Majority Action’s Director Vote Recommendation
We are calling on investors to vote against Thomas A. Fanning, Chairman, President, and Chief Executive Officer, and David J. Grain, Lead Independent Director ahead of Southern Company’s annual general meeting on May 25, 2022. Votes against Thomas A. Fanning and David J. Grain are warranted on the basis of their failure to oversee the climate performance of Southern Company.
The Office of the Illinois State Treasurer has flagged that it intends to withhold its votes from Board Chair Thomas Fanning and has also been flagged by the Climate Action 100+ initiative.
Southern Company generated the fourth most electricity and was the third-highest emitter of CO2 among U.S. investor-owned utilities in 2019.
The company has a net-zero by 2050 goal for its electric production, however its interim target only seeks to reduce emissions by 50% from 2007 levels by 2030. Furthermore, the company’s net zero targets appear to exclude emissions associated with the generation of power purchased for resale to its customers and scope 3 emissions related to its customers’ use of fossil gas.
Recently, investor-owned utilities such as Duke Energy and Dominion Energy have expanded their net zero goals to include certain scope 2 and 3 emissions including emissions from power purchased for resale and customers’ use of fossil gas from their gas distribution businesses.
Though Southern Company temporarily reached its 2030 GHG reduction target in 2020, and projects it will consistently do so by 2025, the misalignment of the company’s decarbonization trajectory to consequential net zero milestones is cause for concern. In 2021, the International Energy Agency’s (IEA) Achieving Net Zero Electricity Sectors in G7 Members report requires emissions reductions of 76% or higher to be achieved by 2030 in G7 countries from 2019 levels under its Net Zero by 2050 scenario, with average reductions on the order of 6% per year between now and 2035. Similarly, the Climate Action 100+ Global Sector Strategy for Electric Utilities reiterates that investors expect that emissions from electricity generation should reach net zero by 2035 in advanced economies.
While Southern Company has made plans to retire a large amount of its coal generation by 2028, the company does not meet any criteria for net zero capital alignment, according to Southern Company’s 2022 Climate Action CA100+ scorecard. The capital expenditure plans of Southern subsidiary Georgia Power are a clear example of the gap between Southern’s stated long term decarbonization goal and the company’s capital expenditure plans. Georgia Power is proposing to certify an additional 2,175 megawatts (MW) of capacity from natural gas power purchase agreements between 2024-2028. Georgia Power’s 2022 Integrated Resource Plan (IRP) proposes 2,300 MWs of renewable resources by 2029 — and sets the expectation to request an additional 3,700 MWs by 2035 through future IRP proceedings.
Southern Company’s continued lobbying and climate policy engagement at the state level and in Congress, opposing needed legislation to address climate change, is also misaligned with limiting warming to 1.5ºC. While Southern Company took the right steps in supporting the Build Back Better framework and its climate provisions, as of the end of 2020, the company has also deployed lobbyists for “environmental regulatory relief, generally.” Southern Company Gas CEO Kimberly Greene chairs the American Gas Association, which lobbied against parts of the Build Back Better Act. Georgia Power has also supported legislation at the local level which would make it illegal for government agencies and municipalities to adopt building codes promoting clean energy. Southern Company’s score from InfluenceMap regarding climate policy engagement was also very low, in the D- band, and was described as “appearing to lobby on climate policy with largely negative positions.”
Southern company has failed to set robust interim targets, make the near-term shifts in capital allocation and investment necessary to decarbonize in alignment with a 1.5°C pathway, and ensure alignment of policy influence activities. Therefore, we recommend that shareholders vote against Thomas A. Fanning, Chairman, President, and Chief Executive Officer, and David J. Grain, Lead Independent Director at the company’s annual meeting on May 25, 2022.