Yesterday the Sustainable Investments Institute (Si2) and the Investor Responsibility Research Center Institute (IRRCi) released a report detailing which of America’s top 25 investor owned utility companies are choosing to adapt to the changing business landscape as a result of climate change and which are not.
The report, titled The Top 25 U.S. Electric Utilities: Climate Change, Corporate Governance and Politics shows that while some utility companies are taking steps to change their business practices to adapt to the challenges posed by climate change, others are digging in their heels and going so far as to spend heavily in politics and engage in litigation to protect the status quo.
“Rather than changing the energy mix or seeking innovation that can reduce capital costs, some utilities are deploying their resources toward court battles and political influence,” says IRRCi’s Executive Director, Jon Lukomnik.
This report aims to be a resource for investors looking to know more about a certain company’s policies regarding climate change and for companies to see how they stack up against their peers. The 117- page report uses 12 metrics to measure each company’s climate change orientation including but not limited to potential legal liability, political activity spending and public policy position disclosure, corporate political activity governance, and litigation.
Findings from this report show that these top utility companies are taking disparate approaches to climate change preparedness. Averaging the 12 metrics, PG&E is the company most inclined to adapt while Southern, American Electric Power, and NRG Energy are the most determined to continue business as usual.
The fact that NRG Energy, American Electric Power, and Southern are the least inclined to implement change lines up with their history on political spending. As a whole, the companies included in this report spent over $400 million in the last five years on political and lobbying activities at the state and federal level. NRG Energy, American Electric Power, Southern, and FirstEnergy spent the most over that time and AES, Consolidated Edison, ONEOK and PPL spent the least. Much of this spending activity was aimed at sinking the Clean Power Plan, the Obama Administration’s plan to implement the Paris climate agreement.
How these utility companies are spending in politics is important information for shareholders. Shareholders have the right to know whether a company is lobbying to keep the status quo or supporting policies that foster long term sustainability as this has direct implications for shareholder value. In the wake of the Supreme Court’s decision in Citizens United companies have been able to pour funds into lobbying and elections in secret. Providing transparency around political spending and lobbying is a pillar of shareholder democracy and applies to these utility companies as much as any other company. For years shareholders have been pushing the SEC to issue a rule that would require all publicly traded companies to disclose their political spending because of its direct implications for shareholder value. You can read more about these efforts here.
The author of this report also includes an analysis of where these 25 utilities fall on the CPA- Zicklin Index and found that Edison International, Exelon, PG&E, Ameren, and Entergy scored highly while CenterPoint Energy, AES, NRG Energy, FirstEnergy, Eversource Energy, ONEOK, NextEra Energy, and NiSource scored poorly.
Shareholders have been active at these companies, filing 176 proposals since 2010 on energy issues as well as political spending. Since then, 45 proposals have been withdrawn and 62 challenges have been filed with the SEC. The companies most likely to challenge these resolutions at the SEC have been Dominion, Entergy, Exelon, Pepco Holdings, PG&E, and Xcel Energy. This proxy season 24 proposals have been filed at 14 of the companies in this study universe.
While some of the top American utility companies are attempting to adapt to the changing tide, this report should help investors determine where continued progress needs to be made.
You can download the full report here.
Rachel Curley is the Democracy Associate for Public Citizen’s Congress Watch division.