Nebraska Peace Foundation Climate Resolution on Berkshire Hathaway 2016 Meeting Agenda

Normally, the only time you hear about Nebraskans for Peace’s 501(c)(3) charitable foundation is during a fundraising drive when we’re seeking tax-deductible contributions to support NFP’s educational work. But this past month, the Nebraska Peace Foundation made some big news of its own.

Following on NFP’s 2013 ‘appeal’ urging Warren Buffett to use his financial celebrity to rally international action on climate change, in early 2014 the Nebraska Peace Foundation purchased an ‘A-Class Share’ of Berkshire Hathaway stock with the intention of submitting a shareholder resolution on this global environmental peril. The idea of using the shareholder resolution process to draw attention to the climate change issue wasn’t original. Newground Social Investment/Investor Voice SPC of Seattle, Washington had submitted a resolution calling for Berkshire Hathaway to calculate its carbon footprint at the 2014 shareholders meeting. Corporate regulations however required that new investors like the Nebraska Peace Foundation hold a share for a full year before the November resolution submission deadline to be eligible to submit a proposal. By just two months, the Foundation missed the eligibility window for the 2015 shareholders meeting.

This past November though, former NFP president and current Nebraska Peace Foundation board member Mark Vasina (who worked on Wall Street as a regulator in the 1990s) drafted and submitted a shareholder resolution asking Berkshire Hathaway (BH) to evaluate and report on the climate change risks faced by its insurance division. The resolution was modeled on the Bank of England’s recommendation to its regulated insurance companies, which followed publication of an extensive report on climate change threats to the industry.

Content-wise, the Nebraska Peace Foundation resolution was far from extreme, as three senior BH executives have endorsed corporate action on climate change. Last July, BH Energy chair Greg Abel joined other corporate executives at the White House to launch the “American Business Act on Climate Pledge”—a demonstration of the U.S. private sector’s commitment to taking on the global challenge of climate change. Last September Tad Montross, chair of BH insurance subsidiary “General Re” (a reinsurance firm that insures insurance companies), said that in view of the clear scientific evidence of global warming, insurers should guard against being lulled into overly optimistic underwriting because of recent relatively low levels for catastrophic losses. And this past November, Ajit Jain, president of BH Group, was one of 68 global reinsurance industry leaders who signed the “Climate Risk Statement of the Geneva Association” affirming their commitment to progress on climate change resilience and adaptation.

In early February, the Nebraska Peace Foundation learned that its resolution would be included on the agenda of the business meeting at the 2016 Annual Shareholders Meeting which will be held Saturday April 30 at the CenturyLink Center in Omaha. Annually, very few resolutions are brought before the shareholders, and this year it appears the Nebraska Peace Foundation will pretty much have the floor to itself.

News of the BH climate change resolution literally went worldwide as Buffett himself made extensive reference to the resolution in his 2016 ‘shareholders letter’ released February 28. Discussing climate change at greater length than he’s ever done previously, Buffett wrote that “It seems highly likely to me that climate change poses a major problem for the planet... It would be foolish for me or anyone to demand 100 percent proof of huge forthcoming damage to the world if that outcome seemed at all possible and if prompt action had even a small chance of thwarting the danger.”

This issue, he continued, “bears a similarity to Pascal’s Wager on the Existence of God. Pascal, it may be recalled, argued that if there were only a tiny probability that God truly existed, it made sense to behave as if He did because the rewards could be infinite whereas the lack of belief risked eternal misery. Likewise, if there is only a 1 percent chance the planet is heading toward a truly major disaster and delay means passing a point of no return, inaction now is foolhardy. Call this Noah’s Law: If an ark may be essential for survival, begin building it today, no matter how cloudless the skies appear.”

That said, Buffett urged defeat of the Nebraska Peace Foundation resolution by dismissing the relevance of climate change threats to BH insurance profits—a view that stands in apparent contradiction to other BH executives and many in the industry. The BH CEO stated, “As a citizen, you may understandably find climate change keeping you up nights. As a homeowner in a low-lying area, you may wish to consider moving. But when you are thinking only as a shareholder of a major insurer, climate change should not be on your list of worries.”

As the primary shareholder in his own company (as well as the world’s third-richest person), Buffett’s opposition all but guarantees the Nebraska Peace Foundation resolution will go down to defeat. Nevertheless, its presence on the BH business meeting agenda—and the opportunity for numerous people to speak in favor of the measure—affords a tremendous opportunity to educate not only Buffett but the broader public about the imminent dangers of climate change. 44,000 people attended the 2015 meeting. And this year the entire meeting, from start to finish, is going to be live-streamed worldwide.

Nebraskans for Peace and the Nebraska Peace Foundation have been working towards this moment for four years. We’ll never have a better platform. And this could well be the best chance we ever have to get the ear of the 85-year-old ‘Oracle of Omaha.’

This is what we here in Nebraska are uniquely positioned to do. The world is counting on us to make the most of it.

The Nebraska Peace Foundation owns one share of Class A Common Stock and has given notice that a representative of the Nebraska Peace Foundation intends to present for action at the meeting the following proposal.

