June 5, 2012
by Mercy Investment Services Social Responsibility Team
This year, as we recognize the 40th World Environment Day, Chevron investors are using their stake in the company to press for change and accountability for damage done to the Amazon rainforest.
For almost 20 years, oil companies Texaco and Chevron have fought a lawsuit over damages to the Amazon rainforest in Ecuador caused by oil drilling that has impacted the lives and health of village residents near the drilling sites. Last week, Chevron shareholders – including Mercy Investment Services – used the company’s annual meeting to voice their concerns and support resolutions demanding change within the company.
Mercy Investment Services’ shareholder advocacy efforts are directed by the Critical Concerns and Direction Statement of the Sisters of Mercy. In the case of Chevron, Mercy Investment Services has taken a firm stance on environmental issues and engaged the company on greenhouse gas emissions, water and hydraulic fracturing. The Ecuador lawsuit is just one example of the company’s devastating impact on the environment.
Mercy has joined other investors in expressing their concern to Chevron on the Ecuador lawsuit because of the environmental and human impacts of the drilling. In a letter sent to Chevron CEO John Watson on May 25, 40 investors, representing more than $580 billion in assets, urged Chevron to settle the $18 billion lawsuit, which would compensate the villagers and force Chevron to clean up the pollution left behind including toxic oil waste and contaminated water supplies. Investors’ concern extends beyond the environmental impact to the villagers who have suffered from health problems and birth defects since Texaco began drilling in the area in 1967. Chevron inherited the lawsuit in its 2001 acquisition of Texaco.
Chevron’s vow to fight the lawsuit, which has been ruled on against the company by the U.S. Court of Appeals, the Ecuadorian Appeals Court and the Permanent Court of Arbitration, means increased damage to the company’s reputation and financial stability. At the annual meeting, shareholders filed three resolutions related to the lawsuit. The first, which asked for a director with environmental expertise, earned 23 percent support. The second resolution asked for a lower threshold requirement for shareholders to call a special meeting and garnered 30 percent shareholder support. The third resolution related to the Ecuador lawsuit requested that the company separate the board chairman and CEO positions, which is considered a best practice in corporate governance structures. That resolution, which earned 14 percent support in 2008, won 38 percent shareholder support in 2012.
The significant support gained by these resolutions shows that investors believe the company needs to implement changes and gives investors more traction in their engagements with Chevron. Mercy Investment Services will continue to work with other investors to convince Chevron to settle the lawsuit and strengthen its governance structure. Mercy Investment Services engages several energy companies, including Chevron, on the environmental impacts of companies on people and planet.