Shareholders seek reports on sustainability

May 16, 2014

Practitioner Insights thumbnail 2Shareholders have been urging companies to implement a variety of sustainability reporting requirements this proxy season.

Certain of these initiatives are tailored to focus on those areas relevant to a specific company. Recently, for instance, Arjuna Capital wrote to its fellow shareholders of Southwestern Energy Co. in support of a proposal that would require the company to annually prepare a report on methane emissions resulting from the company’s operations.

Other proposals seek to require companies to prepare reports about sustainability issues in general. The same day Arjuna wrote to Southwestern’s shareholders, Calvert Investment Management Inc. wrote to its fellow shareholders of AmSurg Corp., urging them to vote in favor of a proposal that would require the company to prepare a sustainability report on the company’s “management of environmental, social and governance issues.”

Narrowly tailored sustainability reporting

Arunja is advocating a proposal that would require Southwestern to issue a report for investors that “reviews the Company’s policies, actions and plans to measure, mitigate, disclose and set quantitative reduction targets for methane emissions resulting from all operations under the Company’s financial or operational control.”

Arunja’s letter focused on the economic prudence of preventing methane leaks and stated that implementing the proposal would allow investors to assess the company’s economic risks associated with leaking gas. In support of this argument, Arunja reminded shareholders that leaked natural gas is no longer available for sale, and cited reports stating that the sale of “recovered natural gas” can generate significant revenue for energy companies.

A significant portion of Arunja’s letter also addressed the environmental effects of methane emissions, particularly with respect to climate change. Southwestern’s board expressed opposition to the proposal, primarily because it purports that the company is committed to reducing methane leaks without a reporting mandate.

Arunja is not the only shareholder to promote a proposal that would require an energy company to report its methane emissions. Shareholders were able to get similar proposals on the agendas of annual meetings at Kinder Morgan Inc. and Marathon Oil. These companies’ boards appear united in their opposition to the proposals.

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