Shareholders Challenge Companies to Increase Disclosure and Reduce Risks to Public Health and the Environment from Coal Ash
May 14, 2012—Tomorrow FirstEnergy Corporation* (FirstEnergy) shareholders will vote on a proposal asking the company to report on its efforts to reduce the environmental and health hazards of coal ash stored in ponds, landfills and mines. The proposal was filed by Green Century Capital Management (Green Century), an environmentally responsible investment advisory firm. The Adrian Dominican Sisters, an international congregation of approximately 800 vowed religious women with over 30 years of commitment to, and practice of, socially responsible investing co-filed on behalf of the Camilla Madden Charitable Trust. Southern Company* shareholders will have the opportunity to vote on a similar proposal filed by Green Century and Catholic Health East when the company meets next Wednesday.
In 2010 FirstEnergy completed a merger with Allegany Energy and according to the company’s website, this “more than doubled FirstEnergy's highly efficient, supercritical coal capacity.” Green Century and the Adrian Dominican Sisters believe that the increased dependence on coal makes it is more important than ever for the company to disclose how it is managing the associated risks.
“The management of coal ash is inherently risky, yet the company does not provide investors with adequate information to determine how the company is managing and mitigating those risks,” said Christopher Matthias, of the Adrian Dominican Sisters. “In the absence of meaningful disclosure, investors cannot fully assess the risks and rewards from investing in various companies in the energy sector, and are concerned about unpleasant shocks to shareholder value,” he continued.
Coal ash is a byproduct of the coal combustion process that contains arsenic, mercury, lead, and other toxins. The health, environmental, and financial risks of managing coal ash came to light in December 2008 when a dam holding back a 1.1 billion gallon coal ash pond belonging to the Tennessee Valley Authority (TVA) burst and covered over 300 acres with toxic sludge. TVA has estimated spill-related costs at $1.2 billion and has been the target of over 50 lawsuits since the spill.
The investors are particularly concerned about FirstEnergy’s operations at the Bruce Mansfield plant and its Little Blue Run dam which is 400 feet tall and covers a surface area of 967 acres. It is at least 30 times larger than the TVA dam that breeched in 2008. Every day, up to 3.2 million gallons of coal ash waste is sent to the Little Blue Run Dam facility. Furthermore, there have been documented seeps and leakage from Little Blue Run and there is evidence of increased levels of arsenic in wells around the pond.
This is the second year that this proposal will go to a vote at FirstEnergy and last year, 36 percent of shares voted supported the proposal**. The shareholders contend this is a notable amount of support because, unlike electoral campaigns which require a majority vote, shareholder proposals require a much smaller threshold to make an impact. “Last year’s vote demonstrates that a significant number of shareholders are very concerned about this issue and believe the existing disclosure is insufficient,” said Larisa Ruoff of Green Century. “We would like to see FirstEnergy respond to this strong shareholder support and increase its transparency,” she continued.
“Next week, shareholders at Southern Company will vote on a similar proposal. This will be the third time that shareholders will vote on the proposal at Southern. It received over 20 percent of the vote the last two years**. “Burning coal has significant environmental externalities that carry financial risks. We believe both FirstEnergy and Southern Company should respond to concerned investors demanding more information on efforts to reduce environmental and health hazards associated with coal combustion waste, and how those may reduce legal, reputational and other risks to the company’s finances and operations,” said Ruoff.
Green Century Capital Management is an investment advisory firm focused on environmentally responsible investing. Founded by a partnership of non-profit environmental advocacy organizations in 1991, Green Century's mission is to provide people who care about a clean, healthy planet the opportunity to use the clout of their investment dollars to encourage environmentally responsible corporate behavior. Green Century believes that shareholder advocacy is a critical component of responsible investing and actively advocates for greater corporate environmental accountability.
The Adrian Dominican Sisters, established in the 1880s, is a congregation of approximately 800 vowed religious women based in Adrian, Michigan. They have over 30 years of commitment to, and practice of, socially responsible investing (SRI).Their commitment incorporates two aspects of SRI: institutional investing in the major stock markets according to criteria, including shareholder advocacy on corporate social responsibility (CSR) issues; and investing in non-profit community-based organizations engaged in community (re)investment. Both aspects of the Adrian Dominicans’ SRI history are rooted in and guided by the Catholic Social Justice tradition. Both endeavors are guided with fiduciary and financial expertise, with expectation of financial return.
* The Green Century Balanced Fund and the Green Century Equity Fund did not hold FirstEnergy Corporation or Southern Company as of March 31, 2012.Please refer to the Green Century Funds website for current information regarding the Funds' portfolio holdings. These holdings are subject to risk as described in the Funds' prospectus. References to specific investments should not be construed as a recommendation of the securities by the Funds, their administrator, or their distributor.
** The percentage in favor was calculated by (i) dividing the number of votes in support of the proposal by (ii) the sum of the number of votes voted in support of and against the proposal. Abstentions and broker non-votes were not included in the calculation.
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