On April 29, a network of more than 270 institutional investors with over $23 trillion in assets said they are concerned that utilities are not preparing for the risks associated with climate change. According to the group of investors, a failure to prepare for climate change will negatively impact their holdings, portfolios, and assets.

Stephanie Pfeifer, CEO of the Institutional Investors Group on Climate Change, announced the publication of the Investor Expectations of Electric Utilities Companies – Looking down the line at carbon asset risk. The report is intended to guide the utility industry in adapting their business strategies as a result of the international climate change agreement:

Institutional investors are concerned that some companies are not sufficiently prepared for the transition to a lower carbon economy. Business strategy and capital allocation decisions made now will determine the future sustainability and portability of the utility sector for decades to come.

The report is also intended to provide other investors with a guide for engaging with electric utilities about their management of fossil fuel power plants and to increase renewable energy assets in their portfolios. The report recommends several questions to ask utility companies, including:

  • What is the company’s actual and projected generation mix?
  • Has the company undertaken a 2 degree (or 1.5 degree) scenario stress test?
  • Is there a timeline for the phase out of coal power plants?

According to the report, shareholders and investors should also question utilities about the current inadequate disclosure of funding since many power companies are not transparent as to whether or not it is investing resources in advocacy groups to subvert public policies that address climate change or block renewable energy growth. This is especially important in light of the recent developments over ExxonMobil and its funding of climate denial for decades. It was also revealed last year that Southern Company had been funding funding Willie Soon, an astrophysicist and climate change denier at the Harvard-Smithsonian Center for Astrophysics through one of its subsidiaries called Southern Company Services.

The questions in the report are:

  • How much is spent on lobbying activity and how is this spending broken down?
  • What industry associations does your company have links with (including trade associations, chambers of commerce and business forums)?
The Institutional Investors Group on Climate Change report comes just a few weeks after the Sustainable Investments Institute (Si2) produced a study examining the 25 largest U.S. investor owned utilities by revenue. This study is also meant to help investors evaluate how these utilities are responding to the challenges posed by climate change.

Data and analysis featured in the report for investors to be knowledge of includes:

    • A list of the most carbon-intensive utilities, which includes American Electric Power, AES Corporation, Consumers Energy, DTE Energy, NRG Energy, and Xcel Energy.
    • Details concerning greenhouse gas emission legal liabilities. “On the high end sit Southern Company, NextEra Energy, and American Electric Power.”
    • A compilation of lobbying and campaign contribution data revealing more than $400 million has been spent by the 25 utilities in the study in the last five years. NRG Energy, FirstEnergy, Southern Company, and American Electric Power are among the highest spenders.

These reports are just two warnings for the utility industry so that companies can better position themselves in the face of climate change risks and possible litigation over greenhouse gas emissions.

However, last month, shareholders of Berkshire Hathaway, a corporation with multiple utility subsidiaries, rejected a resolution calling for the company to write a report about the risks climate change creates for its insurance companies. And shareholders of AES Corporation, the corporation that owns Dayton Power & Light and Indianapolis Power & Light, voted against a resolution asking the company to publish an assessment of the long term impacts of climate change on the company’s portfolio of public policies. The management for both corporations issued recommendations for shareholders to against the proposals.

Nevertheless, over the coming days and weeks, other shareholders will get the opportunity to weigh in on climate change related resolutions, including: Arizona Public Service’s parent companyDuke EnergyFirstEnergyNextEra EnergyPNM Resources; and Southern Company. A full list can be found on Ceres’ Investor Network on Climate Risk website.

Photo: Wild Earth Guardians

Posted by Matt Kasper

Matt Kasper is the Deputy Director at the Energy and Policy Institute. He focuses on defending policies that further the development of clean energy sources. He also focuses on the companies and their front groups that obstruct policy solutions to global warming. Before joining the Energy and Policy Institute in 2014, Matt was a research assistant at the Center for American Progress where he worked on various state and local policy issues.