Still “Impactful” After All These Years

Jonas Kron, JD

In the Winter 2011 issue of Investing For A Better World, our colleague Farnum Brown described shareholder advocacy as version 2.0 on SRI’s (socially responsible investment’s) travels towards 3.0, and discussed the importance of directly pressing companies to improve their environmental and social impacts. Similarly, Amy Domini of Domini Social Investments recently wrote passionately in the Huffington Post about the importance of shareholder advocacy as a meaningful way for investors to have a positive impact on the world. Both pieces touched upon the ongoing debate about what to call our field. What was once “socially responsible” or “ethical” investing is now “ESG” (environmental, social and governance) investing or “sustainability” investing. We welcome the newest arrival, “impact investing” into the lexicon as a term that encompasses the new types of enterprises being started by social entrepreneurs as well as one that describes what labor plans, religious shareholders and socially concerned investors been doing for three decades.

Both Farnum’s and Amy’s pieces also noted some examples of successful shareholder advocacy that speak to the impact of SRI/ESG investing. We thought it might be a useful contribution to the nomenclature discussions to devote some space to reviewing some of the most recent “impactful” shareholder campaigns from SRI/ESG firms (with apologies to language purists).

Toxic Chemical Phaseouts. Some of shareholder activists’ “greatest hits” have been in persuading companies to reduce or eliminate their use of toxic chemicals. They are found in virtually every ecosystem in the world, and up to 300 toxic chemicals have been found in humans. The following are examples of company actions taken following shareholder dialogues and/or proposals:

• General Mills announced that it would no longer use bisphenol A (BPA) in its Muir Glen brand tomatoes packaging (2010)
• Apple announced it would stop using brominated flame retardants in its computers (2007)
• Sears Holdings (Sears and K-Mart) began a multi-year process of phasing out PVC products and packaging (2007)
• Whole Foods announced that it would remove baby bottles and other products that contain BPA from its shelves (2006).

Political Spending Disclosures. The Citizens United Supreme Court case of 2010 renewed attention to the role of the corporate sector in politics and the public policymaking process. Shareholders have been working to lift the veil on corporate political spending since 2004. Assisted by the nonprofit Center for Political Accountability, shareholders have persuaded 52 major corporations (including 35 in the S&P 100) to disclose and require board oversight of their political spending with corporate funds, beyond what is required to comply with the laws.

Corporate Sustainability Reporting. Before SRI investors founded Ceres and the Global Reporting Initiative, standardized corporate sustainability reporting was virtually nonexistent, and where it did exist it was guided by trade association criteria that lacked public credibility. Today, thanks to persistent and diligent shareholder advocacy, about 1,800 companies produce reports based on the GRI guidelines, and demonstrating that “what gets measured gets managed.”

Lesbian, Gay, Bisexual and Transgender nondiscrimination policies. Shareholder advocates can rightly claim credit for persuading many of the nation’s most prominent corporations to adopt inclusive nondiscrimination policies. Activists have filed well over 200 resolutions that have led to better policies at 150-plus corporations – affecting the lives of millions of workers around the world. Many additional companies have changed policies simply in response to inquiries from shareholders.

Home Depot Wood Purchasing Policy. In the late 1990s a broad coalition of shareholders added their voices to the campaign demanding that the world’s largest retailer of lumber products stop selling wood products from endangered forests. Using the vehicle of a shareholder resolution and outreach to large institutional investors, the shareholders generated twice as much support as was typical for a resolution in the 1990s. The campaign resulted in a commitment to phase out sales of wood products from endangered forest areas within three years, and the company’s commitment to give preference to Forest Stewardship Council certified lumber wherever possible.

PPG – Community Accountability Report

RESOLVED

Shareholders request the Board of Directors to report to shareholders, within six months, on how the corporation ensures that it responsibly discloses its environmental impacts in all of the communities where it operates. The report should be prepared at reasonable cost; omit proprietary information; and go above and beyond existing legal obligations and legal compliance systems. The report should contain the following:

1. how the corporation makes available reports regarding its emissions and environmental impacts on land, water, and soil—both within its permits and emergency emissions—to members of the communities where it operates;

2. how the corporation integrates community environmental accountability into its current code of conduct and business practices; and

3. the extent to which the corporation’s activities have negative health effects on individuals living in economically poor communities.

