It’s illogical – and quite myopic – that many of the nation’s largest institutional investors refer to shareholder-sponsored resolutions addressing material topics such as climate change, resource constraints and environmental stewardship as “special interest,” “non-routine” or involving “special circumstances.”

The opposite is in fact the case. We strongly agree with David Lubin and Daniel Esty’s contention in a recent Harvard Business Review article that sustainability is a core driver of competitive business strategies. Sustainability issues present both opportunities for competitive advantage and risks that, left unmanaged, will cause a company to lag its sector. If companies aren’t addressing sustainability they won’t be producing long-term value for their shareholders.

The financial numbers back this up: A review of 36 studies by Mercer Investment Consulting shows strong linkages between ESG (environmental, social and governance) integration and positive investment performance. “Eighty-six percent of the studies are neutral or positive,” Mercer’s Jane Ambachtsheer told the CalPERS Board of Directors in August.

With this in mind, Ceres recently unveiled the new and detailed Ceres Guidance: Proxy Voting for Sustainability to a Council of Institutional Investors breakfast in Boston. Our guidelines are a tool. But more importantly, they launch a serious effort to get mainstream investors moving now – immediately – to assert their prerogative, as part of their fiduciary duty, on these issues. Ceres, which coordinates the $10 trillion Investor Network on Climate Risk, has the partners in its network to leverage this initiative.

The guidance includes:

- Ceres’ set of Proxy Voting Sustainability Principles covering governance, social issues, environmental issues and general sustainability topics like “Management Accountability for Sustainability Goals” and “Adoption of Specific Environmental Performance Goals and Measurements.”

- Accompanying guidance on how to cast votes on particular sustainability resolutions. For example, when faced with a resolution that proposes independent directors, the guidance advises voting for this proposal applying the Proxy Voting Sustainability Principle of “Loyalty” to shareowners. When faced with a resolution calling for a link between executive compensation and sustainability performance, the guidance advises voting for this proposal applying its “Management Accountability for Sustainability Goals” principle.

- A compilation of sustainability resolutions from recent proxy seasons and the vote counts on these resolutions from the 2010 season. Surprising examples indicative of sustainability trends include a 60.7 percent vote at Sprint on a resolution requiring the company to account for both its direct and indirect political spending and a 53 percent vote requiring coal producer Massey Energy to set greenhouse gas emission reduction targets.

- A compilation of sample proxy voting guidelines already being used by leading investors around the world. Guideline language from big pension funds like Florida’s State Board of Administration on water scarcity and proxy access are highlighted next to guideline examples from the AFL-CIO on performance based equity compensation, TIAA-CREF on charitable contributions, SRI funds like PaxWorld on workplace health and safety and more.

Investors who adopt the Proxy Voting Sustainability Principles will be better positioned to vote consistently and responsibly on the 700-plus sustainability resolutions now being filed with US companies each year. They can adopt these principles as a policy to guide their proxy voting consultants or as a supplement to other proxy guidelines. Pensions funds and other asset owners can similarly press their asset managers to use these principles in voting their proxies. For those developing proxy guidelines for the first time, these principles can provide the framework for shaping a comprehensive set of corporate governance guidelines.

The resolutions are categorized so that investors can determine whether their existing proxy voting guidelines are sufficiently specific to create consistent voting outcomes on these resolutions. The list of common resolutions can also be used as a checklist for investors who wish to ensure that their existing or new proxy guidelines will comprehensively cover sustainability and governance issues arising in the future.

Lastly, and perhaps most importantly, the Ceres Guidance includes more than 75 leading examples of proxy guidelines that asset owners and asset managers can consider as they re-visit their own guidelines and policies. The sample language from public pension funds, asset managers, socially responsible investment funds, labor unions, and foundations covers key sustainability topics such as climate change, water availability, broad environmental risks, ESG-driven executive compensation and board of director governance.

Our message to asset managers, asset owners and voting fiduciaries who have yet to incorporate specific mention of the various sustainability issues into their proxy voting guidelines is clear: Now is the moment to act. You cannot defer to the opinion of specific management bodies in deciding how to vote on issues that will help determine business success or failure and significantly impact long-term value creation in the coming years.