WHEREAS: Climate change is a slow-moving process relative to many other public policy issues. Nonetheless, the future of the world’s climate system hinges heavily on actions taken by governments, corporations, and individuals over the next few decades. Claims exposure to weather-related events requires that insurance and reinsurance companies take the lead in evaluating and managing the impact of extreme weather. Meanwhile, climate change could have unanticipated adverse effects on the investments of insurers.

AND WHEREAS: Reporting of risks helps companies better integrate and gain strategic value from existing operations, identify and anticipate gaps and opportunities, develop company-wide communications, and receive feedback. Reporting on the impact of climate change for Berkshire Hathaway insurance companies would confirm their status as leaders in the global insurance industry, complementing the leadership BH energy companies demonstrate in the provision of renewable energy.

BE IT RESOLVED: Shareholders request the BH insurance division, within a reasonable period of time, issue a report describing the division’s responses to the risks posed by climate change. The report should include specific initiatives and goals relating to each risk issue identified; be prepared at a reasonable cost; and omit proprietary information.

SUPPORTING STATEMENT: Insurance regulators worldwide are exploring the implication of climate change-related risks for the insurance sector and adapting their supervisory approach.

In 2013 the National Association of Insurance Commissioners in the US adopted revisions to the Financial Condition Examiners Handbook to support examiners in assessing any potential impact of climate change on solvency of insurance firms.

In September 2015, the Prudential Regulation Authority of the Bank of England (responsible for regulation of UK insurance companies) issued an 85-page report outlining the risks facing the insurance industry as a result of climate change. The PRA has indicated it expects PRA-regulated insurance firms to consider the risks identified.

The impact of climate change on the UK insurance sector: A climate change adaptation report by the Prudential Regulation Authority identifies three climate-change risk factors affecting insurers:

“(i) Physical risks: the first-order risks which arise from weather-related events...such as damage to property, and also those that may arise indirectly through subsequent events, such as disruption of global supply chains or resource scarcity.

“(ii) Transition risks: the financial risk which could arise for insurance firms from the transition to a lower­ carbon economy. For insurance firms, this risk factor is mainly about the potential re-pricing of carbon­ intensive financial assets, and the speed at which any such re-pricing might occur...

“(iii) Liability risks: risks ...from parties who have suffered loss and damage from climate change, and then seek to recover losses from others who they believe may have been responsible ...[through] third-party liability contracts such as professional indemnity or directors’ and officers’ insurance.”

The operations and capital strength of BH insurance companies would benefit greatly from a thorough internal review of the risks posed by climate change.

THE BOARD OF DIRECTORS UNANIMOUSLY FAVORS A VOTE AGAINST THE PROPOSAL FOR THE FOLLOWING REASONS:

The Board of Directors shares the views of Berkshire’s Chairman and CEO, Warren E. Buffett as to why Berkshire shareholders should vote against the shareholder proposal. Mr. Buffett described his reasons in his letter to Berkshire shareholders that is included in Berkshire’s 2015 Annual Report. A condensed summary of his thoughts regarding this proposal follow.

It seems highly likely to me that climate change poses a major problem for the planet. I say “highly likely” rather than “certain” because I have no scientific aptitude and remember well the dire predictions of most “experts” about Y2K. It would be foolish, however, for me or anyone to demand 100% proof of huge forthcoming damage to the world, if that outcome seemed at all possible and if prompt action had even a small chance of thwarting the threat. If there is only a 1% chance the planet is heading toward a truly major disaster and delay means passing a point of no return, inaction now is foolhardy. Call this Noah’s Law: If an ark may be essential for survival, begin building it today, no matter how cloudless the skies appear.

It’s understandable that the sponsor of the proposal believes Berkshire is especially threatened by climate change because we are a huge insurer, covering all sorts of risks. The sponsor may worry that property losses will skyrocket because of weather changes. And such worries might, in fact, be warranted if we wrote ten- or twenty­ year policies at fixed prices. But insurance policies are customarily written for one year and repriced annually to reflect changing exposures. Increased possibilities of loss translate promptly into increased premiums.

So far, climate change has not produced more frequent or more costly hurricanes or other weather-related events covered by insurance. As a consequence, U.S. super-cat rates have fallen steadily in recent years which is why we have backed away from that business. If super-cats become costlier and more frequent, the likely—though far from certain—effect on Berkshire’s insurance business would be to make it larger and more profitable.

As a citizen, you may understandably find climate change keeping you up at nights. As a homeowner in a low­ lying area, you may wish to consider moving. But when you are thinking only as a shareholder of a major insurer, climate change should not be on your list of worries.

Proxies given without instructions will be voted against this shareholder proposal.

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April 30th 2016

Randy Whitehead - I supported the position of our Board and voted against the Resolution on my proxy, not because I am not concerned about theoretical climate change but because this subject matter is not germane to an annual shareholder meeting, and for the reasons Mr. Buffet has stated, but more importantly the truth spoken by Mr. Munger about you people and your agenda. But you will have achieved what your actual objective was, attention in the media, particularly from your leftist friends at Yahoo.