WHEREAS

PPG is a global supplier of coatings, chemicals, with over 140 facilities worldwide.

PPG is committed to “operating in a manner that is protective of people and the environment” and “is focused on stewardship and conservation, which not only helps protect the environment, but also gives PPG a competitive advantage in the marketplace.”  (2008 Corporate Sustainability Report).

Yet, a recent analysis by Riskmetrics ranks PPG “worst in sector for Toxics Release Inventory emissions normalized by US sales.”

A report by noted scientist Wilma Subra links PPG’s Lake Charles facility’s emissions to documented medical conditions afflicting residents of neighboring Mossville, LA. (Chemical and Industrial Sources of the Chemicals Associated with the Medical Symptoms and Health Conditions of Mossville Residents, 5/25/09.)  PPG is named as a source for over 60% of the chemicals identified and associated with medical ailments, the highest correlation rate of the five industrial plants analyzed in the study.

PPG was named as one of the top 100 U.S. corporate air polluters in 2005, according to researchers at the University of Massachusetts. (http://www.peri.umass.edu/ej/)

SUPPORTING STATEMENT

We believe that corporations have a moral responsibility to be accountable for their environmental impacts. No corporation can operate without the resources that local communities provide, but often these communities bear the brunt of corporate activities.

The proponents are also concerned about the effects of corporate activities on low-income areas and communities of color.  Many communities bordering industrial facilities, including those owned by PPG, are majority African American.  One study has found that industrial facilities operating in more heavily African-American counties “seem to pose greater risk of accident and injury than those in counties with fewer African-Americans.”  (“Environmental Justice: Frequency and Severity of U.S. Chemical Industry Accidents and the Socio-economic Status of Surrounding Communities,” Journal of Epidemiology and Community Health, (2004)).  We believe that all communities have a right to clean air, water, and soil.

Stakeholder engagement is featured prominently in PPG’s 2008 CR report, but no formal stakeholder engagement policy is in effect. The requested report would do much to assure shareholders and other stakeholders that the corporation takes seriously its ethical responsibilities to all of the communities that host its facilities.

ConocoPhilips – Environmental Impacts of Oil Sands

WHEREAS

ConocoPhillips has extensive interests in oil sands operations in the Canadian boreal forest region. Our company is the operating partner of the Surmont oil sands venture and is a partner in the FCCL Oil Sands Partnership, in addition to having interests in other properties.

Oil sands extraction presents a unique set of challenges due to its resource intensive and environmentally damaging nature. Oil sands mining requires heavy water use, land disturbance, toxic waste storage, and emission of air pollutants. These environmental impacts, along with their implications for local populations and wildlife, can introduce legal, regulatory and reputational problems to oil sands companies.  In addition, volatile oil prices and changing oil demand during the lifetime of these projects can impact both their costs and associated income.

Industrial logging and oil sands have reduced the boreal to less than 40% of its original size; the remaining forest is fragmented, with harmful impacts on many species.  According to the Canadian Parks and Wildness Association, it will take over 300 years before reclaimed areas become functioning forest again.

Oil sands companies have not proven that full reclamation of toxic tailing ponds is possible. The long-term persistence of these ponds, which have been shown to leak toxic pollutants into local water sources, presents additional challenges to companies.

Extracting one barrel of bitumen requires 2-5 barrels of fresh water.

An average barrel’s extraction requires enough natural gas to heat a Canadian home for 1.5-5.5 days, and the removal of four tons of earth.  While processed sand must be replaced and the site reclaimed, in 40+ years of oil sands operations, not a single acre has received a reclamation certificate from the Canadian government.

Oil sands have made Alberta the largest emitter of industrial pollutants in Canada.

Litigation from First Nations presents possible problems to both oil sands and pipeline companies, which may face increased costs and restrictions on development. Even after a project has been approved, it can be subject to lawsuits challenging its development.

