According to New York Attorney General Eric T. Schneiderman, it is critical work to force coal and other fossil fuel companies to start being honest about the damage they are doing to our planet. Schneiderman is out to prove that big oil and other fossil fuel businesses are no longer invincible when it comes to the issue of climate change and the effect of inadequate disclosure to investors.
In November 2015, Schneiderman’s office found that St. Louis-based Peabody Energy Corp. NYSE (BTU) misled its investors by downplaying the future economic impact of climate change on its business in its mandatory financial disclosures. After an investigation lasting over two years, the New York AG’s office also found that the company falsely claimed that it could not estimate the financial loss it would face from global regulations to curb the use of coal.
So it seems Peabody has not been forthcoming about the financial pressure the company could encounter from stricter government regulations of emissions as governments and banks balk at financing coal-burning power plants. According to the AG’s office, “Peabody has in fact made market projections about the impact of potential climate change regulatory actions.” And they didn’t bode well for the company’s financial future, it said.
According to a New York Times article, in 2013 the company projected that aggressive regulatory action could reduce the dollar value of the coal it mines out of the southern Powder River Basin in Montana by 38 percent, and of the Illinois Basin by 33 percent in a decade. And in March 2014, a consulting firm hired by Peabody projected that if a $20-per-ton carbon tax were to pass, it would reduce the demand for coal for use in electric power generation in this country by 38 to 53 percent compared with 2013 levels.
Peabody has entered into an agreement with the AG’s office agreeing to be more forthcoming with investors about the potential financial impact of climate change and on the global decline in demand for coal. The agreement comes amidst growing pressure on large institutional investors to diversify away from fossil fuels and commit to selling their investments in oil, coal, and natural gas companies.
In September 2013, an international group of 75 institutional investors representing more than $3 trillion in assets launched a coordinated effort to spur 45 of the world’s largest fossil fuel companies to provide greater transparency into the physical and financial risks posed by climate change. With stricter climate change regulations on coal, cleaner fuel options become more attractive and shareholder capital could end up being wasted on developing high-carbon, high-cost fossil fuel reserves that cannot be burned.
Successful divestment campaigns could pull billions out of fossil fuel companies. Its time to hold fossil fuel companies accountable for the escalating risks of climate change on their shareholders.