And if you fail to specifically address these issues in your guidelines, you run a serious risk of breaching your fiduciary duty by voting inconsistently or failing to vote on resolutions of critical importance to the companies you own and the shareholders or beneficiaries to whom you owe your fiduciary duty.

Sustainability will not wait. Climate change, water constraints, human rights and labor issues, new rules for corporate behavior or for governance and stakeholder treatment will simply not be ignored in a globalized economy where environmental, economic and social developments move at lightning speed – along with news of corporate failure and its attendant bottom-line and reputational damage.

The opportunity to promote key governance and sustainability reforms at large public companies – including reforms that might have helped avert the ongoing financial crisis – is a key competitive opportunity for those with their eyes open. Investors are increasingly watching – the rise in both the number and vote percentages of recent sustainability resolutions is testament to that. With our new guidance we’re confident they’ll be watching even more.

Kirsten Spalding is the California Director for Ceres. She works with members of the Investor Network on Climate Risk on their initiatives and represents Ceres on the West Coast for all Ceres programs.  Prior to joining Ceres, she served as Chief Deputy Treasurer under California Treasurer Phil Angelides and Director of the Treasurer’s environmental financing authorities.

This article was first published on the Harvard Law School Forum on Corporate Governance and Financial Regulation and is re-published with the author's permission.

Which Fortune 500 companies have the best records for reducing greenhouse gas emissions?  Which have noteworthy policies and practices for preventing human rights abuses in their supply chain?  Which have outstanding records for encouraging employee diversity?   And which companies constitute the 10 best in the world for overall sustainable business practices?

Those types of questions are being asked more frequently these days by a growing number of consumers, investors and regulators. Problem is, depending on which sustainability ratings list you consult for information, answers to the questions can vary dramatically.

Citing the “continued confusion, uneven quality and opacity” of proliferating ratings for corporate sustainability programs, a new non-profit initiative has been launched to develop a generally-accepted “framework” for sustainability ratings worldwide.

Plans for the Global Initiative for Sustainability Ratings (GISR) were announced by Ceres, an investor and environmental organization, and the Tellus Institute, a Boston-based research organization.

“GISR is a global non-profit, mission-driven program aimed at moving markets to the advantage of true sustainability leaders,” the organizations said. “It seeks to achieve for sustainability ratings what the Global Reporting Initiative (GRI) strives to achieve for sustainability reporting, namely, creation and continuous enhancement of a framework that is designed and managed as a public good to advance the global sustainability agenda.”

The initiative seeks to bring some order to the burgeoning industry of corporate sustainability ratings, which includes market indices (such as the Dow Jones Sustainability Indexes and FTSE4Good Index Series), mainstream media listings (Newsweek’s Green Rankings and Fortune’s Most Admired Companies) as well as long-standing social investor rankings (the KLD 400 Social Index) and other sustainability lists.

An October 2010 report by the consultancy SustainAbility examined 108 different ratings systems – of which only 21 existed in 2000.

According to the SustainAbility report, a “growing number of companies are linking executive compensation to performance on ratings. Major mainstream asset managers are examining company sustainability performance as part of their investment decision making. And, slowly but surely, citizens and consumers are starting to wake up to these issues and are turning to ratings for actionable information. While these are all welcome developments, increased attention means ratings must be able to demonstrate that they are fair, accurate and credible.”

In announcing the GISR initiative (PDF), Ceres and Tellus said the potential of sustainability ratings “has been hampered by the proliferation of the field into scores of raters each with its own, usually proprietary, methodology; lack of transparency regarding the structure and implementation of methodologies; uneven coverage of key, material sustainability issues; inefficiencies and survey fatigue on the part of rated organizations; and, in some instances, conflicts of interest whereby raters play multiple roles in their relationship with rated organizations.”

Its organizers said GISR will work "to bring coherence, transparency and coordination to sustainability ratings" by designing a generally-accepted framework that:

• Accelerates the infusion of sustainability content – initially in public equities and later in bonds, real estate and other asset classes – into mainstream financial ratings;
• Moves existing sustainability ratings toward a core set of principles and process/performance content;
• Serves as a stand-alone, dynamic framework for ratings users.