Oil sands extraction projects are long-term, capital-intensive developments with multi-decade payback horizons. Compliance with local, regional and national regulations may not be enough to protect our company from adverse consequences.

RESOLVED

Shareholders request that an independent committee of the Board prepare a report (at reasonable cost and omitting proprietary information) on the environmental damage that would result from the company’s expanding oil sands operations in the Canadian boreal forest. The report should consider the implications of a policy of discontinuing these expansions and should be available to investors by November 2010.

SUPPORTING STATEMENT

The requested report should discuss the intense environmental and social impacts of oils sands operations that occur despite best efforts at mitigation, including the environmental impact on water resources and biodiversity, and the social impact on Albertans, including indigenous populations.

ExxonMobil – Environmental Impacts of Oil Sands

WHEREAS

ExxonMobil has significant investments in the Canadian oil sands. ExxonMobil owns 69.6% of Imperial Oil, one of Canada’s largest oil companies. Imperial is 100% owner of the Cold Lake oil sands project and also owns 25% of Syncrude. ExxonMobil and Imperial jointly own and operate 100% of the Kearl oil sands project. According to ExxonMobil’s FY2008 10-K, 1.1 billion barrels (over 50%) of our company’s additional proven reserves come from Kearl, demonstrating our company’s dependence on Canada’s oil sands for long term growth. There are significant environmental, social and economic challenges associated with the oil sands. The resource-intensive and environmentally damaging nature of oil sands development may introduce regulatory, operational, liability and reputational risks to oil sands companies.

Water scarcity is a growing operational concern for oil sands development. Local annual water flows are projected to decrease 24-68% over the coming century. According to the Petroleum Technology Alliance of Canada, “rapidly growing demands for water… will drive and limit development.”

The persistence of tailing ponds, which are known to leak toxic pollutants into groundwater, may present risks along with significant reclamation costs not currently carried on our balance sheet.

Lawsuits filed by Aboriginal peoples against the Canadian government challenge oil sands and pipeline projects even after approval. Mining the oil sands’ tar-like bitumen is expensive, with multi-decade payback horizons. Volatile oil prices and changing demand can impact the viability of these projects. The International Energy Agency found that since oil prices peaked in July 2008, 85% of deferred or cancelled non-OPEC production capacity was in the oil sands. According to Ernst & Young’s 2009 Business Risk Report: Oil and Gas, “*c+ompanies that invest in long term oil projects with a high marginal cost of production, such as… oil sands, are likely to be the most vulnerable.” Nexen, another oil company, dedicates over three pages of its FY2008 10-K to risks associated specifically with its “heavy oil” (oil sands) projects. Shareholders believe ExxonMobil has not adequately reported on how possible risks associated with oil sands projects may impact our company’s long term financial performance, given our company’s significant investments in this area.

RESOLVED

Shareholders request that the Board prepare a report discussing possible long term risks to the company’s finances and operations posed by the environmental, social and economic challenges associated with the oil sands. The report should be prepared at reasonable cost, omit proprietary and legal strategy information, address risks other than those associated with or attributable to climate change, and be available to investors by August 2010.

SUPPORTING STATEMENT

The Board shall determine the scope of the report. Proponents believe risk information of interest to shareholders could include, among other things, assessing the impact of worst-case along with reasonably likely scenarios regarding:

Environmentally-related restrictions that might hinder or penalize operations, including those associated with water, land and tailings;

Potential effects of Aboriginal lawsuits against the Canadian government;

Vulnerabilities to market forces that might lead to oil sands project cancellations.

ConocoPhillips Cops Out on Aggrieved Refinery Neighbors

In early June, I traveled with members of the Interfaith Center for Corporate Responsibility (ICCR) through Louisiana’s heavily industrialized and highly polluted 85-mile stretch between New Orleans and Baton Rouge known as “Cancer Alley,” then further west to the town of Mossville, a cancer alley unto its own. Our guides were leaders from local environmental justice, indigenous community, and coastal restoration groups, including the New Orleans-based Advocates for Environmental Human Rights (AEHR), which fight to restore the state’s damaged coastline and obtain environmental justice for neglected communities.

