Welcome to the Climate Nexus finance newsletter – a regular update that looks at the big stories and players at the intersection of climate change, finance, regulation, and energy, with tips for the week ahead.
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Shareholders want climate action, but companies…not so much
With climate crisis impacts ramping up, corporate America is diverging on how to address them—and whether to talk about them at all. The nation saw 28 billion-dollar disasters last year, a record and part of a rising trend, according to a Climate Central post citing government data. Severe storms were the most frequent type of megadisaster, while tropical cyclones were the costliest.
Some investors are waking up to the problem. Shell is facing its biggest shareholder action on climate to date: A group of 27 investors representing about 5% of its outstanding shares filed a resolution urging the company to set tighter climate targets, Reuters reported. But in companies’ C-suites, political pressure is silencing even the greenest companies about their climate efforts. A report in Grist highlights “greenhushing,” the opposite of greenwashing: A survey of 1,400 companies found 70% of those focused on sustainability are deliberately hiding their climate goals.
One company is not staying silent when it comes to shareholders wanting climate action: Exxon Mobil. The Texas oil giant just sued U.S. and Dutch climate investors Arjuna Capital and Follow This, aiming to exclude their proposal to accelerate greenhouse gas emission cuts from the ballot at Exxon's annual shareholder meetings. Labeling their climate agenda as "extreme," Exxon seeks a declaratory judgment from a friendly judge that could potentially tighten the Securities and Exchange Commission’s rules on proxy ballot proposals across corporate America. Exxon argues these investors are primarily focused on advancing changes detrimental to Exxon's existing business model, utilizing a shareholder proposal process that Exxon criticizes as flawed and easily manipulated. The company is challenging the inclusion of a proposal that demands an acceleration of its emission reduction plans, including Scope 3 emissions, on grounds of business interference and repeated shareholder rejections of similar proposals in the past.
Live free, unless it’s ESG
Just when you thought the dark money-funded right-wing political attacks on businesses, investors, and ESG couldn’t get any more outrageous, it could now become a crime! Yes, you read that right, and no, this is not something coming from Russia or other authoritarian regimes. New legislation introduced by New Hampshire Republicans in the ‘live free or die’ state would make the use of common-sense environmental, social, and governance risk criteria a felony punishable by up to 20 years in jail. One commentator noted how idiotic this is because, as you know, ESG is about considering how certain risks impact a company’s bottom line.
Not to be outdone, Florida’s CFO Jimmy Patronis has started implementing one of the state’s signature pieces of anti-ESG legislation, which requires banks to sign a decree in exchange for being designated as a Qualified Public Depository so they are eligible to accept public funds. Expect the Republican assault on banks, businesses, and investors to only get weirder and spread to other states if the financial sector, like these 117 banks operating in Florida, continues to play along with this costly and anti-free market culture war.
State pension funds flunk
A new report ahead of the 2024 proxy season, "The Hidden Risk in State Pensions: Analyzing State Pensions’ Responses to the Climate Crisis in Proxy Voting,” analyzes how 24 public pensions in 16 states and NYC—collectively representing $2+ trillion in assets under management—are or aren’t addressing climate risks through their role as shareholders in major corporations and proxy voting practices.
The report grades these 24 pensions on proxy voting records, voting guidelines, and data transparency. It reveals that many public pensions are falling short on addressing climate risks to their investments and adequately protecting the savings of millions of Americans. The findings are alarming: Only nine pensions received A, B, or C grades, with the rest receiving failing grades.
Is ESG in the room with us right now?
The business community is still trying to figure out how to do ESG without saying it. The exodus away from troublesome terminology is partly driven by BlackRock, which removed references to global warming from its 2024 priorities list and will stress “financial resilience” instead of ESG in upcoming annual meetings. Net-zero alliances like the Paris Aligned Asset Owners are also shielding themselves from potential antitrust allegations by clarifying that signatories make individual commitments in line with fiduciary obligations. Despite this semantic push, four in ten executives surveyed by PwC said they accepted lower returns in 2023 for climate-friendly investments.
Meanwhile, global elites at Davos aren’t doing a great job at rebuilding trust around climate action, contrary to the meeting’s theme. Attendees noted that “climate has clearly fallen back on the agenda,” with ESG absent from the 2024 program. Discussions around artificial intelligence took priority, with 75% of CEOs surveyed in a PwC pre-Davos survey believing AI will significantly change their business in the next three years. The World Economic Forum hopes to revive ESG’s credibility with Stakeholder Metrics, a new methodology for comparing factors like carbon emissions, pay equality, and boardroom diversity in a more robust way.