Ceres and the Tellus Institute said they are the “principal conveners” of GISR but will be working with various partner and collaborating organizations.  “In its initial phase spanning approximately 18 months, a multistakeholder Steering Committee will oversee GISR,” they said.

GISR’s schedule calls for a beta version of its sustainability ratings framework about 12 months after launch and a Version 1.0 approximately 18 months after launch.

“GISR’s overarching goal is to bring sustainability ratings into the mainstream,” the organizers said. “This will occur through uptake by pension funds in RFPs, investment managers in portfolio decisions, government agencies in procurement initiatives and NGOs in advocacy and partnership initiatives. Over time, through a process of convergence and integration, we believe all ratings—financial or otherwise— across all asset classes should be infused with sustainability content.”

Investors filed a record 101 climate and energy-related resolutions with 88 U.S. and Canadian companies in 2010, a 50% increase from the year-earlier, according to activist shareholder organizations.

A record 51 resolutions were withdrawn after the companies agreed to climate change and energy-related commitments.

Sixteen of the 42 resolutions that went to a vote achieved 30 percent or greater support, nearly three times the number that achieved that level of support in 2009.   The average vote for the 42 resolutions voted on so far this year was 24.6 percent, up from 21.7 percent last year.

The statistics were compiled by Ceres, a coalition of investors and environmental groups, and the Interfaith Center on Corporate Responsibility (ICCR), a coalition of nearly 300 faith-based institutional investors.

”The BP spill is only the latest reminder of why investors are ratcheting up their attention to climate and other environmental risks across their portfolios,” said Mindy Lubber, president of Ceres. “This year’s record results send a powerful message that companies should boost their attention to these issues.”

“If our portfolio companies are to provide long-term shareowner value, they need to be proactive, not reactive, in addressing climate change and other ESG matters,” said Jack Ehnes, CEO of CalSTRS, the second largest pension fund in the U.S.   Mr. Ehenes said the record results for shareholder filings in 2010 are “an encouraging sign that investors and companies are paying increasing attention to long-term drivers of value.”

Among the resolutions, requests for companies to provide a corporate responsibility or sustainability report have “increasingly resonated with investors,” according to Tim Smith, Senior Vice President for Walden Asset Management.  He  pointed to a  record 60 percent vote at Layne Christensen and votes at Gentex and St. Jude in the low 30s and low 40s, respectively. “We believe this signals a tipping point for the case for transparency on CSR,” he said.

Correction 7/26: An earlier version of this story incorrectly reported the comments of Walden Asset Management’s Tim Smith in discussing vote results at Gentex.

The issues with key high votes and share value of votes in favor, according to Ceres and ICCR, were:

Adopt greenhouse gas (GHG) reduction goals:
CMS Energy, 35.1%  ($729 million)
ExxonMobil, 27.2%   ($39.7 billion)
Massey Energy, 53.1% ($852 million)
Ryland, 37.4%  ($234 million)

Issue a sustainability report including GHG reduction strategies:
Boston Properties, 44.1%  ($3.2 billion)
Chesapeake Energy, 31.5%  ($2.4 billion)
EQT Corporation, 37.4%  ($1.4 billion)
Federal Realty Investment Trust, 44.6%  ($1.4 billion)
Layne Christensen, 60.3%  ($234 million)
St. Jude Medical, 42.8%  ($3.1 billion)

Report on the environmental and health risks associated with coal ash:
CMS Energy, 43.1%  ($875 billion)
MDU Resources Group, 40.5%    ($962 million)
The Southern Company, 21.0%  ($2.6 billion)

Report on risks posed by the environmental, social and economic challenges associated with oil sands operations:
ConocoPhillips, 27.1%  ($13.8 billion)
ExxonMobil, 26.4% ($38.3 billion)

It’s official: the oil spill that began in the Gulf of Mexico on April 20^th is now the largest in American history, surpassing the Exxon Valdez spill in 1989.  Sen. Lisa Murkowski (R-Alaska) observed that "the recovery from the Exxon Valdez oil spill was long and sad, and it took 20 years for litigation over punitive damages to be resolved....That in and of itself was a tragedy we can't let happen again."

