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Responsible Alpha was very pleased to present in multiple classes at the Ross School of Business at the University of Michigan describing cases how hurting communities hurts the bottomline. Why It Matters
Mercury in Our Food: The amount of mercury near the surface of many of the world’s oceans has tripled as the result of human pollution.Source: The Guardian.
Air Pollution Kills: Air pollution causes 300,000 premature deaths across Europe each year. New rules recently adopted by the European Parliament could reduce that number 70% over the next ten years. Source: Reuters.
Corporates Hide: In 2014 and 2015, Calvert Investment and its attorneys asked the SEC to address Dow Chemical’s ownership of Union Carbide and to provide restitution to those harmed. Dow Chemical replied that they only bought the assets of Union Carbide not the liabilities. The Union Carbon methyl isocyanate leak December 2-3, 1984 led to 575,000 injuries, 16,000 dead, and billions in damages. Dow Chemical purchased Union Carbide in 2001. Source: SEC and SEC.
Declining Mental Cognition: Air pollution has been shown to affect mental health and cognitive ability, particularly in children.Source: Physicians Weekly.
Dementia: Air pollution is also strongly linked to dementia and cognitive decline in older people. Source: UK Government.
US Poor Air Quality: Nearly 40% of people in the U.S. live in counties that don’t meet EPA air quality standards. Source: State of the Air.
Hurting Our Children: The percentage of Black children in the U.S. suffering from asthma is more than twice that of white children, and their death rate from asthma is ten times higher. Source: US HHS.
Duke Energy Case Study (as of 2020) For years, Duke has stored coal ash in landfills and ponds that often leak toxins into waterways. A leak in 2014 at a Duke North Carolina coal ash pond site left coal ash coating 70 miles of the Dan River. In 2015, Duke pled guilty and agreed to $102 million in fines and restitution due to federal environmental crimes because the company acknowledged it coal ash dumps at five power plants to leak toxic waste into water supplies.
Then, in North Carolina, the Southern Environmental Law Center (SELC) brought lawsuits on behalf of several community groups, resulting in the largest coal ash cleanup in the nation through enforceable commitments to excavate or recycle 126 million tons from all 14 of Duke’s leaking, unlined coal ash sites across the state.
Duke’s net income decreased to $1.4 billion in 2020 compared to $3.7 billion in 2019.
With coal ash cleanup costs to date reported at $3.154 billion and forecast to be at least $9.390 billion, this has materially diminished Duke’s reported $59 billion for its capital expenditure plan to transition to a clean energy future.
The Government Pension Fund of Norway divested its est. $420 million equity investment in Duke.
Fully incorporating Duke’s coal ash debt obligations adds about $3 billion to Duke’s consolidated debt. As a result, S&P downgraded Duke downgraded to BBB+ from A-.
Dominion Energy Case Study (as of 2020)
The Atlantic Coast Pipeline joint venture was a $8 billion 604-mile-long natural gas pipeline with a capacity of 1.5 billion cubic feet of gas daily to alleviate a bottleneck to gas produced from the Marcellus Shale in Appalachia reaching growing markets in Virginia and North Carolina, including the Hampton Roads ports. Risks included:
Pipeline was to go through five BIPOC majority counties in North Carolina, and one of the 3 BIPOC majority counties in Virginia. For example, Robeson county NC is one of the poorest in the state, with a 2010 median household income of $30,608, and per capita income of $15,321. Demographically, Native Americans constitute 40% of the population, Blacks 24%, and Whites 32%.
More than 1000 water crossings in the State of Virginia alone.
July 2020: Dominion Energy and Duke Energy announced the cancellation of the Atlantic Coast Pipeline Project leading to a debt increase of $950 million for Dominion and $850 million for Duke Energy and a 3.5% to 4% negative earnings impact.
2020: Net income from discontinued operations including noncontrolling interests decreased $2.6 billion.
2020: Dominion recorded a current liability due to the Atlantic Coast Pipeline in 2020 of $1.052 billion.
2020: Net income declined nearly 130% to a net loss of about $401 billion in 2020.
Summary
As demonstrated in the attached presentation, environmental justice materially impacts the economic value of the corporations globally. There exist hundreds of examples to choose from globally. The key is to communicate and work with communities to decrease public health risks as this risks can hurt both stakeholders and shareholders.
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