Jun. 17, 2022
Freeda Cathcart, FLMI June 17, 2022 Dear Secretary Vanessa Countryman, I appreciate the SEC response to the increase of shareholder resolutions demanding more transparency and accountability in how U.S. companies are responding to climate risk, by creating the proposed rule change for The Enhancement and Standardization of Climate-Related Disclosures for Investors. It’s important to require information about a registrant’s climate-related risks that are reasonably likely to have a material impact on its business, results of operations, or financial condition. Investors need information about climate-related risks that includes disclosure of a registrant’s greenhouse gas emissions, which have become a commonly used metric to assess a registrant’s exposure to such risks. Extreme weather is bad for business. Investors are tired of watching their communities being reduced to ashes or washed away in floods caused by climate change. Demand is increasing for companies to stop greenwashing projects that accelerate climate change. Climate risk is financial risk. Shareholders are sending strong signals that they support more disclosure, especially when it comes to methane, a major component of natural gas, which is 80 times more potent as an extreme weather accelerant than carbon. After an overwhelming majority of Chevron shareholders voted 98% in favor of a shareholder proposal from Mercy Investment Services calling on the oil and gas major to issue an analysis on the reliability of its methane disclosures, Andrew Logan a senior director of oil and gas at Ceres said: “Today’s vote on methane disclosures is a crystal-clear statement on the benefits of aggressive action to measure and reduce methane emissions, for the climate, as well as companies’ and investors’ bottom lines. We commend Chevron for supporting this proposal but also know that this is only a first step. Even more critical will be how Chevron follows through on the proposal’s request that the company significantly improve its approach to methane measurement, given that science suggests that the industry’s current approach underestimates methane emissions by 60% or more.” Dominion Energy shareholders voted by over 80% for a resolution I introduced calling for a Report on risk and impacts of natural gas use. After the annual meeting, shareholders held a press conference calling for Dominion to take immediate action to reduce exposure to stranded assets and expressing concerns about Dominion’s current involvement with new, natural gas projects. They appealed to Dominion to limit their risk to climate exposure by exiting from their contract with the Mountain Valley Pipeline (MVP) and by canceling the build out of any other new, natural gas infrastructure projects. Dominion shareholders had their dividend checks reduced by one-third after the cancellation of Dominion’s and Duke’s multi-billion dollar Atlantic Coast Pipeline, and they now need Dominion to take responsive action to protect them from future losses. MVP exemplifies the need for requiring companies to submit climate disclosures so investors can accurately assess the amount of risk they are willing to incur. MVP was originally conceived of by EQT Corporation in 2014. By 2018, EQT split off their transmission assets, including the MVP project, into the new Equitrans Midstream Corporation (ETRN). After MVP’s construction began through the treacherous Appalachian terrain, it became obvious that the warnings of scientists and engineers were correct and that the project was in peril. As late as 2008, even some environmental groups still thought that natural gas would be a bridge to renewables. However, the EPA classifies natural gas methane as an accelerant of climate change. After hurricane Sandy devastated NYC’s Financial District in 2012, forward-looking companies immediately responded by investing billions of dollars in research and development of sustainable, renewable energy. These investments have paid off by making renewable energy competitive with natural gas. We have reached the end of the natural gas bridge which makes it unnecessary to waste any more money on out-of-date projects like the MVP. While MVP’s owners haven’t canceled the project yet, there are signals that they know that it is doomed. NextEra Energy, one of MVP’s major partners, has written off its equity in the MVP and filed the following statement in its annual report with the SEC: “As a result of this evaluation, it was determined that the continued legal and regulatory challenges have resulted in a very low probability of pipeline completion.” The rest of MVP’s partners: Equitrans Midstream (ETRN), Consolidated Edison (ED), RGC Resources (RGCO), and Alta Gas, have all written off a significant amount of their equity in the MVP project. Observers have noticed a huge discrepancy between MVP’s claims that their project is almost complete and their compliance reports with FERC. As noted in a recent Natural Resources Defense Council article: “MVP construction is only 55.8% complete. Not ‘nearly 95%’ as claimed by pipeline supporters. This statistic comes from the pipeline company’s own weekly reports submitted to FERC, with the most recent one being from May 2, 2022 (Appendix A, page 5).” Many of MVP’s pipes lie in fields being exposed to the elements. In 2018, a MVP contractor testified in federal court that the pipes needed to be buried within six months to avoid losing their integrity. It’s been years since farmers have been prevented from using their land while the pipes are rusting in their fields. It appears that MVP may be trying to use the war in Ukraine and high natural gas prices to justify project completion. However, Thomas Hadwin, a retired utility executive, filed a report on June 29, 2021 showing that there is no economic necessity for the MVP. There is already enough infrastructure in place to meet the needs of the region, and any path to possible exportation would be prohibitively expensive. Instead the Ukraine War and high natural gas prices should stimulate the switch to renewables and electricity to escape the volatility of the global fossil fuel market. Government investors, like the Massachusetts Pension Reserves Investment Management (PRIM) Board that oversees the state’s $101.5 billion pension fund, have responded to climate risk by implementing new proxy voting guidelines: “One of the strongest tools a pension fund has for engagement is proxy voting,” said State Treasurer Deborah B. Goldberg, who Chairs the PRIM Board. “These votes will have a long-term impact on our changing climate while achieving our financial goals.” Investors must be able to determine the risk between a solid return on their investment or a possible boondoggle. Investors need the SEC to implement the proposed rule change for The Enhancement and Standardization of Climate-Related Disclosures for Investors. Sincerely, Freeda Cathcart Berkshire Hathaway and Dominion Energy shareholder