Mossville was once rich in biodiversity and natural resources. The country town was thriving when Jim Moss, a former slave, arrived in the 1790s and opened a post office. Settlers fished the swamps, raised livestock and raised families free from racial hostility.

In the 1920s and 1930s, oil and chemical companies were lured south by cheap labor and tax exemptions that endured for decades. By the 1970s, Mossville was home to the largest concentration of polyvinyl chloride (PVC) facilities anywhere in the U.S. In all, 14 industrial facilities won permits to operate in and around Mossville.

The community’s health declined as it was gradually poisoned by industrial flares, groundwater contamination, PVC emissions and other potent chemical hazards. ConocoPhillips, PPG Industries and Georgia Gulf are among the companies responsible for the most toxic and flammable substances processed and stored in Mossville.*

By 1998, Mossville residents began exhibiting recurring illnesses – cancers, rashes, and chronic respiratory and reproductive diseases — compelling the federal Agency for Toxic Substance and Disease Registry (ATSDR) to test residents’ blood.  Blood levels of dioxin were an alarming three times higher than the general population. The Environmental Protection Agency (EPA) recorded vinyl chloride emissions at 120 times greater than the ambient air standard. University of Texas researchers found that 91 percent of the residents suffered from at least one disease related to toxic chemical exposure. Despite these findings, government agencies failed to respond to the community’s need for medical services, relocation assistance, and pollution reduction.

Faced with a dying community, residents mobilized to create Mossville Environmental Action Now (M.E.A.N.), and collaborate with AEHR and Wilma Subra, a chemist who received a MacArthur “genius” grant for her environmental health advocacy. Their analysis of government data found clear matches between the specific dioxins and dioxin compounds in emissions and waste transfers, and those found in residents’ blood, attic dust, yard soil and vegetables. A comparison of EPA and ATSDR data found an astounding 77 percent of the dioxin compounds emitted by one Georgia Gulf facility, for example, matching 77 percent of the dioxins detected in blood samples in 2001.*

In 2008, Mossville residents brought their story to ConocoPhillips’ (ticker symbol: COP) annual meeting. ConocoPhillips’ Lake Charles refinery sits on the edge of Mossville and has a history of ignoring community concerns. At the meeting, CEO Jim Mulva promised them a thorough and careful investigation of their concerns. A year passed. Residents returned to the 2009 annual meeting, and again heard promises – this time Mulva’s personal assurance he’d travel to Mossville within sixty days.

In support of the community, members of the ICCR (including Trillium Asset Management Corporation) wrote to Mulva, urging him to keep his promise.

Mulva agreed to meet in Mossville in July, stipulating that only three residents could attend. The community agreed to this unreasonable condition hoping that a first meeting could plant the seeds for future dialogues. One day before the scheduled meeting, local plant manager Willie Tempton emailed M.E.A.N. saying Mulva would not attend because “significant changes in the external environment” would make it difficult if not impossible to meet the objectives of the meeting. Tempton attributed Mulva’s no-show on outside interference “from the media and the investors”.

A respectful letter from investors and vague indications of media interest either frightened off the chief executive of one of the nation’s largest companies or merely brought to the surface the arrogance that allowed it to pollute Mossville. If ConocoPhillips intends to proceed from a place of respect and integrity, Jim Mulva should have nothing to fear from media interest or concerned shareholders. The invitation is still open to visit Mossville. It would be a wiser move to accept it than to underestimate the persistence and determination of Mossville residents and their allies.

Trillium Organizes Tour of ‘Cancer Alley’

In early June, Trillium Asset Management Social Research Analyst Susan Baker led a group of 40 investors on a fact-finding tour of Louisiana’s “Cancer Alley.” The investors, who were gathered in New Orleans for the annual meeting of the Interfaith Center for Corporate Responsibility, represented faith-based institutions and socially responsible investment firms collectively holding billions of dollars under management.

