Utility holding company Xcel Energy is getting lots of free publicity this week, since its name is on the arena in St. Paul, Minnesota where the Republican Party is holding its national convention. Last week, the company was being named in a different context.
While much of the attention of the country was focused on the Democratic National Convention, New York Attorney General Andrew Cuomo announced that Xcel had settled litigation brought against it by the state by agreeing to disclose the financial risks that climate change poses to the company and its investors. Minneapolis-based Xcel is itself a major contributor to global warming thanks to its ownership of more than a dozen coal-fired electric power plants in states such as Colorado, Minnesota and Texas.
Last year, Cuomo launched an investigation of Xcel and four other energy companies — AES, Dominion, Dynergy and Peabody — that were building new coal plants around the country. In Xcel’s case, the plant is Comanche 3 in Colorado (seen above in an Xcel photo simulation), which is expected to be completed next year. The probe was based on New York’s Martin Act, the same securities law that Cuomo’s predecessor Eliot Spitzer used in prosecuting Wall Street investment banks and major insurance companies.
The settlement with Xcel (the cases involving the other companies are ongoing) is a milestone in the effort to get publicly traded companies to reveal more about the potential financial consequences of climate change. Cuomo’s use of his prosecutorial powers is only one front in that effort. Institutional shareholders, working through the Investor Network on Climate Risk, have been pushing companies through shareholder resolutions while urging the Securities and Exchange Commission to mandate better disclosure. At the same time, the Carbon Disclosure Project is urging large companies to directly report their estimated CO2 emissions.
Under the settlement with Cuomo, Xcel will be required to include in its annual 10-K filing with the SEC a discussion of financial risks relating to:
- present and probable future climate change regulation and legislation;
- climate-change related litigation; and
- physical impacts of climate change.
In addition, Xcel will have to provide various climate change disclosures on its operations, including:
- current carbon emissions;
- projected increases in carbon emissions from planned coal-fired power plants;
- company strategies for reducing, offsetting, limiting, or otherwise managing its global warming pollution emissions and expected global warming emissions reductions from these actions;
- and corporate governance actions related to climate change, including whether environmental performance is incorporated into officer compensation.
Although Cuomo’s agreement with Xcel applies only to that company, it could give a boost to other efforts to get large corporations to own up to the financial and other consequences of the growing climate crisis.
For this to happen, shareholder activists and others have to make sure that when companies accede to demands for climate-risk disclosure the result is meaningful. Xcel’s last 10-K filing, issued before the settlement, refers to climate change and emphasizes the need to reduce greenhouse gas emissions. When mentioning the New York State case, the company thus argues that it is already making the disclosures sought by Cuomo. Yet its main emphasis in the 10-K is on reassuring investors that the company is prepared for climate change, while there is no acknowledgment that building new plants such as Comanche 3 is exacerbating the problem. That’s not risk disclosure—it’s corporate spin.
If this same sort of rhetoric and evasion appear in the company’s next 10-K, let’s hope Cuomo prosecutes Xcel for violating the settlement agreement.
