The Power of Faith-Based Investors in the Face of a Changing Climate
The Paris Agreement takes effect on November 4, 2016 and nations around the planet look to implement their commitments and meet their targets on greenhouse gas (GHG) emission mitigation, adaptation and financing a low carbon future. One of the greatest challenges of our day is to transition the global economy to a greenhouse gas emissions-free world while incentivizing development. Some might say we need a miracle. We certainly need creative, committed professionals to deliver the financial products and renewable energy technologies, adaptations and efficiencies to meet these goals.
Top photo: Investor groups and NGOs launched CAMPAIGN EXXON to highlight the greatest laggard and the most generous supporter of climate deniers in the early 2000’s.
Faith Based Investors Tackle Climate Change
In the late 1980s, the faith-based investors at the Interfaith Center on Corporate Responsibility (ICCR) were working to eliminate Apartheid while advocating for corporate practices that respect human rights and protect the planet. The insurance industry in the U.S. had just released the numbers: one-third of their loss reserves had disappeared in the 1980s due to severe climatic events. More expensive homes built along coastlands could account for some of the additional losses, but the storms were more frequent and more severe. A growing number of scientific studies concerned about warming temperatures in the atmosphere were catching the attention of citizens, business leaders, and government officials. ICCR members held additional concerns about the impacts of climate change on poor people around the world who have little or no carbon footprint and had no notion of insurance. By the early 1990s ICCR members started to raise concerns with companies in the utility sector about efficiencies and demand-side management (DSM). Later in the decade, companies in the oil and gas, utility, and auto sectors received shareholder resolutions asking companies to calculate and report on their GHG emissions. Shareholder dialogues with these companies also addressed the science of global warming in light of corporate funding of the Global Climate Coalition (GCC), which published disinformation and created the basis for the climate deniers of today.
Within a few years companies started to disclose their carbon emissions. By 2000 the Carbon Disclosure Project was founded. Now known as CDP, this organization compiles data from companies allowing investors to evaluate the efforts of a company to reduce their carbon footprint, assess risk and set reduction goals. As a bonus, corporations realized newfound savings as costs were reduced when emissions were cut. Individual companies have reported billions in savings since they started tracking their emissions. Investments in efficiencies have offered some of the best returns.
By the new millennium, concerns about climate change were growing. Hundreds of companies were reporting their carbon emissions. Investor groups and NGOs founded Campaign Exxon to highlight the greatest laggard and the most generous supporter of climate deniers. Companies received a resolution asking them to disclose their lobbying fees, including to industry groups that might have used the support to finance the GCC and other initiatives. Shareholder resolutions asking for companies to report on their “climate risk” were filed with corporations and financial institutions. The largest reinsurers, SwissRe and MunichRe, had climate risk executives and were soon asking how CEOs and directors of companies were addressing climate risk. Economists at the time realized that climate change presented a material risk to companies and needed to be disclosed as such. ICCR investors were joined by city and state institutional investors and other shareholders in the filing of shareholder resolutions and the support of such resolutions on the proxy ballots.
CEOs had begun to announce the termination of GCC membership by the year 2000, realizing that the disinformation campaign was counter-productive to the work of companies and sector groups as they were well underway in the task of addressing climate change and the opportunities and risks it posed.
While the world was still far from an international climate treaty, by 2005 thousands of companies internationally were disclosing GHG emissions, and sometimes the associated climate risk.
In 2006, with so many investors attentive to the disclosure of GHG emissions, financing of disinformation and lobbying, disclosure of investments in renewables and new technologies, ICCR members discerned what more was needed. While disclosure itself was important, it was not going to stop climate change. In the 2007 shareholder season we saw a new wave of shareholder resolutions asking companies to set reduction targets and asking companies for the business plans to thrive in a climate constrained economy.
Admittedly, this last request has been a steeper climb for investors and companies. Yet additional corporations continue to report new targets in their sustainability reports year over year. Corporations such as Walmart have committed to being carbon-neutral by 2050, with new commitments announced during Climate Week at the United Nations in September 2016 by Bank of America, General Motors and Apple to source 100% of their energy needs from renewables.
It’s Not Just Climate
Since 2007 faith-based institutional investors and their partners have worked together on dozens of strategies to help companies become leaders in a climate-constrained world.
As the climate in the USA and around the world has drastically shifted over the years, we see the impacts on water, agriculture, and various species. Companies now are asked to report on their water footprint and set reduction goals. With pesticide use on crops and antibiotic use in animals and their feed, we see growing health impacts. Related climate concerns increase as precious waterways are contaminated from run-off, and soils are depleted.