When news of the Exxon Valdez oil spill broke in March of 1989, the slow and inadequate corporate and government response to the disaster ushered in a new wave of leaders in the environmental movement.  One of these new visionary leaders was the late Joan Bavaria, the driving force behind the Boston-based CERES, which was founded in 1989 to advance what was then viewed as a sweeping 10-point code of environmental conduct that became known as the CERES Principles.

In ancient Rome Ceres is the goddess of agriculture, charged with guarding humankind's survival.  In the wake of the Exxon Valdez disaster, Joan Bavaria and the CERES team began to build a movement to do just that by creating a new way to hold companies to higher environmental performance and disclosure standards and to provide market based incentives to spur innovation and environmental leadership.  Joan worked tirelessly to build a first-of-its-kind multi-stakeholder coalition comprising environmental organizations, corporations, faith-based institutions and institutional investors all working to find new collaborative solutions.

It was not an easy task in the early 1990's to bring corporate CEOs and leaders in the environmental movement together.  At the time of the Exxon Valdez spill, a spokesman for Exxon said that the CERES Principles "do not recognize the need to balance environmental protection with the importance of adequate energy resources and a stable, healthy economy."

Five years later another oil company, Sun Oil, had an entirely different view on this when it broke ranks with the Fortune 500 and surprised everyone to become the first large company to join with CERES.  The CEO of Sunoco, Robert Campbell, said at the time that his company and members of CERES developed trust for each other and realized that their goals were similar. "Their goal and our goal did not seem so far apart," Campbell said. "The Sun Company decided that by signing the CERES principles they would be placing themselves at the forefront of business' role in protecting the environment."   Bob Campbell displayed true leadership and willingness to ignore pressure from his CEO counterparts, who at the time were angry at him for joining with environmentalists.

CERES continues to play an important role and is focusing on steering investor assets toward companies demonstrating a commitment to sustainability and improved environmental performance and away from more risky laggards.  The original reporting framework CERES designed in the early 1990's evolved into the Global Reporting Initiative, the de facto standard for corporate disclosure of sustainability information used by 1,500 companies worldwide.

New initiatives are emerging today to tackle the new paradigm and the hard choices associated with our addiction to oil.  Earthster, for example, allows companies to quickly assess the environmental impacts of thousands of household products.  And consumers now have a new resource in Good Guide that rates over 75,000 products on environmental performance.    These innovations and others all mark the beginning of a new era of radical transparency where the power is shifting from producer to consumer, as new information and resources become available to separate companies that are truly green from those that greenwash.

The Future for BP

BP's CEO Tony Hayward has pledged  "to clean up every drop of oil" off the oil-soaked shore and to put the "Gulf coast right as fast as we can."   Since April 20th, BP has spent over $800 million responding to the spill.  BP's stock price has dropped over 25% during this period, eroding nearly $25 billion in market value.

More trouble lies ahead for BP as it may face the specter of EPA fines of $1,100 per gallon or up to $4,300 if gross negligence was found to cause the spill.  The total costs for BP could exceed by some estimates over $25 billion, far eclipsing the $3.8 billion costs for the Exxon Valdez spill.

How BP handles these costs will be a true measure of the company.  BP has come under fire for its early handling of the financial settlements from individuals.  Alabama's Attorney General Troy King  has said he told BP to stop encouraging settlement agreements among coastal residents that he said stripped people of their right to sue in exchange for a $5,000 settlement.  Furthermore, CEO Hayward recently was quoted in The Times of London repeating his commitment to pay all verifiable individual claims but qualified his statement further by saying that because "this is America" many of the claims will likely be "illegitimate." Instead of hedging and dodging, BP would be well served to take the high road on settlement issues and learn from the lessons of Exxon

On the wall of Bavaria's cluttered Boston office was a sign that read:   “Life is a test. It is only a test. If this were your real life, you would have been given better instructions.” She was put to the test in 1990 as she visited Prince William Sound on the first anniversary of the Valdez spill and wrote: ''The extent of the damage is still disputed and probably will be forever.  But one thing was crystal clear: such disasters need not happen, they must not happen, and we must not let time heal this wound so well that we forget the tears, the tragedy, and bet again on luck to pull us through.''  This message rings as true today as it did in 1989. While the tragedy of the Gulf oil spill itself cannot be undone, let’s hope that Mr. Hayward is prepared to follow through on his original commitments and follow Joan's advice of 21 years ago as he deals with the aftermath of clean-up and compensation.

