AEP Sustainability - SUSTAINABILITY & ESG

SUSTAINABILITY/ESG GOVERNANCE

When stakeholders evaluate a company, one of the first things they look at is the strength of corporate governance. How and where sustainability fits into the corporate structure can reveal a company’s priorities. At AEP, we have strong governance to support sustainability and ESG performance, ensuring alignment with corporate purpose and strategy. Our approach to transparency links tangibles (such as financial capital and physical assets) with intangibles (such as reputation, brand, customer loyalty, risk management, trust and credibility) to show bottom line results and benefits.

There is no one-size-fits-all approach to sustainability governance, but we believe it is fundamental to building and strengthening sustained business value. Strong governance ensures transparency, fairness and accountability, and it gives us a structured way to manage the challenges of a changing society. We are committed to strong governance practices that protect the long-term interests of our shareholders.

Our Board of Directors works closely with our executive team to ensure we continually meet or exceed the highest standards of performance, innovation, ethics and service. In addition, the Board receives educational presentations from outside experts and board members attend educational sessions.

Through our Enterprise Sustainability Council (ESC) – with oversight from executive management and the Committee on Directors and Corporate Governance of the Board of Directors – we have clear guidance on our ESG responsibilities for sustainable business development. ESC members, who represent all aspects of our business, serve as strategic ambassadors, providing guidance and support to ensure the success of our sustainable development strategy. They do this by enabling integration of sustainability across the enterprise and in corporate strategy.

The fast-paced growth of ESG investing prompted an expanded and more granular focus on how we manage our ESG performance and disclosure. We have a dedicated cross-functional ESG Team that meets monthly to monitor new and emerging ESG issues and develop strategies for responding to them. Because ESG performance is also a business risk, we added it to our risk summary report and are integrating it with our corporate strategy.

In addition to the ESC and ESG Team, the Committee on Directors and Corporate Governance of the Board of Directors reviews the Corporate Accountability Report annually and monitors our ESG performance. The Committee provides feedback and develops the Board Statement supporting our commitment to sustainable business development and performance accountability. In addition, since 2010, AEP’s internal Audit Services team has conducted a limited review of selected company performance statements. The combined internal audit and governance from the Board of Directors, executive management and the ESC helps us ensure our disclosure undergoes a disciplined review and validation process.

While these issues are discussed by the Board of Directors throughout the year, we report to the Committee on Directors and Corporate Governance on our sustainability-related activities at least twice per year. In addition, the Lead Director of AEP’s Board of Directors conducts annual outreach with our largest shareholders to engage with investors on important ESG matters. The Chairman of the Board also engages throughout the year with investors and other stakeholders.

Learn more about AEP’s Corporate Governance as well as Climate Governance in our Climate Impact Analysis Report.