General Electric: Report on Climate Risk Management In Emerging Markets
WHEREAS: The 2015 Paris Climate Agreement states a goal to limit the increase in global temperatures to substantially below 2 degrees Celsius. Successfully mitigating the devastating impacts of climate change on humanity, ecosystems, and the global economy requires every corporation to reduce climate emissions related to its actions. Investors are concerned not only about climate risk to individual companies they hold, but also the economy-wide risk of climate impacts and the associated harm to investors’ portfolios.
The Intergovernmental Panel on Climate Change “Special Report on Global Warming of 1.5C” details that to avoid the worst impacts of climate change, we must limit warming to 1.5 degrees Celsius. To achieve this goal, 70-85 percent of electricity demand must be met by renewables by mid-century, while coal combustion must decline to close to 0 percent by 2050 (http://www.ipcc.ch/report/sr15/).
Many financing institutions, such as Morgan Stanley, are reducing their exposure to coal given its significant climate and regulatory risks (https://www.morganstanley.com/about-us-governance/pdf/Morgan_Stanley_Coal_and_Oil_Sands_Policy_Statement.pdf).
In spite of the above, General Electric is pursuing new development of fossil fuel projects internationally, including in Pakistan, Cambodia, Bangladesh, Vietnam, Kenya, and Mozambique; each of which has its own unique political climate and combination of available renewable resources to help meet national climate goals.
Many emerging market countries lack sufficient mechanisms to ensure proposed energy projects do not jeopardize the country’s ability to meet climate goals. For example, in 2018 General Electric announced a partnership to build a coal plant in Lamu, Kenya despite there being clean, economically competitive alternatives. Kenya has 7,000 – 10,000 MW of geothermal potential that could be developed for baseload generation. The Lamu project has met with intense local opposition regarding its potential health and climate impacts, and the potentially higher cost of coal-based electricity, creating risks for General Electric.
Given the urgency of addressing climate change, General Electric must adopt policies to avoid locking developing economies into decades of uneconomical, polluting energy while creating risk to its investments and its reputation.
BE IT RESOLVED: Shareholders request that General Electric, with board oversight, publish a report, omitting proprietary information and prepared at reasonable cost, assessing the adequacy of the company’s climate change related criteria for ensuring that investments in fossil fuel projects in emerging markets are consistent with the Paris Agreement’s goal of limiting global temperature increase to “well below 2 degrees Celsius.”
In creating the report, investors request the company consider:
Whether its criteria adequately manage the reputational, financial, and climate risks to GE associated with such proposed fossil fuel projects
Whether its criteria avoid investments in fossil fuel projects in developing markets that run counter to a country’s ability to meet its Nationally Determined Contribution to the Paris Agreement, especially in countries with inadequate mechanisms to enforce climate policies