SOURCE: CA State Controller's Office

May 19, 2006 18:43 ET

Westly Calls on Automakers to Address Climate Change

SACRAMENTO, CA -- (MARKET WIRE) -- May 19, 2006 -- Controller Steve Westly and the Investor Network on Climate Risk today called on the world's largest automakers to address their role in global climate change and the effects it could have on their profits.

Today's effort was aimed at pushing Toyota, Honda, DaimlerChrysler, Volkswagen, BMW, Nissan, and General Motors to increase environmentally sound practices and performance for shareholders. A similar effort in 2004 resulted in action by Ford. Current dialogue between General Motors and investors shows promise of similar positive results.

"Ford has taken the lead with its Climate Risk Disclosure Report. We expect the other companies we invest in to do the same," Westly said. "Taking action will give investors confidence that auto manufacturers are prepared to operate in a carbon constrained economy. Protecting the environment is good for California and good for business."

Controller Westly has been a leader in pushing auto companies to produce cleaner cars. He formed the Global Warming Auto Watch to push companies to harness new, cleaner technologies. That coalition uses its more than $2 billion in auto stocks to push for changes within the auto industry. The coalition includes the California Public Employees Retirement System (CalPERS), the California State Teachers' Retirement System (CalSTRS), the New York State pension fund, the Adrian Dominican Fund, the Tri-State Coalition for Responsible Investment, Connecticut Treasurer Denise Nappier, Vermont Treasurer Jeb Spaulding and New York City Comptroller William C. Thompson.

"A growing number of companies and investors are recognizing the financial risks and opportunities of climate change, and these are especially relevant to the auto sector," Mindy S. Lubber, president of Ceres and director of the Investor Network on Climate Risk, said. "It's important that automakers disclose the implications of climate change for their business, and we look forward to collaborating with them on this issue."

The Investor Network on Climate Risk hosted the May 2005 conference at the United Nations where Westly announced the group's Climate Change Call to Action.

"California's pension funds are among the largest investors in the world," said Westly. "We have a responsibility to protect shareholder value of the companies we invest in."

Yesterday, Controller Westly and the INCR made a similar call on ExxonMobil.

"While the state of California and other oil companies are moving ahead to reduce the risks of climate change, ExxonMobil is stubbornly refusing to meet with shareholders," Westly said. "We demand a meeting with ExxonMobil's board of directors to map out a new direction for the company. Exxon Mobil must limit the risks of climate change and ensure the company is positioned to capture opportunities in alternative energy technologies."

Please see the attached letter to the world's leading automakers.


Dear CEO:

We, as investors managing over $465 billion in invested assets, are writing to request that Company X undertake a comprehensive analysis of the business implications of climate change on the company and report the findings of that analysis to your shareowners. Ford Motor Company recently released the auto industry's first-ever Climate Risk Disclosure Report. The report is an important step toward a strategic response to the changing market and regulatory environment brought on by climate change, rising oil prices, and increasing focus on energy security. We urge Company X to follow Ford's lead by disclosing the financial and competitive risks facing your company due to climate change.

Efforts to curb greenhouse gases will affect the way Company X does business around the world. Your company's ability to compete and thrive in the global carbon-constrained marketplace of today and tomorrow will depend on whether you are rigorously evaluating and disclosing the business risks of climate change.

As fiduciaries, we help manage some of the nation's largest public pension funds, including the California Public Employees' and State Teachers' Retirement Systems (CalPERS and CalSTRS); these two funds alone hold over $1.55 billion in auto company stocks and represent more than two million retirees. As stewards of our beneficiaries' assets, we are concerned that your company may not be not adequately prepared for the regulatory and competitive risks and opportunities brought on by climate change, higher oil prices, and concerns about energy independence.

