New Report Seeks Securities and Exchange Commission Investigation of Misleading Climate Claims by Biomass Industry Giant
Investors With $53 Billion in Assets Call On SEC To Scrutinize Bioenergy Sector Claims That Burning Wood Reduces Greenhouse Gas Emissions and Benefits Forests
Pelham, MA and Asheville, NC. March 14, 2016 – Citing a new report by the Partnership for Policy Integrity and Dogwood Alliance on Enviva Biomass, the largest wood pellet manufacturer in the US, 34 investment groups with over $53 billion in assets under management have requested that the SEC examine claims of climate benefits in the biomass energy sector, and enforce rules requiring companies to disclose material information, including climate-change related risks, to investors.
See the letter and the report here.
Enviva manufactures wood pellets from trees and forest residues at six plants in the Southern United States. The company harvests wood from tens of thousands of acres of forest yearly, with company data showing that over 50 percent is from hardwoods, not pine plantations. The wood is ground and compressed into dried pellets, then shipped overseas to customers in the UK, EU, and Asia, where wood-burning is subsidized as renewable energy.
Renewable energy is not automatically carbon neutral, and power plant emissions data demonstrate that burning wood for fuel emits more carbon dioxide per megawatt-hour of electricity than burning coal. Forest studies and modeling confirm that while trees may ultimately grow back and offset carbon emissions from burning wood, this process takes decades to more than a century, to the extent that it occurs.
Mary S. Booth, director at the Partnership for Policy Integrity and an author of the report, analyzed documents Enviva filed with the SEC when the company went public in 2015, and subsequent SEC filings. “Enviva claims that burning their wood pellets reduces emissions by more than 80 percent, compared to coal. However, data from Drax Power in the UK, one of Enviva’s biggest customers, show the facility emits more CO2 when burning wood and other biomass than when burning coal, a physical reality that contradicts Enviva’s claims. It’s urgent that the bioenergy industry come clean on its real carbon and forest impacts.”
Julie Gorte, Ph.D., Senior Vice President for Sustainable Investing at Pax World Management LLC, signed on to the letter calling on the SEC to monitor company claims about emissions and enforce disclosure rules that protect investors. “Climate risk is increasingly important to investors, as the Securities and Exchange Commission’s 2010 interpretive guidance on reporting climate risks and opportunities attests,” says Dr. Gorte. “It is important that the agency is aware of the loopholes that companies employ to misrepresent their emissions. This letter and report focuses the disinfecting power of sunlight on one such loophole for producers of wood pellets for electricity generation. We urge the SEC and investors to pay attention to this issue.”
The report highlights misleading claims from Enviva’s SEC filings and public statements in three main areas:
- Company claims that burning wood pellets reduces greenhouse gas emissions compared to coal, without disclosing that emissions from burning the pellets are not included in the tally – just the emissions from pellet manufacturing and transport.
- Complex and contradictory statements that obscure Enviva’s use of whole trees for pellets, including mature hardwoods and wetland forests that are not replanted.
- Inaccurate and misleading portrayals of current US and European policy developments, such as incorrect statements about EPA’s regulation of wood-burning power plants, and failure to disclose decreases in bioenergy subsidies for a major Enviva customer in the UK, Drax Power.
The report concludes that Enviva’s statements about the sources of wood it uses for pellet manufacture are also misleading, because they emphasize the role of “residues,” “sawdust,” and other types of waste wood and downplay cutting of whole trees for feedstock. Specifications for the company’s pellet plants indicate that Enviva predominantly uses large-diameter tree trunks and branches for feedstock, including mature hardwood trees from wetland forests. On-the-ground investigations also bear this out.
"There is ample evidence documenting Enviva's reliance on large volumes of whole trees to make wood pellets; we have seen the wetland forest clearcuts and watched truck after truck loaded with trees enter their facilities," said Danna Smith, Executive Director of Dogwood Alliance. "Enviva and others in the biomass industry present the burning of forests for electricity as a positive but it's actually harming our environment, rural Southern communities, and the climate."
