Duke, Southern disclose misleading descriptions of climate policy advocacy to ESG investors

Facing pressure from investors, the top two carbon polluting utilities in the country are making gestures to disclose more information about their advocacy with regard to climate policy, but the disclosures are incomplete and misleading in significant ways. 

The companies, Duke Energy and Southern Company, have come under fire from a growing cadre of institutional investors with a focus on “Environment, Social and Governance” (ESG) issues over their track record of advocating against policies to transition from fossil fuels to clean energy. 

Duke and Southern’s disclosures come in advance of a report, expected this month, from the Climate Action 100+, a coalition of investors representing $47 trillion of assets under management, that will benchmark large U.S. utilities and fossil fuel companies for their efforts to reach net-zero greenhouse gas emissions. The investors will specifically evaluate companies for their “climate policy engagement,” among other factors.

In their recent disclosures, however, Duke and Southern do not appear to be providing adequate information for the investors to gauge their climate policy advocacy. Neither company is offering detailed information about its own policy advocacy activities, particularly with regard to efforts to influence the decisions of state legislators and regulators. 

And both companies appear to be greenwashing the activities of their trade associations, relying on vague statements about climate change that belie the lobby groups’ actual activities.

Disclosures respond to increased pressure from ESG investors

Pressure from asset managers over utilities’ and other polluting companies’ political advocacy has intensified in recent years, as the investors push for those companies to lobby for, rather than against, policies to rapidly decarbonize the economy.

The Climate Action 100+ issued what it called an “urgent call” in October 2020 for large emitting companies to “disclose how their climate lobbying aligns with the most ambitious goals of the Paris Agreement and science-based climate policies.”

“In order to assess these risks to our portfolio companies, we need greater transparency and accountability, especially when it comes to lobbying — or supporting trade organizations that are lobbying — against efforts to address this ever-mounting threat,” New York State Comptroller Thomas P. DeNapoli said at the time.

A $91 billion Norwegian fund, Storebrand, divested from Southern Company last year due to the company’s advocacy against climate policies.

The investor pressure has proven effective in the past; in 2019, a week after the same Climate Action 100+ coalition made a similar plea, Southern Company and AEP deserted a notorious trade association that had lobbied for the use of coal-fired power, American Coalition for Clean Coal Electricity, or ACCCE. (The group now calls itself “America’s Power.”)

Neither Duke nor Southern provides details to evaluate their own climate policy advocacy

The Climate Action 100+ says that one of the metrics it will use to score utilities is whether the companies “list [their] climate-related lobbying activities, e.g., meetings, policy submissions, etc.”

The information provided by Duke and Southern in their latest disclosures offer vague, general support of climate action, but no specifics about advocacy for or against actual policies for the Climate Action 100+ or other investors to evaluate.

Duke Energy’s report, released last week, came in response to a shareholder resolution filed by Mercy Investment Services seeking more information about “if, and how, Duke’s lobbying activities […] align with the Paris Climate Agreement’s goal of limiting average global warming to well below 2 degrees Celsius.” Like the Climate Action 100+ metrics, the resolution further specified its request to include lobbying undertaken by Duke “direct[ly] and through trade associations and social and nonprofit organizations,” as well as “how the company plans to mitigate risks presented by any misalignment.”

Mercy Investment Services withdrew the resolution, according to its website, upon Duke’s agreement to produce a report on “how its lobbying activities align with the goals of the Paris Climate Agreement.” 

However, Duke’s report is limited to a review of its trade association activities. The company failed to disclose its direct lobbying activities or, as initially requested, the political activities of its Duke Energy Foundation. (Utilities often use their charitable arms to influence politics, as documented in a report by the Energy and Policy Institute last year.)

The closest Duke comes to specific policy prescriptions is to say that it “support[s] market-based approaches,” that “existing nuclear generation is essential to maintaining our emissions reduction progress,” and that “gas generation remains essential, at least for a time, to transitioning to an affordable and reliable net-zero carbon future.”

The company provided no disclosure of its “climate-related lobbying activities.”

At both the federal and state levels, Duke Energy has advocated for policies that would have the effect of slowing down decarbonization. It has lobbied Congress for limits on the Public Utilities Regulatory Policy Act (PURPA) – a key law underpinning the growth of U.S. renewable energy – and was characterized as “one of the 35 most influential lobbyists against the Paris Climate Agreement” by the shareholder group Majority Action. In Florida in 2016, Duke funded the effort to pass Amendment 1, a deceptive ballot initiative that purported to be “pro-solar,” but in fact is an attack on customer-owned solar power. Through direct lobbying, the utility supported an Ohio coal bailout bill; it also gave campaign contributions to the bill’s proponents.

