What’s green, worth tens of trillions of dollars, and makes corporations an offer they can’t refuse? The answer: Climate Action 100+, an institutional investor-led initiative that in its brief existence has emerged as a force for radical social transformation. The group already has secured commitments from more than 160 corporations worldwide to reduce greenhouse gas emissions to target levels set by the Paris Climate Change Agreement of 2015, a pact from which President Trump announced withdrawal plans in June 2017. Suppose a company doesn’t want to commit. Well…that could create problems.
Like any scientific controversy, climate change invites skepticism. Human activity may be responsible for increases in atmospheric carbon dioxide concentrations which raise temperatures and threaten ecosystems. Yet there is compelling evidence that global warming is due to non-human factors and that it alternates with global cooling in a recurring cycle. The issue, in other words, is far from “settled.” In science, there are no shortcuts.
Unfortunately, many activists are convinced that if we don’t eliminate fossil fuels from our economy, the earth’s ecosystems will collapse. All too often, they downplay evidence that doesn’t support their assertions. In practical terms, if they had their way the United States and other developed countries would have to accept a lower standard of living.
Climate change activists are also investors. And they are using their equity positions to coax corporations into becoming activists themselves. Climate Action 100+, or CA 100+, is leading the way. This network of progressive investors, managed by a steering committee of five organizations including Ceres and UN Principles for Responsible Investment (PRI), officially coalesced at the Planet One Summit in Paris in December 2017, a follow-up to the Paris Agreement of 2015. Now comprising around 370 institutional investors across dozens of countries, Climate Action 100+ now effectively controls more than $35 trillion in assets. And it’s flexing its muscles.
To be part of the Climate Change 100+ mission, an equity fund, university or other institutional investor must commit itself to investing in companies that sign commitments to reduce their carbon footprint. An initial 100 business enterprises signed on, and another 61 followed. Expect the total to keep rising.
Climate Action’s main goal, pursuant to the Paris Agreement, is limiting global average temperature to “well below” 2 degrees Celsius above preindustrial levels. In addition, the group encourages corporations to comply with the 2015 pact’s “20/20/20” targets – a reduction of carbon dioxide emissions by 20 percent, an increase of market share of renewable energy to 20 percent and an increase in energy efficiency by 20 percent. In its own words, Climate Action seeks to “engage with the world’s largest greenhouse gas emitters to curb emissions, strengthen climate-related disclosures and improve governance on climate change.” The group emphasizes “working with the companies in which we invest.” Such language suggests divestment from any company not on board. With fossil fuel producers, it’s been more than a suggestion.
This July, London-based asset manager Sarasin & Partners, a Climate Action affiliate, announced it had sold nearly 20 percent of its stake (USD$42.1 million) in Royal Dutch Shell, citing dissatisfaction with the company’s progress in meeting Paris Agreement targets. “We have been supportive of your recent leadership in support of the Paris Climate Accord,” Sarasin wrote in a letter to Shell Chairman Chad Holliday. “However, we were extremely disappointed that, despite your public commitment to act on climate change, the strategy that Shell published at its Management Day on 4th June aims to deliver rising fossil fuel production to at least 2030.” Mind you, the company already had caved last December in announcing short-term climate targets. With Climate Action investors on the scene, who needs Alexandria Ocasio-Cortez’s Green New Deal?
The prime mover behind Climate Action, California State Controller Betty Yee (in photo), is uniquely positioned to extract commitments from target companies. In addition to being the state’s chief fiscal officer, she’s also a board member of the California Public Employees Retirement System (CalPERS), the California State Teachers’ Retirement System (CalSTRS) and Ceres. “With trillions of dollars under management globally, we can demand accountability from the largest corporate greenhouse gas emitters and hold governments responsible for the impact of their decisions,” she told a Global Climate Change Summit in San Francisco a year ago.
In a similar spirit, Stephanie Maier, a CA 100+ steering committee member and the director of responsible investment for HSBC Global Asset Management, believes that the list of companies agreeing to oversight is fast approaching a “tipping point.” According to a Climate Action report released this month, 70 percent of its 161 “focus companies” already have set long-term emissions reduction targets.
Climate Action investors come in many types. That includes the Church of England Pension Board, Seventh Generation Interfaith Inc., United Church Funds and other religious groups. Like their secular counterparts, they are morally charged and eager to apply pressure. Adam Matthews, director of ethics and engagement for the Church of England Pension Board, puts it this way: “You’ve never had a mobilization of investors on this scale before. For these companies, there’s no more hiding.”
Comments such as these underscore suspicions that Climate Action affiliates envision a world in which business enterprises either submit to global monitoring or lose a large chunk of working capital. These shareholders represent a real danger to corporate independence. And they are doing nobody any favors by demanding that we treat science as a set of foregone conclusions.