Mark Tulay worked for Joan Bavaria at Boston-based CERES as the organization's first full-time employee beginning in the 1990's.  He has worked in the environmental movement for over 15 years and is the Founder and CEO of Sustainability Risk Advisors, a consulting firm that advises non-profit organizations and institutional investors on sustainability related issues.

When it’s time for salary reviews at Xcel Energy, a Minnesota-based energy company, earnings per share are not the only thing that matters.  In its 2009 corporate proxy statement, Xcel explains how a range of sustainability metrics fit into annual incentive objectives for all executive officers and how it weighs greenhouse gas reductions and safety performance alongside earnings per share.

Company spokeswoman Patti Nystuen told the sustainability group Ceres, “Xcel believes strongly in providing long-term incentive opportunities that deliver awards on the achievement of specific performance goals linked to the success of the company and its long-term strategy in the core utility business.  These include financial and environmental goals."

Xcel is one of a small but growing group of pioneering companies, increasingly aware of the power that policies on executive pay can exert on sustainability behavior.

Seventy-five per cent of Xcel's award incentives have a performance-based vesting schedule based on earnings per share growth.  The remaining quarter of Xcel's awarded incentives are performance-based, relating to aspects of their environmental strategy, such as decreases in emissions.

"In 2007, payouts of annual incentive awards for the NEOs (named executive officers) and all executive officers, including those reporting to the chief executive, were determined entirely by attainment of corporate goals, which included targeted earnings per share, an environmental metric related to carbon dioxide emissions, and safety," Nystuen said.

Across the Atlantic

In Europe, the Netherlands seems to be ahead of other nations in tying remuneration to sustainability objectives.

Dutch banking and insurance giant ING said recently that social, ethical and environmental objectives are to form a component part of its top management executive pay structure.

“ING has formulated corporate responsibility ambitions and priorities, combined with a long-term plan and concrete targets,” the company says in its 2009 corporate responsibility report. “These targets are also part of the performance objectives of our Executive and Management Boards.” The company said there will also be a program for senior managers to work on real-life cases at NGOs in developing countries.

At least three other Dutch firms – chemical company Akzo Nobel, life sciences group DSM, and mail operator TNT – have tied executive compensation to environmental improvement and other objectives, including employee and customer satisfaction.

And in one case, the linkage of pay to sustainability has been introduced to justify potentially controversial management decisions.   The oil giant Royal Dutch Shell, in a disclosure regarding its development of Canadian oil sands resources, makes the point that the company is “actively managing environmental and social impacts,” specifically noting that  “performance on sustainable development is a key feature of management targets and remuneration.”

On the Boardroom Agenda?

These initiatives come in the wake of two reports from organizations, based on opposite sides of the Atlantic, which have argued that the integration of sustainability into executive pay structures is one of the best ways for businesses to marry the twin objectives of sustainability and profit.

The first, published last month by Ceres, the Boston-based coalition of institutional investors and environmental organizations, reveals that an increased focus on corporate governance following the financial crisis of the last few years has now forced environmental sustainability onto boardroom agendas.

"Corporate scandals and the current economic crisis have heightened demands for new approaches to governance, particularly in relation to executive compensation and risk management,” say the authors of the report The 21st Century Corporation: The Ceres Roadmap to Sustainability.

“As sustainability has risen up the corporate, investor and public policy agendas, it has become more fully integrated into these governance expectations," they add.

The report calls on boards to undertake a root-and-branch reorganization of remuneration structures and base executive pay partly on a CEO's ability to integrate sustainable practices into day-to-day operations.  It also highlights the fact that many regulators and shareholders are putting pressure on boards to do a better job of aligning executive pay and performance standards tied to more than short-term profits.  In this top-down corporate governance structure, it calls on companies to name directors who have expertise in environmental sustainability issues.

Critical Challenges

Meanwhile, in its third Remuneration Theme Report, the European Sustainable Investment Forum (Eurosif) has revealed that most European companies fail to link executive pay to environmental, social, and governance (ESG) performance.

