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Xcel Energy Reaches Climate Risk Disclosure Pact With New YorkSubmitted by: Ted Allen, Publications

New York Attorney Andrew Cuomo announced an agreement with Xcel Energy for the utility firm to provide more disclosure to investors on the financial risks of climate change.

?This landmark agreement sets a new industry-wide precedent that will force companies to disclose the true financial risks that climate change poses to their investors,? Cuomo said in an Aug. 27 press release. ?Coal-fired power plants can significantly contribute to global warming and investors have the right to know all the associated risks.?

The agreement was hailed by Mindy S. Lubber, president of the Ceres investor coalition, which has called for greater corporate disclosure of climate risks. ?This groundbreaking settlement will send ripples far beyond Xcel Energy. It serves notice that all companies face financial exposure from climate change and will be expected to better inform investors of their strategies for dealing with it,? Lubber said in the New York press release.

Dick Kelly, chairman and CEO of Minneapolis-based Xcel, said the accord ?will enhance our already aggressive efforts to be responsible environmental stewards.? ?We previously provided detailed information concerning the expected impact of climate change and greenhouse gas emissions regulations on our operations, and under this agreement we will make even more detailed disclosures,? Kelly said in a press release, which notes that the company has voluntarily reduced its greenhouse gas emissions by more than 18 million tons since 2003.

According to Cuomo, Xcel agreed to provide detailed disclosure annually on present and probable future climate-change regulation and legislation; climate-change related litigation; and the physical impacts of climate change. Ceres--joined by Cuomo and state officials from California, Maryland, Florida, Rhode Island, and five other states, as well as the California Public Employees? Retirement System--have petitioned the Securities and Exchange Commission (SEC) to clarify what companies should be disclosing about climate change risks. The SEC has not publicly acted on that request.

The settlement arose from an investigation that Cuomo launched last September when he demanded information from Xcel and four other major utility firms--AES, Dominion Resources, Dynegy, and Peabody Energy--that plan to develop additional coal-fired power plants. The subpoenas to the utility firms were issued under the Martin Act, a 1921 New York state law that grants the attorney general ?broad powers to access the financial records of businesses,? Cuomo said.

At that time, Peabody Energy denounced Cuomo?s probe as political grandstanding. In a press release, the company said the investigation ?has nothing to do with investor communications,? but is an ?unwarranted use of the legal system to advance the ?just say no? agenda, which opposes practical energy answers and has driven America to an unnecessary energy crisis.?

Cuomo?s predecessor, Eliot Spitzer, invoked the Martin Act when he probed Wall Street analysts and mutual fund companies earlier this decade. Whereas Spitzer used the threat of criminal prosecution to negotiate settlements with investment banks, Cuomo primarily has used civil enforcement tools. In early June, he announced a settlement with Moody?s, Standard & Poor?s, and Fitch Ratings to reform the way they rate mortgage-backed securities. Throughout this month, Cuomo--with help from the SEC and other state officials--has made headlines by announcing that major brokerage firms have agreed to buy back billions of dollars in auction rate securities.

While some business advocates complain that Cuomo should leave these matters to federal regulators, he has received praise from other observers who don?t believe that the SEC has done enough to respond to the credit crisis. In an editorial on the rating firm settlement, Financial Week said ?this is one of those times when the SEC could use a spine transplant from state regulators.?

Full post as published by Institutional Shareholder Services -- Corporate Governance Blog on August 29, 2008 (boomark / email).