They traveled 200 miles by bus to tour the heavily industrialized and highly polluted stretch west of New Orleans.  Guided by prominent experts from local environmental justice, indigenous community, and coastal restoration groups, including the New Orleans-based Advocates for Environmental Human Rights, investors were provided with an in-depth examination of the history and current day environmental impacts of industrial corporations on Louisiana communities.  The tour’s ultimate destination was Mossville, LA (known as the “unofficial polyvinyl chloride capital”) to talk to residents who have been disproportionately burdened by the toxic hazards emitted from 14 industrial facilities owned by companies such as Conoco Phillips, PPG Industries and Georgia Gulf. The concentration of vinyl chloride in Mossville, a known carcinogen, has been measured in quantities significantly exceeding ambient air quality standards set by the EPA to protect human health. In 1999, the U.S. Agency for Toxic Substances and Disease Registry reported that residents of Mossville, had blood dioxin levels three times higher than the national comparison group. Supported by shareholder advocacy and legal actions Mossville residents have fought long and hard to make their community viable again.  At the conclusion of this extraordinary tour, Trillium, ICCR, and the Investor Environmental Health Network committed to bring our collective shareholder voice to bear on the environmental injustices compromising human life and health in Cancer Alley.

For more information, contact Susan Baker at sbaker@trilliuminvest.com

Related links:

Environmental Justice Victory in Norco, Louisiana

Dow Chemicals – Report on Pesticde Use and Asthma

WHEREAS:

• Approximately half of Dow’s end-use pesticide products (73 of 149) may be linked to asthma and other respiratory problems through active or inert ingredients or metabolites. Common Dow pesticide products with ingredients linked to respiratory problems include: FulTime, Dursban, Lorsban, Glyphomax, Tordon, Telone, Starane, Dithane, Widematch, Vikane/Profume and more.

• According to the Centers for Disease Control and Prevention (CDC), 16 million people in the U.S. suffer from asthma. Since the mid-1980s, asthma rates have reached epidemic levels.
• CDC states that nearly 1 in 8 school-aged children have asthma, the leading cause of school absenteeism due to chronic illness. Children are more susceptible than adults to asthma; lungs do not fully develop until at least the eighth year after birth, making a child vulnerable to pesticides and other pollutants linked to asthma. The number of children dying from asthma increased almost threefold from 1979 to 1996. <!–[if gte vml 1]&gt;&lt;![endif]–>The estimated annual cost of treating childhood asthma is $3.2 billion.

• According to a 2004 study in Environmental Health Perspectives, pesticides are both a trigger and root cause of asthma. Researchers discovered that children exposed to herbicides are four and a half times more likely to be diagnosed with asthma before age five; toddlers exposed to insecticides are over two times more likely to get asthma.

• In addition to its retail and wholesale pesticide products, Dow produces many active ingredients in pesticides ultimately sold by other companies. For example, Dow is the sole US producer of 2,4-D, and one of the world’s largest producers of chlorpyrifos, both of which are linked to asthma.
• Data from CDC’s 2005 National Report on Human Exposure to Environmental Chemicals found 76% of Americans have chlorpyrifos metabolites in their bodies. Children ages 6-11 have exposure at four times the level EPA considers acceptable for long-term exposure. Additionally, more than 25% of Americans have 2,4-D in their bodies, with highest concentrations also found in children ages 6-11. Proponents believe that CDC’s data may aid in correlation of exposures to disease, which could in turn increase legal liabilities for Dow.

RESOLVED

Shareholders request that the Board establish an independent panel, controlling for conflict of interest, to publish by May 2009, at reasonable cost and excluding proprietary information, a report analyzing the extent to which Dow products may cause or exacerbate asthma, and describing public policy initiatives, and Dow policies and activities, to phase out or restrict materials linked with such effects.

SUPPORTING STATEMENT

Proponents believe the report should include any and all Dow products found in peer-reviewed literature to potentially cause and/or trigger asthma, including end-use pesticides (and their inert ingredients and metabolites), pesticide active ingredients and other chemicals.

Chevron – Global Environmental Standards Report

WHEREAS

The Chevron Business and Ethics Code places the highest priority on the safety of its staff, community members and the environment where it operates. Corporate Policy 530 “commits Chevron to comply with the spirit and letter of all environmental, health and safety laws and regulations, regardless of the degree of enforcement.”