The Energy of the Divestment Campaign – And the Pitfalls
In 2012, the fossil fuel divestment campaign began to energize students, citizens, and faith communities to build the political will to move us to an international treaty and US climate policy. Divestment appealed to some faith communities who wanted to take an absolute position, rather than delving into the complexities of grey areas. Most faith traditions, if not all, engage with others for the purpose of right understanding and right relationship. People of faith should be hesitant to judge someone beyond the possibility of redemption or to demonize others. Faced with the need to transition multinational corporations to a carbon neutral economy, many understand that divestment strategies without corporate engagement and focused investment will not get us close. Investors working with companies understand that divestment initiatives have a minimal effect on multinational corporations. Voices within the faith-based investor community continue to move corporate leaders rather than demonize them (while sounding the alarm for faster and more serious shifts).
If investors neglect their responsibility as part owners of a corporation by not even voting their stock in support of the climate resolutions, nor participating in the life of the corporation except for checking the stock price, yes, go ahead and sell the stock. But most will continue to provide a solid market for fossil fuels. Imagine instead if the momentum encouraged investors to engage with companies demanding significant investments in alternatives to fossil fuels and the technologies that substitute products that rely on fossil fuels. Even if it was as simple as voting in support of a shareholder resolution to create a clear majority, the action would make companies take notice. Imagine investors demanding that Fidelity, Vanguard, Black Rock and other large financial managers actually consider climate risk in their products and vote in support of greater disclosure and action on climate change. Imagine.
Climate Finance Commitments
With the leadership of Ceres and the Investor Summit on Climate Risk, we see international investors, large financial institutions and public pension funds committing hundreds of billions of investment dollars to the transition to a low-carbon economy worldwide.
Billions of dollars are now invested in new technologies, the development of renewable energy, adaptation plans, and climate-resistant infrastructures with new investments growing each month. In the midst of creative, new investment products, faith communities are challenging financial managers and investors to integrate impact investing to assure that poor people, people at greatest risk to the impacts of climate change, and people who live in energy poverty with little responsibility for climate change, are also served by these investments.
The United Nations Sustainable Development Goals (SDGs) suggests a framework for these investments.
The SDGs are part of a comprehensive document called “Transforming Our World: The 2030 Agenda for Sustainable Development,”[1] agreed to by all countries at the United Nations.
The “2030 Agenda” lays out a vision for the future of all humanity, and it describes a process of international collaboration for achieving it. The 17 goals, known as the SDGs, and the 169 targets that accompany them, are the most specific expression of that vision:
1. End global poverty in all its forms everywhere.
2. End hunger, achieve food security and improved nutrition and promote sustainable agriculture.
3. Ensure healthy lives and promote well-being for all at all ages.
4. Ensure inclusive and equitable quality education. Promote lifelong learning opportunities for all.
5. Achieve gender equality and empower all women and girls.
6. Ensure availability and sustainable management of water and sanitation.
7. Ensure access to affordable, reliable, sustainable and modern energy for all.
8. Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all.
9. Build resilient infrastructure, promote inclusive and sustainable industrialization and foster innovation.
10. Reduce inequality within and among countries.
11. Make cities and human settlements inclusive, safe, resilient and sustainable.
12. Ensure sustainable consumption and production.
13. Take urgent action to combat climate change and its impacts.
14. Conserve and sustainably use the oceans, seas and marine resources for sustainable development.
15. Protect, restore and promote sustainable use of terrestrial ecosystems, sustainably manage forests, combat desertification, and halt and reverse land degradation and halt biodiversity loss.
16. Promote peaceful and inclusive societies for sustainable development, provide access to justice for all and build effective, accountable and inclusive institutions at all levels.
17. Strengthen the means of implementation and revitalize the Global Partnership for Sustainable Development Finance.
While Goals 7, 13 and 17 hold obvious links to climate change, others addressing water and agriculture deal with some of the known impacts.
As of this writing, Hurricane Matthew has plowed through Haiti and Cuba and into the U.S. wielding death and destruction: another “Thousand Year Storm”. As the planet and her people grapple with the implementation of the Paris Agreement, investors are at the forefront of its success as companies continue to make progress, and as new investment products come on line to enable the transition to a low-carbon economy. Creative collaboration in the transition will be needed as we address the added challenge of enabling communities around the planet to foster sustainable development.
Article by Sister Patricia Daly, OP who is a Dominican Sister of Caldwell, NJ and has worked in Corporate Responsibility and Socially Responsible Investing for over 35 years. She directs the Tri-State Coalition for Responsible Investment (http://tricri.org), an organization of 40 Roman Catholic Dioceses and Congregations of Women and Men primarily in the NY metropolitan area. Pat represents these and other institutional investors to the Interfaith Center on Corporate Responsibility. Pat has invited companies to address issues of human rights, labor, ecological concerns, equality, and international debt and capital flows and played a role in positioning the agenda of global warming into the priorities of Corporate America. Pat serves on the Advisory Board of Lamont Doherty Earth Observatory, the climate science arm of Columbia University’s Earth Institute, and the Board of Mustard Seed Communities. She is the proud recipient of the 2014 Joan Bavaria Award, presented by Ceres and Trillium Asset Management and holds and honorary doctorates from William Paterson University and Duquesne University.
Article Note: [1] https://sustainabledevelopment.un.org/post2015/transformingourworld
