- Xcel Energy is a major US electric and natural gas company that serves 3.8 million electric customers and 2.2 million natural gas customers across eight states.
- In recent years, the company has made drastic cuts to its climate emissions thanks to Nordea’s active ownership.
- Prompted by Nordea, Xcel Energy was the first utility in the US to set a net-zero emission target for 2050.
“We started our engagement with Xcel Energy’s management in 2017, aiming to get the company to reduce its emissions. By 2021, the company had cut its carbon dioxide emissions by 50%, and in 2022, the company generated more than half of its energy from renewables. In 2018, the company set a goal to reduce its emissions by 80% by 2030. It still has a way to go to reach this goal, but it’s firmly on the right track”, says Nordea’s Head of Commercial Hub Tanja Eronen.
Nordea Asset Management is the shareholder that has been engaging in active ownership at Xcel Energy. This means that Finnish fund investors have helped push the energy company in a more climate-friendly direction. Thanks to Nordea’s active ownership, Xcel Energy has committed to annual emission reductions.
“Companies are motivated to make emissions reductions because they know that we will vote against the board of directors in the annual general meeting if they fall short of their sustainability goals. It is the board’s duty to ensure that the senior management works in line with the company’s goals. Including sustainability considerations in executive compensation is known to accelerate sustainable actions because it makes sustainability another important aspect to consider when making decisions”, Eronen explains the logic.
But it was not Nordea alone that changed the course of Xcel Energy. Nordea is part of the worldwide Climate Action 100+ investor initiative to ensure that the world’s largest corporate greenhouse gas emitters take appropriate action on climate change. The initiative’s investor participants are responsible for direct engagements on the goals of Climate Action 100+ with their focus companies and for informing the group of contributing investors. The engagements are powerful because they bring the power of not just one investor but the entire investor group to annual general meeting votes. This way, the corporate stewardship pushing for emissions reductions is strong.
“Companies that make such fast progress as Xcel Energy are usually ones in which the management has already realised that change is inevitable. Our role is to help them plan how they can make their transition in a way that is controlled and profitable”, says Eronen.
Has Xcel Energy’s rapid transition been a controlled one?
“Xcel Energy has been very profitable throughout the process”, Eronen confirms.
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