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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Slick marketing
In global advertising, where ‘green’ often signifies more than just dollar bills, an intriguing analysis by DeSmog reveals a complex web of boardroom allegiances that might be coloring the industry's environmental commitments in shades of gray. Over a third of board members at the helm of the world's advertising giants also hold influential roles in high-emission companies. These advertising firms, with $67 billion in combined revenue, publicly promote a green future while their directors work in industries like fossil fuels, aviation, and plastics, calling into question their willingness to sever ties with, or even cease amplifying, the very industries undermining their green pledges.
The advertising sector's slow pivot towards a truly sustainable business model starkly contrasts with its innovative campaigns, which often paint a greener picture than reality. While banks and other sectors have taken tangible steps towards encouraging an energy transition among their clients, the advertising world appears to be lagging, setting minimal expectations for its high-carbon partners. "Advertised emissions" — the large carbon impact from consumer use of products promoted by ads — are not covered by most companies' net-zero commitments, creating a major gap between their public sustainability promises and their real actions, especially as they often overlook their high-emission clients.
BlackRock boss battles backlash
Folks from both sides of the political spectrum are pouncing on BlackRock and CEO Larry Fink this proxy season. A UK activist investor challenged Fink’s dual role as chair and chief executive, seeking more board oversight to amend “numerous contradictions and inconsistencies between BlackRock’s ESG strategy and its implementation.” BlackRock wrote in its shareholder voting recommendations that 54 of the 100 largest US public companies have a combined CEO-chair role — but nearly 14% of S&P 500 companies faced proposals last year to separate the positions. Another US-based shareholder group wants an internal review of BlackRock's 2023 climate-related proxy record, citing the firm’s dwindling support for environmental shareholder proposals. On the right, the National Center for Public Policy Research requested a public report on the risks of not explicitly prohibiting discrimination based on “viewpoint” in its equal employment policy. Expect BlackRock to hold the line against proxy proposals from both sides and continue business as usual, including being the world’s largest investor in fossil fuels.
Expect the unexpected on climate risk rule
Here’s the latest in the climate disclosure rule legal saga: The SEC took the unexpected (but not unprecedented) move of preemptively staying its own rule last week. The agency said it would not be providing any additional explanation beyond the public order, which outlined its legal authority and reaffirmed its commitment to vigorously defend the final proposal. The decision follows several legal challenges filed by Leonard Leo-linked entities, including two oil and gas frackers and the majority of Republican Attorneys General Association (RAGA) members. By staying its own rule, legal experts believe the agency’s move will expedite a court decision by eliminating the back-and-forth over various requests by plaintiffs to pause the rule. Others say it potentially avoids adverse ‘Shadow Docket’ litigation.
Not surprisingly, House Republican Financial Services Committee members will continue to serve Big Oil by holding another hearing on the rule tomorrow. The rule’s leading antagonist Rep. Bill Huizenga (R-MI) – heading up the GOP working group trying to vacate the rule – is billing the hearing as a discussion on the pending Congressional Review Act legislation, with votes slated for next week. Given the slim majorities in both the House and Senate and key Senate moderate Jon Tester (D-MT) opposing the repeal, the outcome is anyone's guess. In response, Unlocking America’s Future expanded its advertising campaign calling out self-serving politicians attempting to undermine the rule despite overwhelming support from voters across the political spectrum.
More (or less) disclosure
While the SEC rule hangs in limbo and legal attacks against ESG investing rage on in 26 states, US regulators led by the Federal Reserve successfully sidestepped the ambitions of European bankers to integrate climate risks into global financial rules. According to people familiar with the closed-door negotiations, US representatives have been working to narrow the mandate, eliminate monitoring, and make voluntary the climate-related lending policies put forth by the Basel Committee on Banking Supervision. Federal Reserve Chair Jerome Powell clearly stated that the Fed “[is] not, and will not be, a ‘climate policymaker’,” and it seems that responsibility extends to diluting international agreements.
Meanwhile in New York City, shareholder resolutions proposed by Comptroller Brad Lander and three of the city’s public employee pension funds have successfully pushed the Royal Bank of Canada, JPMorgan Chase, and Citigroup to reveal how much of their financing goes to fossil fuel projects versus green energy. The same resolutions are expected to go to vote at Bank of America and Goldman Sachs annual meetings on April 24th, where both boards recommend shareholders vote against the proposals. What will this energy-supply finance disclosure miss? According to a new study by Friends of the Earth and Profundo, “a huge ‘cow-shaped hole’,” in financed emissions.
