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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To scope 3 or not, that is the question
Widespread speculation about what is in the Securities and Exchange Commission’s (SEC) climate risk disclosure rule can only mean one thing: the measure is close to advancing. Nearly two years after the rule was first proposed, the latest reports indicate a draft proposal has been circulated to commissioners for review and a vote is likely before the end of March.
Commissioners are wrestling to balance a sufficiently robust rule that provides necessary disclosure investors need against the specter of legalchallenges by the Chamber of Commerce and other trade associations. Fossil fuel-aligned interests have focused on so-called scope 3 emissions disclosure requirements, which cover corporate suppliers’ and customers’ emissions and account for over 70% of total climate emissions on average.
Chair Gary Gensler has repeatedly proclaimed that the SEC is neither a climate regulator nor a climate risk regulator, but a securities regulator. But you can’t manage what you don’t measure, and it’s a risky bet in itself to omit key transparency requirements related to the financial risks posed by climate change to investors, other market participants, and the broader economy. Considering estimates show climate change is expected to cost the global economy $178 trillion over the next half century, it’s a risk the SEC shouldn’t take as it may be the only path that actually works.
Big Oil’s divestment burn
The New York State Common Retirement Fund is ditching $26.8 million in fossil fuel investments as part of State Comptroller Tom DiNapoli’s ongoing low-carbon economy transition readiness review. DiNapoli’s move will cut actively managed public equity and corporate bond holdings from eight oil and gas companies, including ExxonMobil. Supporters of the decision commend the third-largest U.S. state pension fund for working towards protecting retirees, state and local governments, and taxpayers from significant climate risk that could result in lower returns. However, critics note that the Fund will continue to hold $500 million, $388 million, and $50 million worth of shares in Exxon, Chevron, and BP, respectively, that it manages “passively” through index funds. Disappointment in divestment commitments is nothing new, but this is the first state pension fund to ban new investments in private equity funds investing in fossil fuel extraction and production.
While Big Oil feels the burn of ignoring climate risk, 200 public companies leading the way towards a clean energy future earned more than $2.2 trillion in sustainable revenue during 2022, according to a new report from As You Sow and Corporate Knights. The Carbon Clean 200 list generated almost double the returns of the main fossil fuel index from July 2016 to January 2024, the report found.
Pipeline to nowhere approved
The Federal Energy Regulatory Commission last week approved the Saguaro Connector, a pipeline proposed by ONEOK Inc. to move fracked gas from the Permian Basin to proposed LNG export facilities on Mexico’s Pacific Coast.
The problem? Those proposed terminals may never be built. As Friends of the Earth and Climate Nexus authors point out in this blog post on BailoutWatch, ONEOK’s CFO said in December that the pipeline “will not go forward if we think we are in a situation where we [have] a pipe to nowhere” — which is exactly what they have, for now, while the Biden Administration revises its process to decide which LNG facilities are in the public interest.
The pipeline would threaten a pristine site in West Texas that is the ancestral home of the Carrizo/Comecrudo Tribe, who have vigorously opposed its construction. It’s worth noting that the biggest shareholders in ONEOK are mega-asset managers Vanguard, BlackRock, and State Street. Climate activists have blasted these firms for supporting fossil fuel expansion while promising climate progress — and that’s exactly what’s happening here.
Greenwashers bail on climate pact
JPMorgan Asset Management and State Street Global Advisors have exited Climate Action 100+, an investor coalition focused on urging companies to reduce their carbon emissions; and BlackRock also reduced its participation by shifting responsibility for the initiative to its international arm. The move by these massive global asset managers marks a significant retreat from the financial sector’s efforts to combat climate change. Their withdrawal from full participation in Climate Action 100+ weakens the coalition's ability to leverage shareholder influence to push major polluters towards decarbonization and highlights a growing divide between U.S.-based asset managers facing political pressures and their counterparts elsewhere.
Various perspectives have emerged in response to the firms' withdrawal: Some question whether this move represents a strategic retreat (termed "greenhushing") in the face of mounting political backlash against ESG initiatives in the U.S.; others ask if it exposes a lack of genuine commitment to climate goals. Critics, including the Sierra Club’s Ben Cushing, suggest that yielding to political pressure undermines the fiduciary duty to manage climate risk. NYC Comptroller Brad Lander didn’t mince words, slamming the financial giants for "caving to climate deniers" and compromising their fiduciary duties.
The asset managers justify their exits by saying they have developed their own frameworks for climate engagement, or by blaming legal and strategic concerns, particularly in the U.S.