The report highlights some critical challenges and opportunities for companies in relation to remuneration, incentives and long-term sustainability.  Research highlights and recommendations for shareholders and regulators include:

• 29% of FTSE Eurofirst300 listed companies have some commitment to linking remuneration to ESG performance – although concerns exist around the extent to which performance targets are set as ‘soft targets,’ thereby guaranteeing a minimum level of bonus.
• Financial institutions account for 23% of the FTSE Eurofirst300 index but only 16% of financial institutions have an ESG-linked remuneration system.
• Shareholders should engage with companies by voting against unacceptable remuneration packages and calling for and taking part in shareholder dialogue in determining remuneration policy.
• Regulators should promote active dialogue between companies and shareholders by legislating for a binding “say on pay” vote and setting appropriate guidelines to promote good remuneration practices and disclosure.
• In the aftermath of the global financial crisis, remuneration policies and specifically the level of bonuses of senior executives of companies and traders continue to hit the headlines.  Investors and regulators have expressed concern that remuneration structures may have contributed to excessive risk-taking and are asking for a stronger focus to be placed on long-term reward schemes and sustainable growth.

Much Work Still to Do

Although steadily increasing, examples of such strategies remain fairly thin on the ground and it is clear that much work remains to be done in strengthening their influence.  For example, a 2009 research paper written by academics at IESE Business School and Arizona State University found that in general firms with an explicit environmental pay policy and an environmental committee do not reward environmental strategies more than those without such structures, suggesting that these mechanisms often play a merely symbolic role.

A major challenge: linking today's compensation package to policies and practices whose impact may not be felt for many years to come.

One means of improving the situation, as outlined in a recent report by a group of advocacy organizations that included the U.K.'s PLATFORM and Friends of the Earth, could be to link executive pay to companies’ long-term financial, environmental and social performance, for example through company bonds and equity held in escrow accounts for directors and released after 10-20 years.

Debates over corporate governance and accountability in the wake of the recent global financial crisis have already highlighted the crucial importance of top executive pay policy as a means of influencing business behavior.  The reports and initiatives outlined above extend this reasoning, by revealing that management remuneration packages are now also recognized as an increasingly important weapon in the armory of campaigners seeking to achieve sustainability objectives.

Andrew Williams (TheGreenExpert@btinternet.com) is a U.K.-based freelance writer.

Corporate sustainability initiatives frequently – and often deservedly – get criticized for being more talk than action.  Integrating environmental and social challenges into the business process can be a daunting task for even well-intentioned and well-resourced enterprises.

A major new 84-page paper from Ceres, the investor and environmental group, seeks to address that issue by laying out an ambitious and detailed program with 20 expectations for companies to focus on and achieve by 2020.  The 21^st Century Corporation: The Ceres Roadmap for Sustainability “is a guide to companies on their journey to comprehensive sustainability – from the boardroom to the copy room – and throughout the supply chain,” says Mindy S. Lubber, President of Ceres.

The paper says companies must cut greenhouse gas emissions 25 percent below 2005 levels by 2020 in order to meet reductions called for by scientists who warn of catastrophic global warming.  The paper also calls on companies to respond to societal issues. “It has become clear that it is not acceptable anywhere in the world to produce goods in unsafe or exploitative conditions,” Ceres says. “These are real business risks for global companies.”

Four Areas for Focus

To accomplish that, Ceres describes its vision of corporate best practices “that must come to represent the norm, not the exception.”  The paper focuses on four broad areas: governance, stakeholder engagement, disclosure and performance.

In governance, “there is a growing expectation that boards of directors as fiduciaries should be informed leaders on sustainability issues that materially impact corporate performance and plans,” the paper says.  Ceres suggests that a board committee have clear accountability for sustainability strategy and performance; that board nominating committees seek directors with expertise in sustainability; and that directors receive regular training in key sustainability issues.

In stakeholder engagement, the roadmap calls for companies to “regularly engage in robust dialogue with stakeholders across the whole value chain.”  Recommendations include adoption of a “stakeholder mapping” process to identify, understand and track key stakeholder groups and how they are engaged on sustainability issues by key business units.

