Members of the Tri-State Coalition for Responsible Investment pioneered early investor work engaging companies in the oil and gas, utilities, and automotive sectors on developing strategies to measure, monitor, and reduce greenhouse gas (GHG) emissions to curtail further negative impacts on the environment and society and to position themselves strategically to thrive in a carbon constrained economy. Climate change is a fundamental challenge to society, presenting enormous financial risks and a compelling moral imperative to mitigate its negative impacts, especially on the poorest and most vulnerable. Global climate change is exacerbating existing challenges for the marginalized in our society, such as food and water security, migration and global health.
Companies in these three industries make up some of the largest contributors to global emissions while also facing the greatest climate-related risks due to business models that rely on fossil fuels. Investors have come a long way since these engagements began in the 1990s; Companies that once denied that climate change was real are beginning to look at climate change as a material financial risk. When the Paris Agreement entered into force in November 2016, the goal to limit warming to below 2 degrees Celsius set a global standard for the GHG emissions reductions required to prevent further irreparable harm to our planet. Despite this progress, corporations have to make significant business model shifts to prepare for the low-carbon transition, and investors will continue to hold companies to the targets set by the Paris goals in future engagements as well as to do their part to address Sustainable Development Goals 7 (Energy Access) and 13 (Climate Action).
We continue to press companies to adopt science-based greenhouse gas reduction goals, engage constructively on climate policy, conduct scenario planning which includes low-carbon scenarios, and invest in clean energy research, development and deployment. This work is complemented by efforts in Climate Finance to assess how we might direct more investment dollars toward the energy transition.
We are also inspired in our work by faith leaders who have highlighted the moral dimensions of climate change, most prominently with Pope Francis’ encyclical Laudato Si’. As the Pope wrote, “The climate is a common good, belonging to all and meant for all.” This concern for the common good, especially for those most vulnerable to the impacts of climate change, is the basis of our work and informs our approach in our corporate engagements.
2017-2018 Engagement Priorities
Oil and Gas
Focus Companies – ExxonMobil, Chevron, Apache
During the 2017 shareholder season, investors pushed companies in the oil and gas sector for greater disclosure of climate-related risks, in the form of resolutions asking for a 2 degree scenario analysis or business plan. Many Tri-CRI members co-filed the ExxonMobil resolution, led by the NY State Common Retirement Fund and the Church of England, which received majority investor support – 62.10% – at the annual meeting. Investors will continue to engage the company on what a robust 2 degree scenario analysis should include. Members also co-filed a resolution at Chevron, led by As You Sow, with a more robust “Low-Carbon Transition” ask, which also received 27% support. The Coalition will continue to support engagements with these companies as co-filers and encourage robust understanding of climate risks and disclosure aligned with the transformation called for in the Paris Agreement.
Utilities
Focus Company – Southern Company
Southern Company is the second largest GHG emitter in the country and is exposed to significant climate related risks, but lacks public-facing disclosure of business plans for resiliency in a carbon-constrained future. The Dominican Sisters of Caldwell re-filed the “Business Plan for 2C Warming Scenario” resolution with Southern Company in 2017 after the company failed to improve its climate-related disclosures this past year. The resolution gained support from investors representing 45.71% of shares, an impressive increase from 34% the prior year. Investors will continue to engage the company on expectations for a strong 2 degree business plan in the coming year. The framework established by the Paris Climate Agreement and IEA 2˚C scenario will likely involve significant shifts to lower carbon electricity generation to achieve the needed emissions reductions. Given the long-term planning horizons in the utility sector, investors urged Southern to disclose its business plan for achieving a competitive return on capital and addressing the opportunities of transitioning to a low-carbon economy while providing safe, reliable, and affordable energy. Investors are seeking increased disclosure that includes goals for reducing emissions, plans to integrate technological, regulatory, and business model innovations; and alignment of incentives, research and development, and public policy positions with this strategy.
Automotive
Focus Companies – Ford, General Motors
The Tri-State Coalition leads engagements with Ford and General Motors on developing robust electrification strategies in line with the Paris goals as well as aligning public policy positions (on the CAFE Standards and EPA GHG Emissions Midterm Review) to the company’s objectives. These are longstanding dialogues with broad participation from ICCR members. This shareholder season, investors will continue to engage both companies on public policy as well as their strategies for business model alignment to the 2 degrees warming scenario by monitoring how companies are maintaining commitments to doubling fleet-wide average fuel economy to 54.5 mpg by the 2025 model year.
Statements of Faith Leaders on Climate Change:
This list of Religious Statements on Climate Change composed by Interfaith Power & Light demonstrates the potential for interfaith collaboration to address climate change.
Resources:
Human Rights Council Resolution on Human Rights and Climate Change 2018
Task Force on Climate-related Financial Disclosures (TCFD) – Final Recommendations (June 2017)
Utility Climate Change Readiness: A Business Plan Analysis, 50/50 Climate Project
Climate Justice Video
Invested in Change: Faith-Consistent Investing in a Climate Challenged World
The Evolution of ICCR Shareholder Proposals on Climate Change
Policy Engagement Toolkit
Power Forward 2.0: How American Companies are Setting Clean Energy Targets and Capturing Greater Business Value (Ceres)
Sectoral Decarbonization Approach: A Method for Setting Corporate Emission Reduction Targets in Line with Climate Science
Implications of COP21- How Do Corporate Carbon Reduction Targets Stack Up (MSCI)
ICCR Statement on COP21
Laudato Si’ and Corporations (Maryknoll Office for Global Concerns)
