Assess Feasibility of Adopting Quantitative Renewable Energy Goals

Resolution Text

RESOLVED: Shareholders request that A.O. Smith Corporation senior management, with oversight from the Board of Directors, issue a report on climate change mitigation strategies, assessing the feasibility of adopting quantitative, company-wide goals for increasing the company's use of  renewable energy, energy efficiency, and any other measures deemed feasible by company management to substantially reduce the company's greenhouse gas (GHG) emissions and climate change risks associated with the use of fossil fuel-based energy. The report should be issued within one year of the company annual general meeting at reasonable cost and omit proprietary information.

Supporting Statement: By assessing the feasibility of setting goals to increase renewable energy usage and reduce GHG emissions and climate risk, A.O. Smith could prepare to take steps to reduce its emissions of the greenhouse gases that contribute to climate change.

The Intergovernmental Panel on Climate Change estimates that a 45% reduction in global anthropogenic GHG emissions is needed (from 2010 levels) by 2030 to avoid the worst impacts of climate change (Global Warming of 1.5 degrees C, IPCC, Oct 2018).

Assessing the feasibility of clean energy goals and other GHG-reducing measures could serve as a practical step towards aligning A.O. Smith's business operations with global efforts to limit climate change. This could help insulate the company from regulatory uncertainty, position A.O. Smith as a company contributing to climate solutions and produce reputational benefits.

Many major companies find that GHG-reducing measures are practical and cost-effective. As costs have fallen, carbon-free renewable energy sources like wind and solar have become, in many markets, the least expensive source of electricity. According to the 2019 Sustainable Energy in America Factbook

(Bloomberg) "at $27-61/MWh without accounting for tax credits, onshore wind is cheaper than new gas­ fired plants for bulk electricity generation in most areas of the  U.S."  Likewise, in 2018, Lawrence Berkeley National Laboratory reported that for investments to  improve  energy  efficiency,  US commercial and industrial companies paid on average just $28 per MWh saved.

Although A.O. Smith offers high-efficiency and renewable energy residential and commercial water heaters and boilers, the company's website (accessed August 3, 2019) is silent on its own specific, measurable  plans to  adopt clean energy and investors have little information  about the company's future plans in this area. As such, A.O. Smith lags behind other manufactures like GM, Ford, Cummins, Kohler, Ingersoll Rand and Xylem that participate in large scale renewable electricity projects. It also lags the more than 190 global companies (see http://there100.org/ for details) publicly committed to 100% renewable power.

Accordingly, we urge A.O. Smith to emulate the best climate risk mitigation practices utilized by its corporate peers and to study the feasibility of adopting long-term clean energy sourcing goals.

Lead Filer

Laura Campos
Nathan Cummings Foundation