March 22, 2015

When legally liable, companies don't dispute global warming

U.S. coal companies that are publicly skeptical of man-made climate change acknowledge in mandatory financial disclosures the widely accepted scientific link between fossil fuel emissions and a warming planet, a Greenwire analysis has found.
Sustainable investment advocates warn that such doublespeak undermines the industry's credibility with shareholders. And scientific integrity experts are critical of the coal companies' climate communication strategy, which they argue is detrimental to the long-term health and security of the American people.
The highest profile practitioner of targeted climate messaging is Peabody Energy Corp., the world's largest private-sector coal company. Peabody produced more than 180 million short tons of coal -- or nearly 19 percent of national output -- in 2013, according to U.S. Energy Information Administration data.
Peabody repeatedly questioned climate science in its December 2014 comments on U.S. EPA's Clean Power Plan, a regulatory effort meant to force states to cut emissions of planet-warming carbon dioxide released from existing coal-fired power plants.
"The climate science upon which EPA relies cannot sustain this dramatic step to remake a significant sector of the American economy," the company said in a 145-page attack on the proposed emission limits.
It then referenced the work of the Nobel Prize-winning Intergovernmental Panel on Climate Change (IPCC), which EPA used to declare CO2 a pollutant.
"Even if the IPCC report were taken at face value (and it is deeply flawed and should not be accepted at face value), the IPCC has steadily downgraded its projections since 2007. It now predicts a slow and moderate warming trend that the IPCC's own data and own scientists have indicated will be net beneficial to the world," Peabody wrote, and then noted CO2 promotes plant growth and reduces heating costs and cold-related health problems.
Existing climate models are "fatally flawed," the company went on to assert, citing a divergence between predicted atmospheric warming and actual warming that is largely explained by increasing deep ocean temperatures.
"These concerns cannot be brushed aside," Peabody said.
But in the required annual performance summary the coal giant filed with the U.S. Securities and Exchange Commission last month, the company appeared to do just that.
In a section of Peabody's 2014 10-K report that discusses risks that "could materially and adversely affect our business," the company acknowledges that IPCC reports have "engendered concern about the impacts of human activity, especially fossil fuel combustion, on global climate issues." No mention was made of the allegedly unreliable science that underpinned those reports from the IPCC.
The company then said "increasing government attention is being paid to global climate issues and to emissions of what are commonly referred to as greenhouse gases, including emissions of carbon dioxide from coal combustion by power plants." It went on to downplay the impact any potential climate laws, regulations or other actions could have on its bottom line.
"Outside of SEC filings, companies might feel freer to lobby," said Betty Moy Huber, an expert in environmental law and corporate compliance issues at Davis Polk & Wardwell LLP. "Within an SEC filing, there is a whole different set of liability standards, and they would be ill-advised to say something that cannot be legally backed up."
Publicly traded companies tend to be candid in their 10-K filings because not doing so could result in litigation from investors or regulatory scrutiny if those annual disclosure reports are found to be misleading.

'Reputation risk'

But disclosure advocates express concern when a company's SEC filing appears to differ from other communications.
"That information does not square," said Jim Coburn, a manager at the sustainable investment group Ceres, responding to Peabody's statements. Along with research group CookESG, Ceres created the SEC climate disclosure search tool that Greenwire used to comb through 10-Ks.
"That's a real problem for the company because the company is misleading investors in its SEC filings," Coburn said. For investors "to understand the company's true stance on climate issues," they would have to seek out its EPA comments, as well as weigh the significance of its trade group memberships and political contributions, he said.
The difference between the straightforward disclosures Peabody made to the SEC and the statements included in its EPA comments poses a "reputation risk problem," Coburn added. Investors may no longer believe what the company says about other threats to its business since -- in the case of climate change, at least -- it prefers to pretend that some risks don't exist, he suggested.
This type of inconsistent messaging extends beyond the climate issue, according to industry critics.
When mines have closed, for instance, some coal companies have loudly blamed the layoffs on Obama administration regulations. At the same time, however, they have offered a more nuanced explanation of their woes to investors, which are mostly the result of competition from abundant natural gas and the spread of renewables.
Peabody pushed back against any suggestions that the company is espousing contradictory views.
"Peabody's position on carbon and climate and on the importance of continuing to develop clean coal technologies to address the issues has been consistent over time," the company said in a statement, which was limited by what it can legally say about its SEC disclosures.

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