Global Warming is Threat to Health of Corporations

By JEFFREY BALL
Staff Reporter of THE WALL STREET JOURNAL

April 16, 2003 1:05 a.m. EDT
Section A, page 2

Global warming is widely seen as an environmental threat of the future, but some influential shareholders are pushing companies to address the
problem now, arguing that it poses a big financial risk.

Institutional Shareholder Services Inc., an adviser to pension and mutual-fund managers, is endorsing a bid by investor activists to compel
American Electric Power Co. to disclose how its status as a major emitter could cost the company big money and how much money AEP could save by
cutting those emissions. The resolution targets four types of emissions, including carbon dioxide, a gas that is widely believed to cause global
warming and that is produced by the burning of fossil fuels. AEP, which serves 11 states in the Midwest and the South, makes 70% of its electricity
from coal and is one of the nation's biggest emitters of carbon dioxide.

ISS is endorsing a similar resolution against General Electric Co. AEP and GE oppose the resolutions, which are set for votes at the company's
annual shareholder meetings, both of which are scheduled for a week from Wednesday. The AEP measure was filed by the Connecticut state pension fund and Christian Brothers Investment Services Inc., which have emerged as aggressive socially minded investor activists. Together, the two groups
own a fraction of 1% of AEP shares.

This year, 14 global-warming-related resolutions are pending against U.S. companies, double the seven that came to shareholder votes last year,
according to Investor Responsibility Research Center, a Washington group that does proxy research. Though none of the resolutions has passed,
those that came to a vote last year received an average of 19% support, double the level of 2001, according to IRRC. This year, resolutions also are
pending against companies including Exxon Mobil Corp., ChevronTexaco Corp., General Motors Corp. and Ford Motor Co.

The trend reflects a push by environmental activists to prompt companies to start viewing global warming as a threat to their bottom lines. For
companies that emit large amounts of carbon dioxide, the activists argue, the big threat is the possibility of tightening government regulations
that could compel the companies to invest heavily -- and quickly -- in cleaner technologies. For companies that aren't themselves contributing to
global warming, the activists say, the threat is from the potential effects of global warming, such as coastal flooding from rising sea levels.

In one sign that even traditional business players are growing concerned about what is coming to be known as corporate "climate risk," Swiss Re,
the big reinsurer, says it is starting to ask companies applying for coverage for their directors and officers to explain what they are doing to prepare
for potential government regulation of greenhouse-gas emissions. Swiss Re hasn't yet decided whether it will deny coverage to applicants it believes
aren't doing enough.

Last year, ISS drew attention when it threw its support behind a global-warming-related resolution against Exxon Mobil. That resolution, which sought to push the oil firm to move toward renewable energy sources, won the support of 20% of shareholders. In 2001, when ISS recommended against the Exxon Mobil resolution, the measure got 9% of votes.

Why did ISS change its stance? "What we've seen is an increased attention on issues of climate change," says Cheryl Gustitus, an ISS spokeswoman.
"Between 2001 and 2002, with the increased attention on it, we've taken a closer look and tightened up our view on it."

But ISS still makes its recommendations on a case-by-case basis, Ms. Gustitus says. This year, though it is recommending support for global-warming resolutions against AEP and GE, it has opposed such resolutions at Weyerhaeuser Co., the forest-products concern, and utility PG&E Corp. The measure at Weyerhaeuser failed at the company's shareholder meeting Tuesday. PG&E's shareholder meeting is scheduled for Wednesday.

At GE, spokesman Gary Sheffer says the company opposes the global-warming resolution pending against it. "We believe that both from a policy
standpoint and a product standpoint we have shown leadership on this issue," he says.

Many global-warming resolutions filed against companies never make it to a shareholder vote. Some are rejected by the Securities and Exchange
Commission after companies protest the measures. Others are withdrawn after companies agree to negotiate.

AEP says it already has done more than many of its competitors both to report and to reduce its emissions of carbon dioxide and of air pollutants.
But going further -- by closing coal-fired power plants and shifting to natural gas, say -- would be expensive and would hit shareholders hard, the
company says.