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The Mass Media

The Mass Media

The Mass Media

Money Talks: Investors demand action from Corporations on Climate Change

Everyone understands that corporations run Washington. One need not look any further than the current resident of 1600 Pennsylvania Avenue to see evidence of excessive corporate influence. When George Bush dismissed the Kyoto Treaty as garbage, many believed that corporate America couldn’t be happier.

While Exxon-Mobil certainly shed no tears for the treaty, many large investors on Wall Street realized the United States was fighting a losing battle against the inevitability of the global regulation of Green House Gases (those pesky fossil fuel emissions responsible for climate change). These investors, representing trillions of dollars, understood the risks and opportunities from climate change. While Lee Raymond (CEO of Exxon-Mobil) fretted over the possibility carbon taxation, others, including British Petroleum (BP), invested heavily in solar energy and other renewable energy sources.

So when Kyoto came into force throughout most of the world, these investors began asking multi-national American corporations what their plans were for doing business in the Kyoto compliant countries. These like-minded investors formed the Investor Network on Climate Risk (INCR – www.incr.com) to ask the questions of companies that Washington was incapable of. But to better understand the tremendous influence of this coalition, one must understand some basics about finance in the stock market.

When a corporation becomes public it seeks to be financed by investors through the Stock Market (Dow Jones, FTSE etc). Based upon the financial performance, future plans and other factors, a supply and demand is created for the stock of a company and thus a price is set for the stock. When investors buy stock in a company they become partial owners of the corporation.

This ownership gives investors certain privileges that the public does not have. For instance, investors have access to the internal financial documents of a company they own and can also set up meetings with management. If an investor feels that management is not responding to their concerns they can sponsor a Shareholder Resolution. This resolution can be no longer than 500 words, but it can cover anything related to the business of the company, including its environmental and social impacts. When an investor sponsors a resolution, all of the owners of the company vote. In the corporate world votes are counted by what percentage of the company you own. Another caveat is that if you don’t vote your vote actually counts for management.

However, this voting (referred to as Proxy Voting if you are not present at the meeting but still vote) does not need to garner a majority of investors in agreement for the company to take the issue seriously. In fact, an 11% vote for Home Depot to end sales of old growth timber resulted in a change of policy. At Ford, years of shareholder activism (as it environmental and social resolutions are referred to) resulted in the release of a report detailing its plans for lowering Greenhouse Gas emissions from its products. These are just a few examples of the effects of shareholder activism on corporate behavior. While protests outside the WTO meetings draw the press, the shareholder activists bore from within to create change.

This shareholder activism is at the heart of INCR. By uniting $3 trillion worth of investors under a call for action on climate change, INCR has created change within dozens of corporations. In fact, recently Lowes agreed to disclose its performance on energy efficiency measures and set concrete goals for the future. Lowes will save millions of dollars by simply turning off its lights and improving its HVAC in its stores – never mind the tons of CO2 emissions that will not enter the atmosphere from these actions. By forcing companies to think about the economic opportunities and risks of climate change, INCR is channeling the forces of global finance for the good of the earth.

Well, you may think it is good to hear that not all corporations are completely evil, but you must be thinking: what does this have to do with me? At UMass, the University Foundation manages an Endowment worth $222 million. This money is invested in the stock market and elsewhere in order to generate income for the University system. Remember, if the University does not vote on shareholder resolutions in the companies it is invested in then they vote for management.

Does this mean UMass could be making money from corporations that are causing climate change (and not voting to stop this) in order to fund scientists, such as UMB’s own Prof. Dukes, that are warning us about the dangers of climate change? It is certainly possible-but we have no idea. As of writing the University of Massachusetts Foundation does not disclose its investments to the university community.

If you’d like to be a part of the movement to change this, email: [email protected]