Investors urge SEC to review filings by Dominion Resources, Southern Co., Covanta Holding for misleading statements about biomass energy benefits, failing to disclose information about environmental impacts, expected regulations, financial risks

Allison Oesterle

AMHERST, Massachusetts , November 20, 2013 (press release) – Investors With $100 Billion in Assets Complain to SEC of Misleading and Incomplete Statements About Climate Benefits, Carbon Neutrality, and Risk of Regulatory Action.

A group of investors is urging the U.S. Securities and Exchange Commission (SEC) to review filings by three leading U.S. companies – Dominion Resources, Inc. (D), Southern Company (SO), and Covanta Holding Corp. (CVA) – for misleading statements about the benefits of biomass energy and failing to disclose key information about environmental impacts, expected regulations, and financial risks. The 15 investors – including Domini Funds, Boston Common Asset Management, Green Century Investments, and several faith-based institutions – represent more than $100 billion in assets under management.

Dominion, Southern, and Covanta are publicly traded companies that operate wood-burning biomass power plants in the U.S. The nonprofit Partnership for Policy Integrity (PFPI) reviewed corporate disclosures by the three companies to determine whether disclosures regarding environmental and investment risks associated with biomass energy complied with SEC disclosure requirements, including guidelines provided by the SEC Climate Guidance issued in 2010. The findings are summarized in a report submitted today to the SEC, accompanied by the letter from investment groups requesting SEC analysis. The investor letter and PFPI report are available online at http://www.pfpi.net/investors-to-sec-please-scrutinize-bioenergy-claims.

The investors' letter to the SEC states: "[T]he industry appears to have failed to live up to its obligations for accurate and nonmisleading disclosure … Bioenergy should be required by the SEC to compete for investment dollars without materially exaggerating its value to the environment, or concealing its weaknesses and uncertainties." The letter requests that the SEC clarify what companies are allowed to claim in relation to the climate benefits and "carbon neutrality" of biomass energy.

"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, PhD, director 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."

Leslie Samuelson, president of Green Century Investments, one of the investment firms sending the letter, 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."

Dominion, Southern, and Covanta have presented biomass energy as a key strategy for reducing greenhouse gas emissions from the power sector. Emerging wood demand by the companies is several million tons a year. Burning a ton of wood emits about one ton of carbon dioxide, along with "conventional" air pollutants including particulate matter, nitrogen oxides (smog precursors) and carbon monoxide.

The PFPI report identifies key concerns about how companies have characterized biomass energy to investors:

• The "clean energy" fallacy. Companies represent their wood-burning power plants as "clean" and "carbon neutral", even though their day-to-day operations emit greater quantities of carbon dioxide and as much or more of key air pollutants as coal and gas plants, per megawatt-hour. The idea that bioenergy should be treated as carbon neutral rests on unproven assumptions that are usually out of the control of bioenergy companies, such as the idea that forests will be allowed to regrow for decades to neutralize carbon dioxide emitted by burning.
• Understatement of regulatory and financial risks. Greenhouse gas emissions from biomass energy are likely to become subject to new regulations. The Environmental Protection Agency is currently determining how to account for bioenergy emissions under the Clean Air Act, and has indicated that facilities burning wood can be large sources of carbon dioxide. States are also beginning to eliminate renewable energy subsidies for large-scale biomass energy, as greenhouse gas emissions from wood-burning are increasingly recognized. Dominion, Southern and Covanta 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.

• Shelley Alpern, director of Social Research & Advocacy, Clean Yield Investments (Norwich, VT);
• Ruth McElroy Amundsen, private shareholder (Norfolk, VA);
• Laura Berry, executive director, Interfaith Center on Corporate Responsibility (New York, NY);
• Sally Ann Brickner, OSF, Justice, Peace, and Ecology coordinator, Congregation of Sisters of St. Agnes (Fond du Lac, WI);
• Patricia A. Daly, OP, executive director, Tri-State Coalition for Responsible Investment (Montclair, NJ);
• Marion Edey, private shareholder (Silver Spring, MD);
• Danielle Fugere, president, As You Sow Foundation (Oakland, CA);
• John Harrington, president, Harrington Investments (Napa, CA);
• Steven Heim, managing director, Boston Common Asset Management, LLC (Boston, MA);
• Adam Kanzer, Domini Funds (New York, NY);
• Nora Nash, OSF, director of Corporate Social Responsibility, Sisters of St. Francis of Philadelphia (Aston, PA);
• Jeffrey W. Perkins, executive director, Friends Fiduciary Corporation (Philadelphia, PA);
• Joy Peterson, PBVM, promoter of Peace and Justice, Sinsinawa Dominican Sisters (Sinsinawa, WI)
• Leslie Samuelrich, president, Green Century Investments (Boston, MA); and
• Stephen Viederman, chair of Finance Committee, Christopher Reynolds Foundation (Boston, MA).

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