What now?

Investors respond to Trump’s climate chaos

Donald Trump announced yesterday that the U.S. will not honor the Paris Climate Accord — a move that damages the international effort to confront global warming and yanks American policy and leadership back a generation.

Many are describing Trump’s disastrous decision as a campaign promise kept. The President told voters he would “cancel” the Paris Accord, a painstakingly negotiated agreement of the world’s nations to reduce greenhouse gas emissions enough to avoid catastrophic climate change — 2 degrees or 1.5 degrees Celsius warmer than before the Industrial Revolution, depending on whom you ask.

However, since the Trump administration says it will exit the Paris Accord over four years, voters in the 2018 and 2020 elections will have a say in what ultimately happens.

Citizen action might still force the United States of America — history’s biggest polluter — to confront our historic responsibilities and do our fair share to salvage the future.

As investors, we try to look through this uncertainty to get a clearer picture of risk and opportunity. U.S. cities and states say they will move on without Trump. But in the last several months, and certainly after June 1, the climate picture looks murkier for many U.S. companies. In particular, the Trump administration’s push to scrap President Obama’s utility-focused Clean Power Plan and proposed cuts to basic energy research threaten to slow the innovation and clean power transition that would ultimately benefit U.S. firms.

And some have predicted that governments implementing the Paris Accord without the United States may adopt carbon taxes that target American goods. That was reportedly a reason why ExxonMobil took a surprising public position in support of the Paris Accord and a simple, uniform carbon tax. By leaving Paris, the United States (and American businesses of all kinds) lose influence at the global bargaining table. American companies may also lose out to firms in China, where the government will continue funding climate-friendly innovation and forging green energy markets around the world.

As impact investors, we have additional perspective and more opportunities in this moment. We believe that politics matters, but we must also use our investor voices alongside and in support of broader fights to address climate change. Zevin Asset Management researches climate change across our clients’ portfolios, and we take account of how companies have and will continue to confront climate risk. And we can press firms to make positive changes that move our economy in the right direction regardless of who’s in the White House.

As U.S. policy moves backward, pressing companies to cut their own emissions, deploy renewable energy, and lobby responsibly become even more important. Impact investing work continues on several fronts, and it remains promising and essential.

Oil sector accountability

One day before Trump’s announcement, in a historic victory, investors forced ExxonMobil to analyze and report on climate change–related risks in a way that acknowledges the science and the policy behind the Paris Accord. In a rare majority vote, a shareholder proposal co-sponsored by Zevin Asset Management received 62 percent support — sending the U.S. energy sector a clear signal that the markets expect them to align with a treaty which will continue to drive and shape global regulations.

Investors will seize momentum and keep using important tools like shareholder proposals to press oil giants to change their risky businesses.

ExxonMobil is making the right noises after that historic majority vote: the board of directors will reconsider the way the company analyzes climate risk. But investors are also concerned that the oil majors are talking one way and lobbying another. A second proposal we co-sponsored urging ExxonMobil to disclose the indirect activity that it funds to sway politicians and undermine basic climate science received 27 percent support this year. That’s not yet a majority, but shareholder votes often build support year after year and a “Yes” vote of any significance gets the board’s attention. We’ll keep pushing because these fights — climate risk reporting and lobbying disclosure — must be fought in parallel throughout the energy sector to make meaningful progress.

And we’re working for impact elsewhere in the industry. Just one day before Trump dumped Paris, our shareholder proposal urging Chevron to find an independent board chair received 39 percent support — an unusually high vote calling for a break with business as usual and strong oversight of Chevron’s climate risks and stubborn environmental liabilities.

And beyond…

We’re also continuing to press big asset managers to overhaul proxy voting policies and consider supporting climate-related proposals like the ones above. After productive meetings and shareholder proposals co-sponsored by Zevin, JPMorgan Chase and BlackRock announced that they would revisit their approaches. And this year, in a surprising shift, BlackRock’s votes against management helped carry the ExxonMobil proposal and a similarly historic win at Occidental Petroleum.

All companies must do their part to confront climate change — not just the oil majors — and many U.S. firms are currently scrambling to re-affirm their support for the Paris process. Back in February, we pushed CEOs to review their participation in President Trump’s policy advisory council, and now the chiefs of Disney and Tesla have withdrawn. Corporate America needs to follow through on these declarations and also re-commit to ambitious greenhouse gas targets, which are based on the Paris Accords. Zevin is urging companies across client portfolios to develop so-called Science Based Targets (SBTs), and just this spring we convinced CVS Health to develop a certified SBT.

Paris without the President

Our shareholder advocacy combines with a commitment to research and avoid the worst polluters. (Indeed, our advocacy with the oil majors is made possible only through clients’ legacy stock holdings.) Whenever possible, we invest in companies like Johnson Controls, BYD, and AXA, which are innovating and scaling climate solutions in, respectively, batteries and building efficiency, electric vehicles, and insurance. We hope you’ll reach out with questions about those investments and about our broader approach to advocacy and impact.

Donald Trump spoke loudly yesterday. But he won’t have the last word on climate change, and we don’t have to wait until the next election to have our say.

Impact investors will help move companies, cities, states, and whole sections of the American economy to join with the world, honor the spirit of Paris, and take on the next fights.

Thanks for reading and sharing. For more, join us on our website, Medium, and Twitter. And contact me with any questions.


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