March 20, 2023

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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The Intergovernmental Panel on Climate Change (IPCC)’s latest report, released today, will be the last such report for about 5-7 years. A synthesis of previous editions, it found that the window to limit warming to 1.5°C is rapidly closing and the re-direction of global investment and finance is essential to keeping warming below catastrophic levels. It reiterated what is evident: “There is sufficient global capital to close the global investment gaps”. Check out the press release here.

President Biden vetoed Republican-led legislation making it harder for money managers to consider climate risks in retirement plan management – the first veto of his presidency. We hear House Republicans are planning a veto override vote on Thursday. The updated guidelines proposed by the Biden administration – which the Republican legislation attacked –  are widely viewed as sound risk management. The current banking crisis serves as a warning of how climate-related financial risks can harm the financial sector.

This proxy season may not see a big upheaval like Exxon's board ouster in 2021, but ongoing responsible investing spats could still have a significant impact on corporate accountability and climate commitments. Below is a teaser of what we’re watching:

• The world's largest investor, Norges Bank, threatened to file ESG shareholder resolutions and vote against the re-election of directors who are failing to tackle the climate crisis, boardroom diversity, and human rights abuses. But will they? With over $1 trillion in assets, Norges Bank's impact could be seismic. 
• The SEC's new Universal Proxy rules could make it easier for dissident shareholders to oust problem directors in contested elections. Although the anticipated wave of single-issue candidate nominations hasn't appeared yet, the new rules give activist shareholder campaigns more "teeth" without significant expense.

As banking fallout continues with the forced merger of Credit Suisse and UBS, and First Republic teetering, attention turns to clean energy and how the industry can access capital now that one of its biggest backers, Silicon Valley Bank (SVB), has gone bust. SVB bankrolled many clean energy startups, and these firms are now scrambling to find other sources of cash. However, our sources suggest that other firms are stepping in to fill the void. Nevertheless, the episode highlights the need for stronger rules requiring banks to maintain higher cash reserves. Although some conservative pundits blame investments in clean energy for SVB's downfall, those claims have been widely debunked.

Speaking of better rules, questions are being raised about how Fed stress tests overlooked the risk of a rapid rise in interest rates — “a stress test is only as good as the scenarios it tests,” said Aaron Klein, a senior fellow in economic studies at the Brookings Institution. The same point applies to climate risks. The Fed is currently facing criticism for overly simple climate stress tests that miss a whole host of factors including those related to the energy transition. Check out the scenarios portal of the Network for Greening the Financial System for slightly more complex and constructive ideas, and a new government white paper that looks at incorporating climate risks into economic forecasting and Presidential budgets. 

• Worth returning to this – Roosevelt Institute: Looking over the Horizon: The Case for Prioritizing Climate-Related Risk Supervision of Banks
• FT: What the World Bank needs to do now | The magic of an SDR-denominated bond
• BankFwd: Calculate your banking climate footprint
• Climate Home: Loss and damage committee ready to start talks following Asian nominations

• Mar 21: Elders in rocking chairs protest big banks. Eighty-six events will take place in over half the US states involving rallies, art installations and activists cutting up their bank cards. The day is being organized by Third Act, a group for climate activists over 60 years old organized by veteran campaigner Bill McKibben, along with the  Sierra Club, Rainforest Action Network and other orgs. The day will mark the first mass action in the US involving people over 60 years of age. Contact Sarah Lasoff at Stop the Money pipeline for more info.  
• Mar 22: Proxy Preview 2023 by As You Sow, the Sustainable Investments Institute (Si2), and Proxy Impact. Register here.
• Mar 22-24: Join Ceres Global and industry leaders from high-emitting sectors to examine what’s needed to transition to a more stable, just, and climate-resilient economy. Register here.
• Mar 30: Poynter training on Private Equity for journalists - use the promo code 23POYSTAFF100 for free access - recommend this one for everyone relatively new to Private Equity, which plays a huge role in fossil fuel investment. 

Thanks for reading! Tips, feedback, or questions? Reply to this email. 

– Tan Copsey, Katharine Poole, Steve Hargreaves, Jayson O'Neill & Shravya Jain-Conti