the shareholders requested the company, with board oversight, publish an assessment of the long term impacts on the company’s portfolio, of public policies and technological advances that are consistent with limiting global warming to no more than two degrees Celsius over pre-industrial levels.

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The CMS Energy resolution contained similar language, and called on the company to report on how it could adjust its capital expenditures to align with a two degree scenario and integrate electric vehicle infrastructure, distributed energy sources, demand response, smart grid technologies, and customer energy efficiency.

Last month, CMS Energy subsidiary Consumers Energy pledged to reduce carbon emissions 80 percent and stop using coal to generate electricity by 2040. In 2016, Consumers Energy retired its seven oldest coal-fired generating plants. The company projected the retirements will result in a 25-percent reduction in its carbon emissions and a 40-percent reduction in sulfur dioxide, nitrogen oxide, and particulates.