Southern Company disclosed the information about its trade associations in its 2020 filing with CDP, a global corporate disclosure organization. Southern’s CDP filing similarly did not disclose any activities at the state level, where most of its activities are regulated. Southern Company has long been known as one of the nation’s most prolific spenders on lobbying and has been one of the most vocal and steadfast utility opponents of environmental regulations and federal action on climate change. Since 2010, Southern has spent more than $140 million on lobbying at the federal level, the most of any utility in the country. Southern has actively lobbied or litigated against the Clean Power Plan, Mercury and Air Toxics Standards, Cross State Air Pollution Rule, Coal Combustion Residual rules, and the Paris Climate Accord, among others. 

Despite its net zero emissions goal, Southern Company is actively lobbying Congress on its own for “environmental regulatory relief, generally,” according to its fourth quarter 2020 federal lobbying disclosure.

Southern Company subsidiary Georgia Power has supported Georgia House Bill 150, which, if passed, would prohibit local governments from setting clean energy goals or building codes that forego the use of gas, a fossil fuel. Georgia Power spokesman was quoted in the Savannah Morning News saying that the utility, “supports House Bill 150 and similar legislation that promotes and maintains a diversified mix of energy supply options for local communities.”

EEI, AGA lobby against climate policy, contrary to utility statements

Both Southern and Duke say that their pro-climate positions are aligned with the pro-climate positions of two of their two largest trade associations, the Edison Electric Institute and the American Gas Association, citing boilerplate language from each. 

EEI says that “global climate change presents one of the biggest energy and environmental policy challenges this country has ever faced.”

AGA says that it is “committed to reducing greenhouse gas emissions through smart innovation, new and modernized infrastructure, and advanced technologies.”

But, like Duke and Southern themselves, neither association has endorsed specific decarbonization targets or policies, and beneath the vaguely supportive statements, both are spending money to lobby against decarbonization policies and for the continued use of fossil fuels. 

At a training camp for utility lobbyists last year, EEI held up two “case studies” for how utilities influence politics. One was for Arizona Public Service’s then-opposition to a clean energy standard, and the other was for FirstEnergy’s effort to pass a law in Ohio through corrupt means that ended clean energy and energy efficiency policies in the state and subsidized coal plants.

EEI lobbied to weaken the Obama Administration’s Clean Power Plan to reduce carbon emissions, and supported the Trump Administration’s efforts to weaken rules that would make it harder for the industry to continue operating coal plants.

EEI also contributed over $150,000 in 2019, the most recent year for which it has disclosed tax records, to organizations like Americans for Tax Reform, the American Legislative Exchange Council, Americans for Prosperity, and the Consumer Energy Alliance, all of which have aggressively fought against climate policies.

AGA has coordinated efforts by fossil gas utilities to lobby and advocate against local, state and federal policies to encourage the electrification of buildings. The trade association has denied playing a coordinating role in those efforts, but audio recordings and documents reported by NPR indicate that the group has played a central role in gas utilities’ national war against building electrification policies.

Perhaps ironically, building electrification policies would benefit the electric utilities owned by Duke and Southern – by far the largest revenue earners of each corporation. But the companies also own gas utilities, and both are supporting anti-electrification legislation in states like Tennessee and Georgia.

Companies say they align with other fossil trade associations, but not with clean energy associations

In addition to AGA and EEI, Duke’s Trade Associations Climate Review positioned the company as aligned with the climate policies of the Business Roundtable (BRT), U.S. Chamber of Commerce, Interstate Natural Gas Association of America (INGAA), and the Nuclear Energy Institute (NEI).

The Business Roundtable, a group of CEOs that has lobbied for policies supportive of the fossil fuel industry, also led an effort to insert language restricting shareholders’ voting rights into legislation. The group sent a letter to Trump economic advisor Gary Cohn advocating for the changes. That letter also called for delaying the EPA’s rules to protect people from harmful ozone pollution, called for an overhaul of the Clean Power Plan, and called for the complete reversal of the Waters of the U.S. rule to prevent pollution of streams, rivers and lakes.

