LOBBYING:

Investor advocates press business groups over climate policy

Progressive investor funds and their allies are increasing pressure on powerful Washington business associations to alter their climate change policy positions, following the high-profile departure of three electric utilities from the U.S. Chamber of Commerce.

In the span of a week, Exelon Corp., PNM Resources Inc. and PG&E Corp. said they will not renew their membership with the chamber because of its opposition to efforts by Congress and U.S. EPA to regulate greenhouse gas emissions. Nike Inc. resigned its position on the chamber's board Wednesday but vowed to remain a part of the 3-million-member association (Greenwire, Sept. 30).

Nike's board resignation has failed to mollify some investors, however.

Newground Social Investment, a registered investment adviser with about $68 million under management, is crafting a letter that will urge Nike to leave the chamber altogether. Seattle-based Newground -- one of a half-dozen U.S. money managers that practice shareholder engagement -- holds Nike shares in its portfolio.

"We've seen this a lot where companies will carve out a moderate stance on policy and be represented by organizations that take reprehensible positions," charged Bruce Herbert, Newground's founder and chief executive.

The Nike letter will mark the first time Newground asks a company to withdraw from a business association because of policy "misalignments," Herbert explained, but "it will undoubtedly not be the last." Newground plans to file shareholder resolutions urging other companies to disclose fully how much money they give to political action committees and trade associations that engage in political activities.

Newground finalized such a deal with Redmond, Wash.-based Microsoft Corp. last week and is close to finalizing disclosure language with Seattle-based Starbucks Corp., Herbert said.

"If we find an egregious misalignment -- as is the case with Nike -- we would routinely ask for [the company] to withdraw from organizations such as the chamber," he explained.

Other institutional investors and their allies also plan to ratchet up pressure on companies they regard as environmentally progressive but whose business trade groups have opposed proposed climate legislation and regulation. The investor proxies say their first aim is to spur companies to declare publicly where they disagree with the chamber and the National Association of Manufacturers -- both of which oppose EPA regulation of carbon dioxide via the Clean Air Act.

Both associations have also warned that House-passed emissions cap-and-trade legislation would put U.S. businesses at a competitive disadvantage with companies in countries that do not cap their emissions of CO2 and other heat-trapping gases.

The associations have yet to offer a detailed critique of companion climate legislation introduced in the Senate on Wednesday. But the departure of three large utilities spurred the chamber President and CEO Tom Donohue to issue a statement this week underscoring that his organization supports strong federal legislation and a binding international agreement to address climate change.

"We believe that in order to succeed, any climate change response must include all major CO2 emitting economies, promote new technologies, emphasize efficiency, ensure affordable energy for families and businesses, and help create American jobs and return our economy to prosperity," Donohue said.

Adversaries aren't convinced.

"We'd like to see the chamber take a position that's more reflective of its diverse set of members," said Emily Stone, a shareholder advocate with Green Century Capital Management Inc., which manages an equity fund with roughly 3,400 shares of Nike. Green Century has also asked Nike to leave the chamber -- a first for the Boston-based mutual fund manager.

"With Nike's strong sustainability reputation, being a chamber member represents a risk to their brand," Stone explained. "Nike is so consumer-facing, and its consumers are increasingly focused on climate change being a problem."

Nike spokesman Kate Meyers did not say whether shareholder activism spurred the athletic apparel giant to give up its chamber board seat.

"Nothing specifically spurred us to make this decision, but we have been evaluating our relationship with the chamber over the last few weeks," she said.

Trickle-up activism

Investor pressure related to climate policy is not new, but it's gaining steam, said Tim Smith, a senior vice president with Walden Asset Management, a division of Boston Trust & Investment Management Co.

For several years, Smith has been discussing with chamber members what he dubs the "disconnect" between the companies' environmental initiatives and their trade groups' policy positions. Walden and Boston Trust own 500,000 shares of Nike, so Smith was quick to craft a letter that commended the Beaverton, Ore.-based company's decision to exit the chamber board.

There will be more letters to more companies, promised Smith, who said Walden and Boston Trust have $1.5 billion in assets under management.

"We're going to more intensely ask companies to challenge the chamber about the disconnect," he explained.

Last spring, the Washington-based Center for Political Accountability compiled a list of companies -- including Caterpillar Inc., General Electric Co. and 23 other blue-chip companies -- that belonged to the chamber and/or National Association of Manufacturers at the time. What the companies also had in common was membership in the U.S. Climate Action Partnership or other environmental-business coalitions that are calling on Congress to pass climate legislation.

The Center for Political Accountability -- along with Newground, Green Century, Walden and 10 other investment firms -- urged the 25 companies in a May 13 letter to bring their political spending into alignment with their publicly stated positions on climate change.

In a June 10 follow-up letter, the shareholder advocates urged the 25 companies to disclose how they are handling their perceived disagreements with their trade associations. The letter suggested that each company disclose the disagreement prominently on its Web site or refund the portion of its trade association payment that is used to craft climate policy positions.

Center for Political Accountability founder and President Bruce Freed said he has heard back from 18 companies and in "serious" discussions with six of those companies. He declined to say which of the 25 companies he continues to engage, but he promised results.

"You'll see an increasing number of companies disclose the misalignments on their Web sites," he said.

He promised to engage additional companies in an attempt to increase pressure on the chamber and manufacturers association to be more responsive to the "broad views" of their members.

Maureen Davenport, NAM's senior vice president for communications, said her organization does not comment on specific member companies.

"We have a balanced policy on climate change that brings many users and producers of energy together toward a solution that will retain and create manufacturing jobs," she added.

Eric Wohlschlegel, a spokesman for the chamber, contended that his association uses a "democratic" system of checks and balances to ensure that its policy positions have broad support.

The chamber's board -- which includes Donohue and executives from more than 100 other member companies -- meets twice a year to vote on recommendations from the chamber's 16 committees. Any member company can join the committees, which focus on the environment, energy, labor relations, taxation and other key issues affecting the U.S. economy.

"There's never been an issue where there's been a full consensus," he noted, adding that the chamber engages its members on more than 300 issues.

The industrial conglomerate General Electric Co. -- which holds a position on NAM's board -- has no plans to leave either organization, said Peter O'Toole, a company spokesman.

He underscored that GE doesn't form positions based on pressure from investor advocates.

"Our chairman and the company take positions that are best for the company," O'Toole added. "Urgent action on climate legislation will make America more competitive with other countries that are starting to become aggressive on renewable energy."

He characterized GE's membership in the chamber and NAM as more than a "black and white" issue.

"There's a lot of gray here," he added. "NAM and the chamber ... are broad organizations with diverse memberships on health care, financial reform, energy, climate and other issues; it's not as if either is a one-issue organization."

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