End of Week Notes
Corporate climate commitments should include promoting policy action
Continued investor pressure needed to counter climate “inactivism”
The climate crisis is getting worse —even worse than scientists predicted it would be.
A “portfolio” of climate disasters this year, reports the LA Times, “has raised the specter of irreversible climate change as never before and offered glimpses of what it means to live on a warming planet where human survival grows more fraught.” And all this is happening “at the high end of projections, even faster than the previous most pessimistic estimates,” says Harvard’s John P. Holden, a professor of environmental policy at the Kennedy School of Government.
Global warming is expected to reduce global economic output by 11% to 14% by mid-century relative to a scenario in which warming is brought under control, according to a recent Swiss Re report. That would mean a global economy about $23 trillion smaller than it otherwise would be.
Against this dire backdrop, investors urgently need climate-risk information from public companies in order to make informed decisions about how to mitigate climate risk in their portfolios. The focus is, increasingly, on company plans to reduce their carbon emissions to net zero, whether these efforts are credible and likely to occur in time to limit global warming to well below 2 degrees Celsius by the end of the century.
But public companies also need to stop saying one thing about climate change to their investors and another thing to policymakers. We all know the climate crisis won’t be solved without decisive policy action and that public companies have enormous influence on policymakers through political contributions, lobbying, and their financial support of trade organizations.
An influential company that might have a credible plan to take its own emissions to net zero could offset that impact entirely by lobbying for “climate inaction”, as Michael E. Mann calls it in his book, The New Climate War, which I recommend. Climate “inactivists” are those that may acknowledge climate science and global warming itself but downplay the need for decisive action and seek delay in implementing solutions.
That’s why it’s important to take note of a recent Ceres report that examines corporate lobbying for science-based climate change policies. Its conclusion:
Even as more large U.S. companies are taking steps to address climate change in their own operations, including setting emissions reduction goals, their advocacy for climate change policies often does not match the ambition of their individual commitments, and even more often fails to match the ambition demanded by climate science. Further, in some instances, companies and their trade associations are even lobbying against the adoption of meaningful climate policies, ultimately undermining conditions that would enable companies to meet their climate goals.
Of the 100 largest U.S. public companies, Ceres found that 73 have publicly affirmed the science of climate change and only 23 have not (N=96 because of subsequent mergers). A smaller majority (55 companies) have made public statements supporting the need for ambitious climate policies, but only 50 have publicly supported the Paris Agreement.
Where the rubber meets the road — specific advocacy for climate action — the numbers plummet further. Only 38 companies have advocated for specific science-based climate policies individually or as part of a group. In fact, just 30 have joined groups advocating for climate policies.
Ceres found that 20 companies have engaged in opposition to science-based climate policies. Here’s the list:
I’ll resist calling them the dirty dozen, but according to Ceres the following companies have engaged in opposition to science-based climate policies despite also having publicly affirmed the science of climate change: Boeing, Chevron, ConocoPhillips, Dow, Duke Energy, GE, GM, Kinder Morgan, Lockheed Martin, Nextera Energy, Southern, and UPS.
In sum, says Ceres:
To achieve a net zero emissions future and mitigate the financial impacts of a changing climate, companies need to publicly advocate for the swift passage of climate change policies and rules that appropriately recognize what is at stake. The cost of inaction is too high; staying on the sidelines or allowing climate to be framed as a partisan issue is not an option.
Investors have a role to play in encouraging companies to step up on climate advocacy. In fact, their efforts during this year’s proxy season were extraordinarily successful. The focus of engagements and shareholder resolutions so far has been on companies whose lobbying activities appear to contradict their public pledges to cut emissions in line with the Paris Agreement.
The first resolution on this topic garnered majority support last year at Chevron. This year, seven companies agreed via engagements to provide shareholders a report on the matter: AIG, CSX, Duke Energy, Entergy, FirstEnergy, GM, and Valero Energy. Among the proposals that came to votes, five received more than 60% support, according to a report by Alliance Advisors:
Speaking of engagement and proxy voting, here is a terrific story to start your weekend about a single shareholder who took it upon herself to ask Netflix to create a sustainability report, which resulted in a large and influential company getting educated on the subject and ultimately producing such a report. Exactly the kind of activity the previous SEC tried to outlaw as a costly nuisance, by the way.
Follow me on Twitter: @Jon_F_Hale