Steven Heim, Managing Director at Boston Common Asset Management and a signatory on the letter, states "There is no green CO2. In addition to producing more CO2, burning wood for electricity can destroy forest carbon sinks for generations to come. Once regulators catch on, the basis for ‘no carbon’ biomass subsidies falls apart and investors may lose, too.”
Companies are required by the SEC to disclose information where there is a “substantial likelihood that a reasonable investor would consider it important in deciding how to vote or make an investment decision, or, put another way, if the information would alter the total mix of available information.” The SEC’s climate guidance extends this requirement to climate change-related concerns, explaining that companies should disclose impacts of legislation and regulation related to climate change; impact of international accords; indirect consequences of regulation or business trends, such as decreased demand for goods that produce significant greenhouse gas emissions; and physical impacts, such as changes in feedstock availability.
Investor groups signing the letter:
Natasha Lamb, Director of Research & Shareholder Engagement, Arjuna Capital
Danielle Fugere, President, As You Sow Foundation
Steven Heim, Director of ESG Research/Shareowner Engagement, Boston Common Asset Management
Stu Dalheim, Vice President, Shareholder Advocacy, Calvert Investments
Steven Viederman, Chair, Finance Committee, Christopher Reynolds Foundation
Shelley Alpern, Director of Social Research & Advocacy, Clean Yield Asset Management
Sally Ann Brickner, OSF. Justice, Peace, and Integrity of Creation Coordinator, Congregation of Sisters of St. Agnes
Duane Roberts, Director of Equities, Dana Investment Advisors
Mark Regier, Vice President of Stewardship Investing, Everence Asset Management
Holly A. Testa, Director, Shareowner Engagement, First Affirmative Financial Network
Jeffrey W. Perkins, Executive Director, Friends Fiduciary Corporation
Leslie Samuelrich, President, Green Century Capital Management
John Harrington, President and CEO, Harrington Investments
Christine Jantz, President, Jantz Management
Peter Krull, President, Krull and Company
Mary Minette, Director of Shareholder Advocacy, Mercy Investment Services
Barbara Jennings, CSJ. Coordinator, Midwest Coalition For Responsible Investment
Luan Steinhilber, Director of Operations and Shareholder Advocacy, Miller/Howard Investments, Inc.
Julie N.W. Goodridge, CEO, NorthStar Asset Management, Inc.
Judy Byron, OP, Director, Northwest Coalition for Responsible Investment
Julie Gorte, PhD., Senior Vice President for Sustainable Investing, Pax World Management Corp.
Rob Fohr, Committee on Mission Responsibility Through Investment, Presbyterian Church U.S.A.
Michael H. Crosby, OFMCap. Corporate Responsibility Office, Province of St. Joseph of the Capuchin Order
Jo Marie Chrosniak, HM, Coordinator, Region VI Coalition for Responsible Investment
Ethel Howley, Social Responsibility Resource Person, School Sisters of Notre Dame Cooperative Investment Fund
Michael Crosby, Executive Director, Seventh Generation Coalition for Responsible Investment
Joy Peterson, PBVM, Sinsinawa Shareholder Committee, Sinsinawa Dominican Shareholder Action Committee, Sinsinawa Dominican Sisters
Nora. M. Nash, OSF, Director, Corporate Social Responsibility, Sisters of St. Francis of Philadelphia
Anna Falkenberg, PhD, Executive Director, Socially Responsible Investment Coalition
Allan Pearce, Shareholder Advocate, Trillium Asset Management
Patricia A. Daly, Executive Director, Tri-State Coalition for Responsible Investment
Timothy Brennan, Treasurer & CFO, Unitarian Universalist Association
Katie McCloskey, Director, Social Responsibility, United Church Funds
Sonia Kowal, President, Zevin Asset Management, LLC