Our company operates in 180 countries, including Africa, Asia and Latin America nations where environmental regimes may be less protective of human health and the environment than in North American and European countries where Chevron operates.

CEO David O’Reilly has recognized the importance of our company’s relationships with oil producing nations in Africa and Latin America. (International Petroleum Finance, 03/09/05, “Chevron Chief Believes the Surplus is Over.”)

Notwithstanding Chevron’s efforts to comply with environmental laws and regulations in developing countries, our company has repeatedly been cited for practices that allegedly have caused environmental damage and harmed the health and welfare of local communities.

• Chevron is accused of polluting land and water resources in its ongoing operations in the Niger Delta. According to observers, these persistent environmental problems have fueled civil unrest, protests against our company and a related lawsuit alleging Chevron’s complicity in security forces’ killing of two protestors. (Nigeria Ten Years On: Injustice and Violence Haunt the Oil Delta, Amnesty International, 11/03/05)

• Kazakhstan authorities have imposed a $609 million fine on the Chevron-led consortium developing the Tengiz oil field, for alleged environmental violations.

• In 2002, the Angolan government fined Chevron $2 million for pipeline oil spills that polluted beaches and damaged fishing in the Cabinda region.

• Chevron is on trial in Ecuador for widespread contamination of Amazonian land and water resources in the 1970s. (“Rain Forest Jekyll and Hyde,” The New York Times, 10/20/05)

• Unocal’s pipeline operations in Burma contributed to the deforestation of the last primary tropical rainforest on mainland Asia, a recognized ‘biodiversity hot spot.’ (“Unocal-Total Oil Pipeline in Burma Threatens Indigenous People, Animals,” Environmental News Network, 4/27/02)

Chevron’s total Environmental, Health and Safety Fines and Settlements has increased from 278 in 2002 to 699 in 2006, according to the company’s latest Corporate Responsibility Report.

Chevron’s three strategic priorities for environmental performance are: “Defining world-class standards, measuring and communicating performance and demonstrating continual performance improvement,” toward the goal of being “recognized and admired everywhere for having a record of environmental excellence.”

RESOLVED

The shareholders request that the Board prepare a report by November 2008, prepared at reasonable cost and omitting proprietary information, on the policies and procedures that guide Chevron’s assessment of host country laws and regulations with respect to their adequacy to protect human health, the environment and our company’s reputation.

SUPPORTING STATEMENT

We believe that Chevron’s record to date demonstrates a gap between its international environmental aspirations and its performance, which would be narrowed by a commitment to apply the highest environmental standards wherever the company operates. The requested report would play a role in illuminating and addressing the factors accounting for this gap.

Formulate A Comprehensive Emissions Reduction Plan – Wells Fargo

Whereas: Climate change and impending policies associated with reducing Greenhouse Gas (GHG) emissions have significant implications for Wells Fargo & Company (“Wells Fargo” or “Company”) and its competitors;

Whereas: The Company’s U.S. and global peers are implementing substantial new policies, programs, and objectives related to climate change and reducing their direct and indirect GHG emissions;

Whereas: Financial support for emissions-intensive activities and businesses is the most significant impact Wells Fargo has regarding climate change; Whereas: Loans, lines of credit, leases, and other multi-year credit guarantees made by the Company to a variety of industry clients (electric utilities, commercial real estate, home builders, oil and gas and coal companies, agricultural companies, and auto manufacturers) may be at risk of default because of the long-term consequences of climate change and global GHG regulations; Whereas: Wells Fargo is the USA’s “#1 agricultural lender among all banks,” “#1 mortgage lender to home builders,” and “one of the USA’s leading commercial real estate lenders among all banks” according to its website; Whereas: JPMorgan Chase (JPMC) works with its largest GHG-emitting clients to develop carbon mitigation plans–including emissions disclosure, offsets, renewable energy investments, and GHG reduction goals–by quantifying the costs of emissions and internalizing those into the analysis of power sector transactions; in 2006, JPMC began reporting the GHG footprint of its power sector portfolio to develop new financial products to facilitate emissions reductions, and is building a commodities trading business for NOX, SO2 and CO2 trading; Whereas: Bank of America has committed to reporting and verifying its emissions from operations AND its public energy and utility portfolio, and reducing those emissions by 7% by 2008;

