11-19-13 10:57 PM EST | Email Article
   By Rhiannon Hoyle 

PERTH, Australia--BHP Billiton Ltd. (BHP) has its hands full trying to reverse falling profits and dealing with subdued prices for many of its major commodities. It's also facing a challenge on another issue: climate change.

Ian Dunlop, a former executive at oil producer Royal Dutch Shell PLC, is standing for election to BHP's board with the support of the U.S.'s biggest public pension fund on a platform to get the world's biggest mining company to act more aggressively on tackling global warming.

He wants BHP to halt production of thermal coal-burnt in power stations to generate electricity-over time, review the carbon footprint of businesses ranging from Australian iron-ore mines to U.S. natural gas fields, and coordinate action with other major energy producers to tackle greenhouse gas emissions.

Mr. Dunlop's candidacy isn't endorsed by BHP, whose board has recommended shareholders vote against his appointment at Thursday's annual general meeting in Western Australia's capital Perth. BHP says it's already well covered on the climate-change issue, citing experience by nearly all its existing board members in the area of health, safety and the environment.

"Mr. Dunlop would not add to the effectiveness of the board," BHP Chairman Jac Nasser said in a notice ahead of Thursday's meeting.

Mr. Dunlop concedes his chances of securing 50% of votes for a board seat look slim, despite a career that included chairing the Australian Coal Association in the late 1980s and a stint as chief executive of the Australian Institute of Company Directors in 1997-2001. Currently, the 71-year-old chairs Safe Climate Australia, a nongovernment research and lobby group.

"If you look at the big companies like BHP, they have the access to the science," said Mr. Dunlop. "They need to lead."

For BHP, which is dual listed in Australia and the U.K., the contest is unusual. The last time its shareholders voted on an external candidate was in 2008, when shareholder activist Stephen Mayne garnered just 12% of ballots. BHP typically backs directors chosen by its own nomination and governance committee, and shareholders are often wary of going against its wishes.

Proxy advisor Institutional Shareholder Services Inc., or ISS, which provides advice to investors and can vote on their behalf, said it's prepared to support external candidates when existing directors had overseen a period of exceptionally poor performance, but this wasn't the case at BHP.

BHP's Australia-listed stock is up 15% compared with a year earlier. Although BHP's net profit fell 30% to US$10.88 billion in the year through June due largely to falling commodity prices, the Melbourne-based company has slowed spending and cut costs to boost shareholder returns.

"Our position is that while climate change presents challenges for BHP Billiton, it does not automatically follow that an individual with a particular view on the issue deserves appointment to the board," ISS said in a report ahead of Thursday's meeting. "BHP Billiton is not unique in needing to devise an appropriate response to climate change, and there is no evidence presented by Ian Dunlop that the company's current position is more urgently in need of reform than that of other large natural resources businesses."

Still, Mr. Dunlop's stance has won over some institutional investors in BHP, which has a market value of 192 billion Australian dollars (US$182 billion).

California Public Employees' Retirement System, or Calpers, said it plans to vote its US$500 million of BHP shares in favor of his candidacy. Local Government Super, a pension fund for local government workers in Australia's New South Wales state, has pledged the support of its U$115 million stockholding.

"We need to challenge groupthink on this issue," said Anne Simpson, Calpers's senior portfolio manager and director for corporate governance. "We want the industry to take action and this is an opportunity to have that agenda taken into the heart of the debate in the boardroom by someone who understands the severity and potential impact of this risk, and also has a blue-ribbon history in this industry."

A landmark United Nations report published in September reaffirmed the growing belief that human activity is the dominant cause behind a rise in global temperatures and reiterated that a long-term planetary warming trend is expected to continue.

"We accept the science of climate change and see it as a governance issue," said Bill Hartnett, head of sustainability at Local Government Super. "Ian is a well-considered, experienced man and in order to have this addressed as a strategic issue company boards may increasingly need skills broader than they have at the moment."


-Write to Rhiannon Hoyle at rhiannon.hoyle@wsj.com


Subscribe to WSJ: http://online.wsj.com?mod=djnwires

(END) Dow Jones Newswires

November 19, 2013 22:57 ET (03:57 GMT)

Copyright (c) 2013 Dow Jones & Company, Inc.
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