Companies should report regularly on their sustainability strategy and performance, according to the suggested roadmap.  “Disclosure will include credible, standardized, independently verified metrics encompassing all material stakeholder concerns, and detail goals and plans for future action,” the paper says.

In operations, the Ceres roadmap calls on companies to “invest the necessary resources to achieve environmental neutrality and to demonstrate respect for human rights in their operations.”  Performance should be measured “related to GHG emissions, energy efficiency, facilities and building, water, waste, and human rights.”

Sustainability as Economic Driver

In an introduction to the paper, David Blood, Senior Partner of Generation Investment Management, writes: “The interests of shareholders, over time, will best be served by companies that maximize their financial performance by strategically managing their economic, social, environmental and ethical performance.  Central to this thesis is the explicit recognition that sustainable solutions will be the primary driver of industrial and economic development in the coming decades.”

Ceres has proven effective in the past in turning talk about environmental and social change into substance.   The organization started with the so-called Ceres Principles, a 10-point code of corporate environmental conduct drafted in response to the 1989 Exxon Valdez oil spill.  It launched the Global Reporting Initiative in 1997 and helped GRI organize as an independent organization.

Ceres also directs the Investor Network on Climate Risk, a network of 80 institutional investors with a collective $8 trillion in assets.  The coalition was instrumental in pressuring the U.S. Securities and Exchange Commission to recently announce new guidance on climate risk disclosure for publicly-held companies.

In an action hailed by environmental groups as “ground-breaking,” the U. S. Securities and Exchange Commission voted to provide guidance to publicly-listed companies regarding the level and quality of their disclosures on climate change and its "material"  impact on their businesses.

Commission attorneys said that under the new guidance shareholder reports should evaluate the potential impact on a company of new climate change laws and regulations, both domestic and international. Other factors to be considered would include the impact of severe weather; a decreased demand for goods that produce significant greenhouse gas emissions; and increased competition to produce products that satisfy consumer demand for greener goods.The SEC action doesn’t change existing disclosure requirements, but it does put pressure on companies to step up the quality of information and analysis on climate risk that they provide to stockholders.

In announcing the action at a hearing in Washington, D.C., SEC Chairman Mary Schapiro said the Commission was “not opining on whether the world’s climate is changing” but only providing guidance on how companies should report.

Pressure from Investor Coalition

The SEC was pressed to provide the guidance by a coalition representing some of the nation’s largest public pension funds – such as the California Public Employees' Retirement System (CalPERS) – and other institutional investors with about $1.4 trillion in assets under management. The coalition was organized and largely driven by Ceres, a national network of investors and environmental organizations working on sustainability issues.

“Today’s vote is a clarion call about the vast risks and opportunities climate change poses for U.S. companies and the urgency for integrating them into investment decision making,” said Mindy Lubber, president of Ceres and director of the Investor Network on Climate Risk, a network of 80 institutional investors with $8 trillion in collective assets. “The business risks of climate change cannot be ignored. With this guidance investors can make more sound decisions based on better information – and businesses will have a level-playing field with clear standards and expectations for disclosure.”

In its filings with the SEC, the coalition argued that “climate related risks are material to investors’ decisions” and it asked the Commission to issue formal guidance on what and how companies should disclose information. A “lack of hard data and long‐term planning disadvantages investors, who require this information to make informed investment decisions and protect their portfolios,” the coalition said.  “Furthermore, voluntary disclosures of this type lack the rigor and accountability inherent in 10‐K reports certified by senior management pursuant to enforceable legal requirements.”

The investor group cited two reports which they said showed that S&P 500 companies are providing scant climate-related disclosure to investors.

The first report assessed disclosure by100 global companies in five sectors - electric utilities, coal, oil & gas, transportation and insurance - and found overall limited disclosure: 59 of the 100 companies made no mention of their greenhouse gas emissions or public position on climate change; 28 had no discussion of climate-related risks they face; and 52 failed to disclose actions and strategies for addressing climate-related business challenges.

The second report reviewed over 6,000 SEC filings by S&P 500 companies from 1995 to 2008.   While the study found “some modest improvement” in climate risk disclosure since 1995, it said that in 2008 75% of annual reports filed by S&P 500 corporations “failed to even mention climate change and only 5% articulated a strategy for managing climate-related risks.”