The U.S. Chamber of Commerce was challenged by 24 U.S. senators in 2019 for opposing “congressional, executive, and judicial actions that would meaningfully address climate change.” In 2018, then-Chamber CEO Tom Donohue stated that climate change is not “grounded in science,” and that “[t]o suggest that climate change — which, by the way, we can follow for 3 billion years — is predominantly caused by humans is an overstatement.” The self-described “world’s largest business organization” has funded biased reports on the economic impacts of the Paris Agreement and argued an ongoing need for fossil fuels, and it opposed the EPA’s endangerment finding, which sits at the root of the agency’s ability to regulate greenhouse gases, in every year between 2010 and 2017. 

The Chamber has more recently wavered on some of its longest-held climate positions, though it has affirmed others.

INGAA has lobbied Congress for pro-gas commissioners at the Federal Energy Regulatory Commission and advocated for legislation at to criminalize protests of fossil fuel infrastructure, potentially including charges of terrorism. The group responded to President Biden’s climate plan during his election campaign by arguing without evidence that adding renewable energy to the grid without new gas infrastructure would lead to increased carbon emissions.

The only trade groups for which Duke did not answer a straightforward “yes” in terms of its alignment with the utility’s climate policy were American Clean Power (ACP) and its predecessor, the American Wind Energy Association (AWEA) – the two explicitly-focused renewable energy trade associations in Duke’s report. The company characterized itself as “working to ensure that ACP’s policy positions align with those of Duke Energy,” and said “AWEA’s approaches to specific policy details were distinct from Duke Energy’s approach,” but did not provide further specifics in either case.

In addition to AGA and EEI, Southern claimed that the climate change positions of most trade organizations to which it belongs were consistent with its own, including the fossil fuel-heavy INGAA and National Association of Manufacturers (NAM). 

NAM, according to its DeSmog profile, has opposed various Clean Air Act rules, the Clean Power Plan, stricter ozone standards, and a wide range of other environmental regulations that it argues would negatively impact industry.

EEI and NAM were key architects of the Global Climate Coalition (GCC), a group of business voices that sowed doubt about climate science. Southern Company was a founding member of the GCC. 

The only two organizations to which Southern belongs that have climate policies which Southern said are not wholly consistent with the company’s position on climate change were the Alliance to Save Energy and the U.S. Chamber of Commerce. Southern did not explain the reasons that it wrote “mixed” about whether those groups had policy positions consistent with Southern’s. In its CDP filing, Southern claimed it supported policy to increase energy efficiency, “with minor exceptions,” though the utility’s electric subsidiaries have all performed poorly on energy efficiency.

Duke, Southern decarbonization plans are also lacking

Elsewhere in its disclosure to investors, Duke said that its decarbonization pathway is “aligned with scenarios consistent with the Paris Agreement’s goals of limiting global average temperature increase to less than 1.5 and 2 degrees Celsius.”

Environmental advocates and some investors have criticized Duke’s decarbonization pathway for being too slow due to continued investments in coal and gas-fired power plants. The utility’s most recent six-scenario resource plan for the Carolinas includes only one committing to no new fossil gas. However, Duke continues to downplay the viability of this scenario, claiming it is too expensive, would delay some coal retirements, and threatens system reliability. In fact, a recent alternative analysis completed by Synapse shows the utility could  add 16 GW of solar, 10 GW of storage, and 2.5 GW of onshore wind in North Carolina by 2035, all while reducing system costs by $7.2 billion compared to Duke’s proposed “least-cost” plan.

Duke, Southern and all of their operating subsidiaries received “F” grades in the Sierra Club’s recent “The Dirty Truth About Utility Climate Pledges” report, which graded utilities based on their plans to retire coal plants, stop building new gas plants, and invest in clean energy. Both companies are planning slow rates of decarbonization during the next decade compared to industry peers and their own past performance, according to an analysis from the Energy and Policy Institute.

For evidence that Duke’s decarbonization is aligned with the Paris Agreement’s goals, the company cited an analysis published by the Electric Power Research Institute (EPRI), a research organization funded by dues provided by electric utilities. But EPRI’s paper on the topic cast doubt on whether it is even possible for utilities to set science-based targets and claimed that uncertainty about whether global climate targets are possible to achieve called into question the need for electric utilities to set their own goals. 

Correction: This post previously referred to EPRI as a trade association. It is a research and development organization.