State pension funds for New York and Connecticut filed shareholder resolution proposals for this proxy season that ask electric utilities to report on their progress in achieving the Obama administration's goal of an 80 percent reduction in greenhouse gas emissions by 2050. In addition to reporting, the resolutions ask the companies to consider innovative energy generation technologies and strategies such as renewable energy and distributed generation, and to evaluate best practices among domestic and international peers. The proposed resolutions have been filed with Ameren, CMS Energy, Entergy, FirstEnergy, and Southern Company.
The shareholder proposals refer to various studies and reports that predict transformative changes in the power generation sector, including a 2013 report by Edison Electric Institute that urges the industry to "proactively assess the impacts and alternatives available to address disruptive challenges." Similarly, the shareholder proposals refer to the International Energy Agency conclusion that only one-third of proven fossil fuel reserves can be consumed if the world is going to hold the global temperature increase below 2º C. This line of thought leads activists to talk about the possibility that some fossil fuels and the assets associated with their extraction and consumption will be stranded in the future, and it prompted Bloomberg to launch an electronic Carbon Risk Valuation Tool at the end of 2013 to quantify these risks for investors.
On January 9, FirstEnergy reached an agreement with the New York and Connecticut pension funds for the withdrawal of the proposed shareholder resolution. According to the agreement, FirstEnergy will incorporate information "on additional policies the Company could adopt and additional actions the Company could take to reduce its greenhouse gas emission … in connection with President Obama's goal of a 80 percent reduction in greenhouse gas emissions" in its Sustainability Report scheduled to be published on October 1.
The agreement also requires a committee of independent directors to discuss the shareholder resolution proposal and an outline of related issues. The committee's discussion will include evaluation of long-term actions related to the age and life of the existing generation fleet and drivers of future replacement generation. The standards that EPA plans to issue for greenhouse gas emissions at new and existing electricity generating units are among the drivers listed in the outline.
In press statements following the agreement with FirstEnergy, the New York State Treasurer indicated his goal is to reach similar agreements with other companies. Indeed, the proposal filed with FirstEnergy was part of a larger effort with Ceres that is meant to ensure that the profitability of energy companies is sustainable.