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The largest US corporations are talking the talk on climate
change, but they are not bringing that message to lawmakers with
sufficient urgency, according to a new report by nonprofit
Ceres.
In a review of the statements and lobbying actions of 96 major
US companies in the S&P 100, Ceres reported on 13 July that 76%
of them have "publicly affirmed the science of climate change."
However, only 40% of the companies have engaged directly with
lawmakers on the importance of using science-based policies to
strive to reduce climate change, Ceres said in its report, "Practicing Responsible Policy
Engagement."
Breakouts for four of the top 100 S&P companies were
eliminated in the report due to consolidations and mergers.
Ceres found that 21% of the companies have lobbied against
science-based climate policies, even as many of them have announced
their own emissions reduction programs, meaning "… these companies
demonstrate a troubling inconsistency, at a minimum, in their
approach to climate change," Ceres said.
"Claiming credit for making operational climate change
commitments while undermining the necessary policy measures to
achieve those very commitments poses significant reputational and
financial risks to companies," it warned.
Ceres defines science-based policy as actions that will help
limit the global temperature rise to 1.5 degrees Celsius, compared
with pre-industrial levels, per the Paris Agreement. These actions
include decarbonization of electricity and transportation, rapid
limits on methane emissions, and use of nature-based climate
solutions.
Assess the impact of climate change on the company, including
how its lobbying and political donations can mitigate or exacerbate
those risks;
Include climate policy across all corporate decisions about
lobbying and policy engagement; and
Align direct and indirect lobbying with science-based climate
policies, including actively lobbying in their favor, both with
political leaders and within trade groups.
Overall, Ceres termed corporate support of science-based climate
policy to be "weak," but it did credit companies such as Capital
One, PepsiCo, and Visa for calling on Congress in 2020 to act in a
"climate-smart" way when spending COVID-19 recovery funds.
At the state and regional lobbying level, Ceres said biotech
firm Biogen, nutrition and health sciences company DSM North
America, and real estate developer JLL have strongly supported
decarbonization of key sectors of the economy, such as
transportation. And it said that a few companies with major
operations in Arizona (Google, Microsoft, Salesforce, and packaging
and aerospace company Ball Corp.) came out in the legislative
session this year for stronger clean energy standards.
Promises, promises, promises
However, Ceres pointed out that for some companies, climate
commitments begin and end with promises—and even those promises
are undermined by the limited information being shared by the
corporate giants. As an example, it said that 46% of the companies
it studied acknowledged in financial filings they were affected by
both the physical and transition risks of climate change. Another
28% disclosed one or the other form of risk, but not both. But 26%
do not acknowledge either form of risk as "material" in financial
reports such as 10-K filings with the US Securities and Exchange
Commission (SEC).
Since taking office in January, US President Joe Biden has
issued executive orders and appointed government agency leaders who
started rulemakings that could significantly increase disclosure
requirements. For example, the SEC this spring opened a rulemaking
on a possible expansion of rules for how companies must disclose climate change risk in
financial statements. In March, the SEC denied requests by two oil
companies to omit shareholder resolution
votes requiring the companies to set specific GHG reduction
targets, and in April the SEC warned companies about making
potentially misleading green investment
claims, updating 2010 guidance.
The Ceres report also contrasted the actions and statements of
large industry trade groups with the messages coming out of the
White House under Biden. Ceres said trade groups have undermined
some of Biden's programs to reduce emissions this decade and to
ramp up US investments in clean energy.
As one example, Ceres called out the American Petroleum
Institute for posting social media ads claiming that Biden's halt
on new oil and natural gas leases will lead to "hundreds of
thousands of job losses and billions of losses in government
revenues."
Also, Ceres criticized the US Chamber of Commerce for stating
that it supports Biden's announcement
of a new goal of a 52-55% GHG emissions reduction by 2030 from a
1990 baseline, while at the same time saying coal-fired power
plants should be part of the US and global energy mix. Basically,
it argued, the Chamber is placing its bet on carbon capture, use,
and storage technologies to keep coal, oil, and natural gas viable
in a net-zero world, and Ceres said it is bringing that message to
Congress.
