As the world wakes up to a new global climate agreement, it's time for energy and pipeline companies companies to start communicating with investors on how such changes will impact their investments.

Iin Canada, the financial implications of climate policy for energy and pipeline companies comes with a twist – Indigenous legal rights to the land in British Columbia.

Kinder Morgan— the owner of the Trans Mountain pipeline expansion project that traverses Alberta and British Columbia— is a prime candidate for updating their investor information to reflect these rapidly evolving business risks.

One of their recent investor conferences focused on the shifting prospects of their business model, and was entitled “With Change Comes Opportunity.” In spite of their apparent love of change, company management has failed to fully and properly address the linked issues of climate change policy and Indigenous legal rights in their Canadian business unit.

Lack of disclosure on these two material issues creates a misleading picture of the company’s business prospects. This is dangerous for investors.

Assessing Kinder Morgan’s “Aboriginal Policy”

The company’s approach to Indigenous legal rights, outlined in their Aboriginal Policy, suggests that senior management's grasp of Indigenous land claims and associated inherent legal rights in British Columbia is about as well-informed as Disney’s Pocahontas.

The policy begins:

"Kinder Morgan Canada is committed to working with Aboriginal communities in a spirit of cooperation and shared responsibility; and building and sustaining effective relationships based on mutual respect and trust to achieve respective business and community objectives."

These are fine sentiments, but they are not followed with any pertinent analysis. This is not surprising, as to date the company has been reading investors the kindergarten version of Indigenous legal rights.

In the past, Company spokesperson Ali Hounsell has indicated that Kinder Morgan “has engaged in meaningful consultation with 133 First Nations to date over the project,” and "deeply respects Aboriginal rights and title in Canada."

If Ms. Hounsell were to accurately report to investors on the status of the company’s engagement with Indigenous landowners—after re-reading the Supreme Court of Canada’s Tsilhqot’in decision— she would have to provide an update.

Investors should have been informed that the goalposts for project approval have shifted from consultation with Indigenous land owners towards consent from those same owners. They should know how Kinder Morgan’s consultation practice will change to reflect this development in Canadian constitutional law.

It's now time to toss out simplistic clichés and good-will fairy tales and provide more in-depth, legally accurate information. The reality of Indigenous land rights in Canada might come as a shock to those investors who have thus far restricted themselves to reading the company’s corporate reporting on these issues.

In particular, the ears of Kinder Morgan shareholders should prick up at the following passages on consent stated in Tsilhqot’in:

“Once title is established, it may be necessary for the Crown to reassess prior conduct in light of the new reality in order to faithfully discharge its fiduciary duty to the title-holding group going forward. For example, if the Crown begins a project without consent prior to Aboriginal title being established, it may be required to cancel the project upon establishment of the title if continuation of the project would be unjustifiably infringing.” (At paragraph 92, emphasis added.)

“Governments and individuals proposing to use or exploit land, whether before or after a declaration of Aboriginal title, can avoid a charge of infringement or failure to adequately consult by obtaining the consent of the interested Aboriginal group.” (At paragraph 97, emphasis added.)

The Tsleil-Waututh Nation, the “People of the Inlet,” whose reserve sits less than two miles across Burrard Inlet from the pipeline terminus and Westridge marine terminal have indicated their unequivocal opposition to the project. They conducted an independent assessment of the project, have identified the project as illegal according to their own laws, and made it clear that they do not consent to the project.

Trans Mountain’s response appears to be deaf to the legal risks it faces from First Nations opposition. In its public communications, the company has indicated that:

"…like the Tsleil-Waututh, Trans Mountain appreciates the need for a healthy Salish Sea, and we are committed to safe and environmentally responsible operations. As always, Trans Mountain stands by our commitment to engage with First Nations and invites Tsleil-Waututh Nation to come to the table and engage in clear productive conversation.”

If the directors of Kinder Morgan and other pipeline proponents like Enbridge do not properly communicate the nature of these legal risks to shareholders, they could be leaving themselves open to liability under Canadian and U.S. securities law.

Annual report fails to adequately describe the scope of Indigenous land rights

By neglecting to explain the constitutional legal rights of BC Indigenous communities to block the Trans Mountain project, Kinder Morgan could be failing to provide accurate information to investors. The annual report indicates that the company:

“… generally do[es] not own the land on which our pipelines are constructed. Instead, we obtain the right to construct and operate the pipelines on other people’s land for a period of time. Substantially all of our pipelines are constructed on rights-of way granted by the apparent record owners of such property.”

In the case of unceded Indigenous land in British Columbia, many of the “apparent” and actual record owners do not agree with Trans Mountain’s expansion plans. This was communicated loud and clear to Kinder Morgan management by Tsleil-Waututh leader Rueben George last May, when he indicated that “Tsleil-Waututh will never consent to the Trans Mountain project — because it will destroy our culture, our way of life and our spirituality.”

In spite of this clear communication from the landowner, the company provides no details to investors on opposition by the Tsleil-Waututh and other Indigenous landowners or the long list of legal challenges discussed above.

Kinder Morgan’s discounting of demand destruction under a 1.5 degree target scenario

Reference to the business impacts of climate change in Kinder Morgan’s annual report is similarly scant and includes outright contradictions. At one point the company indicates that: “Climate change regulation at the federal, state, provincial or regional levels could result in significantly increased operating and capital costs...”

Later on in the same report, the almost exact opposite statement is provided: “[T]he timing and location of climate change impacts is not known with any certainty and, in any event, these impacts are expected to manifest themselves over a long time horizon. Thus, we are not in a position to say whether the physical impacts of climate change pose a material risk to our business, financial position, results of operations or cash flows.”

If the company knows that climate change regulation could materially impact their business prospects, is it not obvious that this policy will be tightened in response to physical climate change risks? Financial regulators should be demanding more accurate communication to investors.

Judging from statements by the leaders of almost every country in Paris earlier this month, the world's largest property insurers and the global scientific community, there does appear to be certainty on a range of physical climate change impacts that are already manifesting themselves.

The wording of Kinder Morgan's annual report is almost exactly the same as that appearing in Peabody Energy’s own inadequate financial reporting on climate change risk. If Kinder Morgan has been cutting and pasting from Peabody’s misleading SEC filings, investors should worry.

Responsible investors should exercise their legal right to access accurate information

Increases in the cost of capital through more stringent enforcement of existing environmental regulations in British Columbia or Alberta, in addition to action on the federal government’s stated commitment to a 1.5 degree emissions budget target, could all have immediate impacts on the company’s business prospects.

Especially in light of the New York Attorney General’s enforcement action against Peabody Energy on its dubious climate risk disclosure, Kinder Morgan management and other pipeline proponents should consider providing shareholders with full and fair disclosure of all material risk information relating to operations on indigenous land on Canada’s Pacific coast.

In fact, as owners of the company, shareholders have a right to know how the company plans to adapt to a low-carbon economy, address indigenous land rights, and preserve shareholder value in the process.

Investors deserve better, more complete information from companies like Kinder Morgan and Enbridge.