Kinder Morgan Becomes Latest Fossil to Face Climate Risk Disclosure Dilemma
Kinder Morgan, the heavily–leveraged Houston company that wants to triple the capacity of its Trans Mountain diluted bitumen pipeline, doesn’t think science is settled enough to assess the risk that climate change—or policy responses to it—might pose to its business. Some shareholders disagree.
Kinder Morgan shareholders including the influential California pension giant CalPERS, with its five million KM shares, will vote later this month on a resolution to require the company’s executive team to provide its owners with “an assessment of the medium- and long-term portfolio impacts of technological advances and global climate change policies,” Greenpeace Canada’s Keith Stewart writes in the National Observer. “It will likely be joined by Blackrock, the world’s largest asset manager and one of the largest investors in Kinder Morgan, which is calling on all companies to assess climate risk.”
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In its most recent annual report, the American company equivocates on the attribution of global warming to human emissions, Stewart notes, a skepticism that its Canadian president Ian Anderson expressed last year before walking back his comments. Now, KM’s board is urging shareholders to vote against the disclosure resolution, arguing that such an assessment “may cause us to overstate the likelihood of certain risks, which could be detrimental to our business.”
Its letter to shareholders concedes that “some climatic models indicate that global warming is likely to result in rising sea levels, increased intensity of hurricanes and tropical storms, and increased frequency of extreme precipitation and flooding.” Nonetheless, the company’s management told its owners, “we are not in a position to say whether the physical impacts of climate change pose a material risk to our business, financial position, results of operations, or cash flows.”
More likely, Stewart speculates, C-suite executives fear what an honest response would force them to reveal.
Exxon is under multiple investigation for concealing what it knew about the climate effects of burning fossil fuels. Canada’s Suncor, responding to a similar request, had to concede recently to its shareholders that if the world approaches its Paris climate goals, the company’s business future will more or less collapse under the combined weight of plummeting oil demand and collapsing prices.
British Columbia gave Kinder Morgan until June 2 to make a final commitment to the Trans Mountain expansion, but the company has admitted that it is unlikely to complete the much-contested undertaking on its original C$6.8-billion budget, and questions have been raised about whether it could survive the project’s failure.
“For the moment,” Stewart observes, “Kinder Morgan is choosing to fight its own shareholders so that it doesn’t have to answer the question.” But silence will only work so long, he notes. “Canada’s security regulators, inspired by the work of the global Financial Stability Board led by former Bank of Canada Governor Mark Carney, are looking at making these kinds of climate risk disclosures mandatory.”