“This transparent information is beneficial to investors and the public, and indicates a willingness from AEP to begin to ‘turn a big ship.’”
– AEP Investor
In 2016, stakeholder engagement was largely dominated by the ongoing shift to a clean energy future, including questions regarding carbon risk, potential stranded assets and renewable energy development. Investor interest significantly increased among several of AEP’s European investors, many of whom are supporters of the United Nations Principles for Responsible Investment (also known as the Montreal Pledge). The Pledge commits them to engaging companies on environment, social and governance (ESG) issues that they see as relevant to their investment analysis and decision-making process. Many of their questions were about their exposure to long-term shareholder return risk based on AEP’s carbon profile.
In 2017, some stakeholder groups began asking us about our intent to align with the Financial Stability Board’s Task Force for Climate-related Risk Disclosure’s proposal to conduct scenario planning for climate change. We do conduct scenario analyses regularly as part of our strategic planning, risk management and resource planning processes. We are evaluating the task force’s recommendations to understand the intent and process, talking with stakeholder groups to learn more about the kind of evaluation they are looking for and to determine if additional evaluation or analysis would be meaningful for AEP and its broad set of stakeholders.
In 2016, we engaged with 13 organizations representing AEP investors or who were considering AEP for an investment portfolio with specific interests around carbon risk or ESG issues. In advance of every call, we share specific information about AEP’s environmental and carbon footprint, capital investment strategy and clean energy transition. This initial exchange of information allows us to have more engaging and productive dialogue. Overwhelmingly, the feedback has been very positive. We recognize they will have additional questions as we continue to transform our business. We expect to receive ongoing requests from investors on ESG issues, and we are prepared and willing to engage at any time.
Every year, the Lead Director of AEP’s Board of Directors participates with management in a proactive shareholder outreach program. In addition, in 2016, we began formal outreach to investors and other groups interested in ESG issues. In November 2016, we held a call to share an update on AEP’s business transformation. Our intent is to schedule these calls throughout the year, similar to quarterly earnings calls, with a focus on AEP’s transformation. We work closely with Investor Relations and others at AEP to be responsive to inquiries or requests for engagement that we receive in a timely manner.
What We Learned
- Awareness of AEP’s transformation progress is not as high as we thought, making proactive engagement valuable for AEP and investors.
- When we share our progress and future path, it resonates with investors.
- Open dialogue is more constructive than shareholder activism and can lead to real change.