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November 22, 2013

Investors Call for Improved Disclosures by Operators of Wood-Burning Power Plants
    by Robert Kropp

A report by the Partnership for Policy Integrity challenges claims of carbon neutrality by three companies with bioenergy operations, and 15 fifteen investors call on the Securities and Exchange Commission to review disclosures by the companies. -- A coalition of sustainable institutional investors have written to the Securities and Exchange Commission (SEC), requesting that it review the disclosures of three operators of wood-burning power plants “for misleading statements about the benefits of biomass energy and failing to disclose key information about environmental impacts, expected regulations, and financial risks,” according to a press release from the Partnership for Policy Integrity (PFPI).

Also submitted to the Commission was a report by PFPI assessing the quality of SEC disclosures by Dominion Resources, Southern Co., and Covanta.

Referring to guidance on climate change disclosures issued by the Commission in 2010, the report describes claims of carbon neutrality by operators of wood-burning power plants as a “clean energy fallacy” and concludes that the three companies “are in some cases directly impacted by new policies and regulations, and have asserted to state and federal regulators that new regulations could make bioenergy uneconomical, but they have not disclosed these concerns to the SEC and investors.”

Under certain circumstances, the guidance issued by the SEC requires a company to “to disclose the impact that business or legal developments related to climate change may have on its business.”

The 15 investors, which include members of the Interfaith Center on Corporate Responsibility (ICCR) and other organizations, collectively represent more than $100 billion in assets under management.

“We are writing to request that the Commission evaluate disclosures of certain registrants in the bioenergy industry for consistency with the Commission’s disclosure rules and 2010 Climate Guidance,” the investor letter states.

“Our review of disclosures is inspired and informed by the Commission’s 2010 Climate Guidance, which clarified the obligations of companies to accurately and completely report on financial implications of carbon emissions and regulatory developments related to climate change,” the letter continued. “We request that the Commission assess whether the companies have adequately disclosed related risks and material information needed to make their disclosures non-misleading, and to require remedial disclosures where needed.”

Signatories also requested that Commission representatives meet with them to discuss the findings of the PFPI report, and that the Commission issue a clarifying statement on the reporting requirements for operators of bioenergy plants.

“Burning wood in power plants emits more greenhouse gases than fossil fuels on a day to day basis, as well as air pollutants that degrade air quality and threaten health,” said Mary Booth of PFPI. “Companies that present bioenergy as ‘clean’ and ‘carbon neutral’ are likely to be misleading investors, because bioenergy carbon neutrality, if it occurs at all, may only occur years to decades into the future.”

The companies targeted by the investor letter were quick to respond, according to Biomass Magazine.

“The federal government issues production tax credits for generating units using waste wood and considers them to be renewable and sustainable,” a spokesperson for Dominion Resources said.

But Leslie Samuelrich, president of Green Century Capital Management and one of the letter's signatories, said, “For those of us who actively invest in renewable energy, it is essential to have a honest disclosure of the relative climate benefits of biomass energy compared to wind and solar energy. The SEC needs to take action here to compel nonmisleading disclosure by biomass companies that provides clear guidance as to what constitutes clean and low-carbon renewable energy.”

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