Welcome back 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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Inflation hits renewables
Last Thursday, New York regulators denied requests from renewable energy developers to hit consumers with billions in additional costs for large-scale wind, solar, and offshore wind projects. This makes it hard for energy companies struggling to cover escalating construction and financing costs amid high inflation and interest rates, and it’s spooking investors, as renewable energy stocks suffer record outflows. Some analysts are optimistic that current difficulties are short-term, and investments in domestic supply chains could help ease the situation. However, climate change in general is an inflationary force for many products, and until the problem is addressed, it will likely put a hefty burden on American household finances.
Citi’s mega oil merger
Citigroup is banking the biggest fossil fuel deal in recent history: Exxon’s acquisition of Pioneer Resources for $60 billion. The deal makes Exxon the biggest oil and gas producer in the Permian Basin by a wide margin, and shows one way the biggest fossil players are positioning their industry as inevitable and irrefutable at a time when it must wind down to help meet climate goals. Considering Citi’s verbal commitment to pursue net zero by 2050—and its lack of a credible transition plan—it’s notable that the megabank still provides crucial support for the very deals that keep polluters humming.
PE’s lone wolf
In the world of private equity, where profit margins often eclipse environmental concerns, Alpine Investors' decision to embrace B Corp status—a type of for-profit company that not only seeks to generate profits but also prioritizes social and environmental objectives—emerges as a curious anomaly. The new structure will now allow the private equity firm to legally pursue social responsibility alongside maximizing shareholder value as an overriding objective. This transformation, while intriguing, underscores a broader issue within the private equity sector. Many of the largest PE firms remain notorious for their lack of commitment to climate action, buying up dirty assets and investing heavily in fossil fuels despite the clear need to execute a just energy transition. We’ll see if Alpine's new ethos, with a particular focus on diversity, equity, and inclusion, can survive in an industry typically dominated by layoffs, cost cutting, and price hikes.
Modest gains in Morocco
The World Bank and International Monetary Fund meetings wrapped up on Sunday in Morocco with modest outcomes, in stark contrast to the growing need for these institutions to deal with interlocking global economic, political, and climate crises. The talks did not unlock substantial new capital for developing countries to fight climate change. World Bank governors endorsed the bank’s new vision to strive for “a world free of poverty on a liveable planet,” and Sub-Saharan Africa secured a third seat on the IMF’s executive board. There were also encouraging signs that the Vulnerable 20 group of countries (V20) may also be recognized as a new group within the IMF, giving climate-vulnerable countries more say in the IMF processes. Proposals to change the IMF’s structure and increase lending face delays, with reports suggesting the U.S. is unwilling to endorse reforms that increase China’s influence.
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Green talk, gray votes
The recent surge in ESG shareholder proposals hasn't been matched with a surge in support from major asset managers, as heavyweights like BlackRock, Vanguard, and State Street have been notably reserved. Without their oppositional votes, nearly 30 significant ESG proposals in each of the last two years at U.S. large caps would've achieved over 40% support to reach "key resolutions" status. Highlighting the schism, five major 2023 proposals, which won the nod of over a third of independent shareholders, were met with an unanimous "against" from the Big Three. This divergence casts a shadow over the professedly "woke" image paraded by some in corporate America.