Neither API nor the US Chamber could provide a comment until
they had more time to review the report.
However, as news developments show, US trade groups are far from
the only representatives seeking to keep fossil fuel assets alive.
The Institute for Environmental and Energy Economics on 12 July
reported that the Japan Bank for International Cooperation will
finance coal-fired power in emerging economies if the projects are
accompanied by carbon capture and storage or if a proportion of
ammonia or biomass is co-fired with the coal, a stance in contrast
to other major lenders that have said they will not finance new
coal-fired power.
Ground is shifting
Ceres said that trade groups and corporations are at risk of
being on the wrong side of changing social attitudes and government
policy if they do not revamp their lobbying, as well as their
actions. Through groups like Climate Action 100+, investors are
raising the pressure on corporate lobbying on climate issues.
After reviewing corporate climate commitments and investors'
attitudes, Peter Gardett, IHS Markit research and analysis
executive director, said he sees that trend emerging. "The
financial, commercial, operational, and political environments for
large corporations in the US have all changed dramatically around
climate change in the past year, so it is not surprising that
companies are trying to balance the momentous shift toward action
on climate risk with their mandate to provide continuity for their
shareholders, partners, employees, and regulators," he said in an
email.
Indicative of how the ground is shifting even day-to-day, 41 US
companies, including many in the Ceres study, on 13 July called on
Congress to prioritize investments that can accelerate the
transition to a resilient net-zero economy in any infrastructure
legislation. Biden had proposed a $2.2-trillion infrastructure bill
back in March, and after discussions with Democrats and
Republicans, it's been whittled down to about $1.2 trillion, still an immense
sum.
In a statement coordinated by the Center for Climate and Energy
Solutions, the corporations said: "Sizeable investments in
resilient, low-carbon infrastructure are needed to move the country
toward a net-zero future. Access to clean, reliable, and affordable
energy is as crucial to American families as it is to our nation's
largest companies."
Signers include agribusiness giant ADM, Amazon, Bank of America,
DuPont, IBM, and energy companies Dominion, Duke Energy, National
Grid, NRG Energy, and Southern Company.
At the same time, investors are voting with their dollars,
redirecting them away from fossil fuels and towards renewables. BlackRock, the world's largest
fund manager with about $9 trillion in assets, started a third
investment fund in April to invest in renewable power projects
around the world and launched a new exchange-traded fund for
institutional and individual investors who want to invest in the
low-carbon economy.
BlackRock CEO Larry Fink has been outspoken about the need for a
coordinated effort by government, corporations, and investors to
move forward on the energy transition. And he has warned that an
individual company's actions, while perhaps putting it on the right
side of the climate issue, is ineffective if it's not part of a
broader approach across industries and nations.
As an example, Fink spoke at an investment conference in Europe
this month about the impact of a Dutch court in May ordering Royal Dutch Shell to reduce its
Scope 3 carbon emissions by 45% by 2030 from a 2019 baseline. Fink
pointed out that Shell can do this merely by selling high-carbon
assets, which the company has said it's considering. But this is
meaningless in terms of reducing global carbon emissions.
"Divesting, whether done independently or mandated by a court,
might move an individual company closer to net zero, but it does
nothing to move the world closer to net zero," Fink said.
That complexity—the idea that one company's actions must be
seen in the context of national and international goals, as well as
in relation to its own prior actions and those of its
competitors—is becoming more apparent, said Gardett. But it's
also evolving quickly, and with different elements gaining greater
attention from the public and lawmakers, making it challenging for
companies to keep up.
"Only a year ago, the outlook for climate policy in the US was
very different, and the reality is that it could be very different
again a year or two from today. In the meantime, companies need to
plan for a future that is increasingly favoring electrification,
infrastructure resilience, digitalization, and cleantech deployment
trends that all have climate implications but are not primarily
driven by action to minimize or manage climate change," Gardett
said.
"Over time, their lobbying work will presumably come to reflect
the reality of a reshaped economy, and until that economy arrives
they are navigating an energy policy transition as complex as the
physical and economic transitions also currently underway," he
said.