Tesla: Request for Report on Climate-Related Water Risk
CLIMATE CHANGE SCENARIO ANALYSIS
WHEREAS: Climate change is expected to exacerbate water shortages nationwide. According to a report by the Department of Energy, “there is agreement among climate models that there will be a redistribution of water, as well as changes in the availability by season.” That report highlights increasing regional droughts. (https://science.energy.gov/~/media/ber/pdf/Sap_4_5_final_all.pdf).
Climate change-induced water risk is a material liability already affecting companies as water shortages increase across the globe, including in the United States. Risks to companies include disruption of operations due to water shortages at production facilities or in supply chains. Companies also face political risks due to competition for water resources by local communities or other companies or industries. Producing at a lower capacity or having to halt operations are both possible outcomes of drought and water scarcity, posing material harm to the company and investors alike.
Most large companies have developed water planning and water reduction and recycling initiatives to diminish these risks and reduce costs. In the American automotive industry, peer companies GM, Ford, and Fiat Chrysler have developed water stewardship standards and inform investors on their water resource management through voluntary reporting initiatives such as CDP Water Information Requests and sustainability reports. Tesla Inc. has yet to provide any information to shareholders on its water stewardship initiatives. Hence, investors are in the dark about how the company is managing these material risks.
Manufacturing operations like those of Tesla require large amounts of water. Tesla operates in states like California and Nevada, where water rights are often contentious. Tesla also operates internationally, recently announcing plans to build a factory in Shanghai. World Resources Institute’s water risk mapping tool shows that all these regions have medium to high risk of water stress. (http://www.wri.org/our-work/project/aqueduct/).
Better transparency on these risks may reveal shortcomings in Tesla’s water planning. For instance, Tesla’s ability to successfully continue and expand operations at its Gigafactory in Nevada may be water-limited. The Tahoe Reno Industrial Center in which Tesla operates reportedly lacks clear water rights to serve manufacturing tenants. Nevada officials acknowledge that water rights in the region “are restricted during drought conditions, which are becoming increasingly common.” (https://www.newsdeeply.com/water/articles/2017/08/22/uncertainty-over-water-source-for-tesla-and-corporate-giants-in-reno).
Disclosure is the primary means by which investors can gauge how our company is managing its water risks, including adoption of best practices for water management and quantitative measures of the company’s water-related impacts. Due to Tesla’s lack of transparency on water-related risk, investors seek quantitative, comparable data about how it is managing the risks and reducing impacts of its water use across its operations.
RESOLVED: Shareholders request that Tesla, with board oversight, provide a report on its climate-related water risk, including strategies to mitigate that risk beyond regulatory requirements, data on the source and volume of facility withdrawals and consumption, quality impacts from wastewater discharges, competing local or regional demands for water supplies affecting key facilities, and quantitative goals to manage or reduce water use at the company’s operations. Such a report should omit proprietary information and be prepared at reasonable cost.