There are six factors which indicate that auto companies should shift production to cars that are more fuel-efficient, burn clean fuels, and emit less pollution. Those factors are:

--  Volatile gas prices.  High and volatile gas prices as a result of
    Hurricane Katrina coupled with limited supply and rapidly rising world-wide
--  Energy Security.  Dramatic revisions to both the International Energy
    Agency's and the Energy Information Administration's oil price forecasts,
    predicting rising oil prices and increasing dependence on five or six
    middle eastern countries.
--  Energy Independence. New energy independence measures, including
    enactment of the 2005 U.S. Energy Bill, to accelerate introduction of fuel
    efficient technologies and biofuels.
--  New Regulations.  New policies globally ensure that the world's major
    auto markets are covered by carbon or fuel economy standards.  In the U.S.,
    11 states have adopted or are close to adopting tailpipe emission standards
    that would affect 33% of passenger vehicles sold in the U.S.
--  Alternative Technologies. The clear emergence of hybrids as an
    important mid-term auto technology to produce cleaner, more fuel-efficient
--  New Fuels. The emergence of biofuels as the alternative fuel of
Investors representing over $3 trillion in assets came together at the United Nations in May of 2005 to develop strategies on how to maintain shareowner value against this changing economic and environmental backdrop. We are committed to working with the largest emitters of greenhouse gases in our portfolios on how they are positioning the company for long-term profitability, and we invite further conversations with you about these complex issues. We hope the four action items listed in Attachment A will serve as a guide for your climate risk report, which we look forward to reviewing by October 2006.


Steve Westly, California State Controller

Adrian Dominican Sisters
Phil Angelides, Treasurer, State of California
California Public Employees' Retirement System
California State Teachers' Retirement System
Denise Nappier, Treasurer, State of Connecticut
Jeb Spaulding, Treasurer, State of Vermont
William C. Thompson, Jr., Comptroller, City of New York
Tri-State Coalition for Responsible Investment
Attachment A

Companies, both in the auto sector and in other high-risk sectors, have shown that analysis and disclosure of the risks and opportunities posed by climate change can be done. It is an important first step in mitigating the impact of climate change and capitalizing on potential opportunities. Such an analysis will help your company consider and manage the risks and opportunities and enables investors to make more informed investment decisions. We have outlined below the specific actions we are requesting of [company NAME] and others in the industry.

1.  Strategic Analysis of Climate Risk and Specific Management Actions to
    Address Risk - By disclosing [Company NAME]'s strategic analysis of the
    risks and opportunities posed by climate change -- including a clear
    and straightforward statement of your company's current position on
    climate change including policy -- you will be demonstrating to
    investors and other stakeholders your company's commitment to
    addressing the issue, its implications for competitiveness and access
    to resources, as well as the firm's plan for meeting any strategic
    challenges it identifies.  [Company NAME] should also disclose all
    non-proprietary actions you are taking to minimize your climate risk
    or capture opportunities.  You should describe corporate governance
    actions and the executives in charge of addressing climate risk.

2.  Emissions and Their Management - The critical component of a climate
    change strategy in the auto industry is careful management of carbon
    emissions and other greenhouse gases.  [Company NAME] should disclose
    your historical, current, and future emissions of greenhouses gases
    from not just operations and purchased electricity, but most
    importantly from the operation of your vehicle products, as well as
    the specific actions you are taking to reduce emissions.

3.  Quantified Regulatory Scenario Analysis - [Company NAME] should
    analyze and quantify the effect on the firm's competitiveness,
    shareowner value, and possible compliance costs of existing climate
    change and energy standards in any country in which you operate, as
    well as a limited number of plausible greenhouse gas regulatory
    scenarios.  This scenario analysis should include multiple state
    adoption and successful enforcement of the California CO2-equivelant
    vehicle standards, and the imposition of tighter CO2 standards --
    either voluntary or mandatory -- in the EU, Canada, and other
    countries where your company operates.

4.  Assessment of Physical Risks of Climate Change - [Company NAME] should
    also analyze and disclose possible physical effects that climate change
    may have on the business and its operations.  These effects may include
    the impact of changed weather patterns, such as increased storms; water
    availability and other hydrological effects; changes in temperature;
    and impacts of health effects, such as heat-related illness or disease,
    on their workforce.
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