Climate Change Investigation into Peabody Finds ‘False, Misleading Statements’ about Risks

Days after launching an investigation into whether ExxonMobil lied to the public and investors about climate change risks, New York attorney general Eric T. Schneiderman says an investigation by his office found that Peabody Energy, the largest publicly traded coal company in the world, violated New York laws prohibiting false and misleading conduct in the company’s statements to the public and investors regarding financial risks associated with climate change and potential regulatory responses.

As part of the agreement with the New York attorney general’s office, Peabody will file revised shareholder disclosures with the Securities and Exchange Commission that accurately represent climate change risks to investors and the public.

Schneiderman initiated an investigation of Peabody’s financial disclosures in securities filings in 2013. The investigation found that the company repeatedly denied in public financial filings to the SEC that it had the ability to predict the impact that potential regulation of climate change pollution would have on its business, even though Peabody and its consultants actually made projections that such regulation would have severe impacts on the company, Schneiderman’s office says.

For example, Peabody internally projected that if specific aggressive regulatory action was implemented on existing power plants and future electricity generation in the US, it would reduce the dollar value of coal sales in its primary United States markets by 33 percent or more. Peabody also hired an outside consulting firm, which in March 2014 projected that enactment of a $20 per ton carbon tax would reduce the demand for coal as a fuel source in electric power generation in the US in 2020 by between 38 percent and 53 percent compared to 2013 levels, the investigation found.

As part of the agreement, Peabody says it agreed to modifications in its financial disclosures centering around two primary areas:

• The use of the International Energy Agency’s (IEA) World Energy Outlook scenarios. Peabody has long cited IEA’s World Energy Outlook regarding global energy scenarios. In the future, the company has agreed to enhance its disclosure around all the published scenarios when referencing IEA’s World Energy Outlook.
• The ability of the company to estimate impacts from prospective future laws or regulations. The company has previously stated that it cannot predict the impact of potential laws or regulations on Peabody due to the uncertainty surrounding those predictions. Peabody has agreed that any future statements concerning the difficulty of making particular projections or predictions shall be accompanied by a statement that Peabody has made projections of the impact of scenarios involving certain potential laws and regulations relating to climate change or coal, which could result in materially adverse effects on its markets or company. To evaluate risks and allocate capital, Peabody has examined the potential impact of hypothetical future laws on coal markets.

In a statement, the company says “Peabody believes that technology is the bridge to a low-emissions future for a world experiencing rising electricity demand to satisfy urbanization and offer a higher quality of life. Peabody has been among the most vocal companies worldwide in advocating clean coal technologies, including greater deployment of high-efficiency low-emissions coal-fueled plants and development of next-generation carbon capture, use and storage technologies.”