Whereas: Wachovia, JPMC, and Bank of America commit to engaging in national public policy discussions on climate regulations and renewable energy; Whereas: Citigroup began reporting on CO2 emissions from power projects it finances in 2003;

Whereas: Citigroup, Bank of America, JPMC, Goldman Sachs, and HSBC have set quantitative targets to reduce direct CO2 emissions, while they, and Wachovia and ABN-AMRO, have adopted a company-wide policy on climate change; Whereas: HSBC pledged to become carbon-neutral by the end of 2006 and met that goal early;

Whereas: While Wells Fargo’s “10-Point Environmental Commitment” has made some progress on reducing emissions from internal operations through conservation measures and offsets, it lacks a comprehensive, strategic approach and well-established goals for reducing both direct emissions from operations and indirect emissions from its GHG-intensive clients; Resolved: That stockholders of Wells Fargo & Company request that the Board of Directors formulate comprehensive emissions reduction goals relating to (a) the Company’s own operations and (b) the activities of its corporate borrowers, advisory and project finance clients, and the companies whose securities Wells Fargo underwrites. The goals and the extent of the Company’s progress in meeting them should be disclosed to shareholders by October 2007 and annually thereafter, at reasonable cost and omitting proprietary information.

Report on Developing Sources of Renewable Energy – ConocoPhillips

Whereas: Due to the international requirements of the Kyoto Protocol, ConocoPhillips is facing unprecedented pressure to reduce emissions and meet clean energy demands, and growing public pressure to make significant emissions reductions.

To avoid the most dangerous impacts of climate change, experts believe that we must hold CO2 emissions at or near 2004 levels for the next 50 years. Some governments are implementing ambitious reduction targets, driving the demand for renewables. For example, California and New Mexico have plans to reduce greenhouse-gas emissions from 75 to 80% by 2050; the U.K., 60% by 2050. Thirty-eight states, provinces or countries have adopted renewable portfolio standards, and 49 countries have adopted targets for the electricity share provided by renewable sources.

In July 2006, the E.U. overwhelmingly approved a jet fuel tax on flights within member nations, which could potentially reduce demand.

Failure to reduce operational emissions, or to offer low-carbon products may result in the purchase of expensive carbon credits even as competitors are generating new revenue sources through the sale of excess credits.

Renewables are the fastest growing segment of the energy market. In the past ten years, wind energy worldwide has grown by around 28% per annum. President Bush said that wind energy could provide 20% of the country’s electricity supply. In 2006, US photovoltaic installations grew by 20% over 2005, among the highest growth rates in the world due to new federal and state programs to stimulate demand.

Two of our main international competitors, Royal Dutch Shell and BP, have significant renewable energy divisions. Shell is investing US $500,000 – $1 billion in new energy technologies over a five-year period. BP has been in the solar business since 2002, realizing its first profit in 2004 and currently enjoying a 20% worldwide market share. It plans to invest $8 billion in alternative and renewable energy businesses over a 10-year period.

Today’s 10,000 MW of wind power used in the U.S. displaces the equivalent of 3.5% of the natural gas used nationwide to generate electricity.

The Department of Energy estimates that by 2015, U.S. photovoltaic capacity will displace the emission of 10 million metric tons per year of CO2 emissions.

Resolved: Shareholders request the Board to prepare a report (at reasonable cost and omitting proprietary information) by September 1, 2007 explaining how the company will respond to rising regulatory, competitive and public pressure to significantly develop renewable energy sources.

Shareholder Supporting Statement

ConocoPhillips’ Baseline Sustainable Development Report states – “We plan to continue to develop technology options with the potential to enable renewable energy and in particular, renewable fuels.” Yet the company’s portfolio currently includes no investments in renewable energy projects, nor has our company told investors how it intends to meet growing regulatory pressures for renewable energy. Supporting this resolution will indicate shareholder desire for full disclosure of the company’s strategy to meet growing demand for diversified energy sources and to remain competitive in increasingly carbon-constrained energy markets.