Ford Motor Co. to Prepare Climate Risk Report

As a result of a shareholder resolution filed with the Ford Motor Co., the country's second largest automaker has announced it will issue a first-of-its-kind comprehensive report later this year.

DEARBORN, Mich. — As a result of a shareholder resolution filed with the Ford Motor Co., the country's second largest automaker has announced it will issue a first-of-its-kind comprehensive report later this year that will examine the business implications of reducing greenhouse gas emissions from Ford vehicles -- as well as the facilities that produce them. The climate risk report will also examine impacts from possible policy and regulatory changes.

Building on previous reporting of greenhouse emissions from its manufacturing facilities, Ford agreed today to examine the strategic and financial implications of various policy and regulatory greenhouse gas reducing scenarios on the company's business over the next five to ten years. The report will focus primarily on the company's products and facilities in its core North American market that accounts for roughly two-thirds of its annual sales. The Ford report also will assess the evolving role of new technologies such as hybrid and hydrogen fuel-cell vehicles in light of the climate change issue.

"With this agreement, we have turned the corner on a pivotal and pressing issue, as more of our nation’s leading companies are getting the message that it is in the best interest of investors and the bottom line to consider and prepare for the financial and business implications of climate change," said Connecticut State Treasurer Denise L. Nappier. "I congratulate Bill Ford for his recognition that planning for climate change is not merely an environmental issue, but a key business issue. As a long-term investor, I am hopeful that where Ford leads, others will follow."

Because motor vehicles are the fastest growing source of greenhouse emissions, a growing number of investors are concerned that increasing consumer demand for cleaner vehicles, higher gasoline prices, and current and future government policies limiting greenhouse gas emissions from trucks and cars will put the value of their investments at risk if companies get caught flat-footed.

Several shareholder representatives have been meeting regularly with Ford officials in recent months to discuss the report requested in the shareholder resolution, including ICCR, the Boston-based Ceres coalition and the Connecticut Retirement Plans and Trust Funds (CRPTF). Ford said today it will consult with all three groups in preparing the climate risk report.

The primary filers of the shareholder resolution were the Sisters of St. Dominic of Caldwell, N.J., a member of Tri-State CRI and ICCR, and the Connecticut Retirement Plans and Trust Funds. The resolution was formally withdrawn this week.

"Climate change is both a business challenge and an opportunity for the auto sector, which faces a doubled-edge threat of rising gas prices and a growing worldwide push for greenhouse-friendly vehicles," said Mindy S. Lubber, president of Ceres, a coalition of investors and environmental groups that helped launch the Investor Network on Climate Risk (INCR) just over a year ago. “Ford’s commitment to pursue this report shows an important willingness to face this challenge, so that it can better position itself competitively.”

Science and environmental groups were also encouraged by Ford’s announcement, expecting that the report will include detailed projections on future greenhouse gas emissions from its products, in addition to information on emission from manufacturing facilities. According to the Union of Concerned Scientists, Ford’s cars and light trucks sold in 2003 emit about 350 million metric tons of carbon dioxide over their life in addition to the tens of millions of metric tons emitted in manufacturing the vehicles.

“If this report is well done and responsible, it will prepare Ford to excel in competing with companies like Toyota and Honda, which have made greater strides producing vehicles that cut heat-trapping gas emissions,” said Kevin Knobloch, president of the Union of Concerned Scientists in Boston. “An honest look will show that investments to aggressively reduce emissions will cost far less than paralysis and inaction. We look forward to being part of Ford’s process.”

“It’s important that Ford analyze the competitive risks of a high emitting fleet when the markets are demanding cleaner vehicles,” added Ashok Gupta, director of the Air and Energy Program at the Natural Resources Defense Council. “We hope this exercise will help Ford decide both to reduce greenhouse gas emissions from their vehicles as a key component of their long-term product planning, and to seek government policies that will help them make that transition.”

The auto industry accounts for 20% of the country’s and 12% of the world’s greenhouse gas emissions. The industry’s emissions are currently on track to rise by over one-third over the next 15 years and double worldwide by 2050.

The shareholder resolution that was withdrawn this week requested that a committee of independent directors of the Ford board assess: how the company planned to ensure its competitive positioning in light of emerging GHG regulatory scenarios at the state, regional, national and international levels; how the company planned to comply with California’s greenhouse gas standards; and how the company could significantly reduce greenhouse gas emissions from its national fleet of vehicles, using 2004 as a baseline, by 2014 and 2024.

An identical shareholder resolution is still pending before General Motors, the world’s largest automaker.

Ford said today that the company agreed to prepare the report because: climate change is a serious environmental issue and shareholders are increasingly asking about the risks as well as the opportunities associated with it; shareholder value and environmental responsibility go hand-in-hand; and planning carefully and exercising leadership now on this important issue will strengthen the company’s business in the long-term.

The report will be issued by the end of the year and will be developed under the direction of a cross-functional vice-presidential task force that has been working on strategies for addressing climate change since 2003. The Environment and Public Policy Committee of Ford’s Board of Directors will review and approve the report before issuing it by the end of the year. The report will also be reviewed by the full board.

In addition to getting input from shareholders, the company will solicit input for the report from climate change experts at the Massachusetts Institute of Technology and Princeton’s Carbon Mitigation Initiative. The company will also include input from science and environmental organizations such as the Union of Concerned Scientists and the Natural Resources Defense Council.