Global Investors Warn Utilities to Change Business Strategy and Prepare for Climate Change

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)?

• • 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.

• An update of the utility companies actively or covertly funding litigation efforts to block the Clean Power Plan in the courts. Southern Company is the most active company opposing the Clean Power Plan, while American Electric Power, Ameren, DTE Energy, Duke Energy, Entergy, NRG Energy and PPL Corporation are also active in their opposition. The report notes the research compiled by Energy & Policy Institute on what utilities are active members in the Utility Air Regulatory Group, American Coalition for Clean Coal Electricity, and the Electric Reliability Coordinating Council.