ICCR Climate Change Strategic Review

By Frank Sherman

The ICCR Climate Change Workgroup met in mid-June, hosted by the Nathan Cummings Foundation, an ICCR member in NYC, to evaluate the progress over the past year and chart out a path forward for the 2018-19 corporate engagement season. We took time to reflect on the social and faith trends; review the political and economic landscape; and map the growing investor actions on climate. We then evaluated our progress over the past couple years before developing a SWOT analysis, mission and vision. In the afternoon, we discussed the path forward by re-directing the existing programs and discussing some new areas to pursue.

Jake Barnett (Morgan Stanley Graystone), together with Mary Beth Gallagher (Tri-State CRI), presented the climate justice perspective by describing the disproportionate adverse impacts climate change has on vulnerable communities. These include decreased agricultural production due to drought resulting in increased migration, disproportionate impacts on women, increased disease burdens due to intensified heat and insect-borne diseases, and displacement from intensified storms due to lack of resilience (e.g. Hurricane Harvey and Maria). In addition, roughly 1.1 billion people lack access to electricity, making the provision of clean, affordable energy essential for communities trying to escape poverty. Unlike secular asset managers, the faith community can elevate climate change from a partisan political discourse to a moral issue that we are all called to address. We need to be bold and exhibit urgency by leveraging partner organizations (Human Rights Watch, Earth Justice, Sierra Club, etc.), and put a human face on the climate change impacts.

Aaron Ziulkowski (Walden Asset) provided the political and economic overview noting that, despite growing awareness, global GHG emissions continue to rise, although they have leveled off in OECD (developed) countries. The national commitments made in Paris fall short of the 2 degree scenario and get the world nowhere near the 1.5 degree ambition. Transportation has replaced electricity production as the top emitter in the U.S. due to the displacement of coal by natural gas. Despite the White House announced withdraw from Paris, several states have set targets for GHG reduction, renewable energy and CAFÉ standards (which reduce auto emissions) that exceed federal standards. Japan, the EU, China and India continue to increase CAFÉ standards while Trump’s EPA rolls back U.S. targets. The EPA is being sued for rolling back methane emissions standards in oil & gas production. Economists are confident that economics wins over politics with the cost of unsubsidized wind and solar electrical power now competitive with fossil fuels. We agreed to step up public advocacy and pressure corporations to do the same if the U.S. wants to remain competitive in a low carbon world.

Jamie Bonham (NEI) mapped the growing awareness and complexity of various investor groups to manage climate risks and opportunities. ICCR has to find its unique voice while leveraging these larger asset managers and NGO’s. Sean Wright of EDF presented some ideas for continued engagement on methane engagements (“The ICCR methane campaign is making a critical difference”). Rob Berridge of Ceres discussed the overlap of the Climate Action 100+ (CA100) with existing ICCR engagements with 40 U.S. companies. He has been identified as the Ceres contact with ICCR on the CA 100+, and will encourage CA100 teams to include ICCR members in their engagements or at least keep us connected (note that SGI members are on the CA100 teams for Exxon, Chevron and Valero). Ceres will analyze the Fortune 500 companies to identify climate laggards that have slipped through the cracks for ICCR to consider engaging.

In assessing ICCR’s progress over the past couple years, we noted advances with heavy GHG emitters by asking for long-term 2-degree scenario plans and science-based reduction targets (SBT). We’ve made more progress with utilities than the transport sectors, while O&G companies continue to hold on to their business-as-usual model, although they too, are starting to develop 2degree scenario reports. ICCR also led the methane campaign with good results (…as attested by EDF) due to our trusted corporate relationships, convening power with companies and non-ICCR investors, and ability to bring NGO expertise and investor focus. Finally, ICCR members were ahead of the investor world engaging global banks and asking for climate related disclosure consistent with TCFD guidelines.

In reviewing ICCR’s capabilities, we felt our strengths included our reputation for long-term, respectful yet challenging engagements; our moral credibility to speak for people and planet; and collaborative culture between members and partners. However, we recognize that often times we lack focus and are spread too thin; we’re not as diverse as desired, in terms of race, faith traditions, and younger generations; and we’re sometimes not clear or consistent in our objectives (“asks”). Opportunities include focusing on climate justice; engaging mid-cap companies: regional companies in communities where we have a presence (CRI’s); diversifying our membership with millennials and other faiths; and better collaboration with partners (e.g. Ceres). In addition to the current political environment, we recognize threats to our dated model such as aging/consolidation of faith members; corporate opposition to shareholder rights; and overlap with some of our partners.

We developed a draft Mission statement: “Through the lens of faith and as stewards of creation, we engage companies as investors and participate in public advocacy to accelerate the just transition to a low carbon economy consistent with the Paris Climate Accord and in preference to those most vulnerable.” We then brainstormed a Vision or what success looks like in terms of the companies we engage, the communities for which we advocate, the environment and society. Out of this came the realization that ICCR needs to stay above political partisanship while having the audacity to (continue to) speak truth to power; be pioneers in addressing emerging, cross-cutting issues; and be true to our justice mission.

Going forward, we will continue the SBT engagements by collaborating with CA100, expanding the energy utility list, adding the Fortune 500 laggards, and identifying mid-cap/small-cap companies in communities where we have members. Engagement of local companies has the potential added benefit of encouraging support for pro-climate policies more broadly. We will shift our conversation from 2 degrees (where too many people will suffer) to 1.5 degree scenarios and will seat our climate change work within a frame of “Just Transition”. Just Transition focuses on the needs of workers and communities as the energy economy transitions away from a reliance on fossil fuels. We plan to expand the methane campaign by challenging the ‘clean natural gas’ mantra – working more closely with affected communities, engaging companies across the value chain, and bringing larger asset managers to the discussion. We will establish an Amazon team where we hope coordination among investors and collaboration with select NGOs will achieve better results than the individual efforts to date. This big tent effort with Amazon will address issues across program areas, including climate change. Finally, we will broaden the effort to engage the financial sector, focusing on regional banks.

We concluded with agreement that the growing investor attention towards climate change is a welcome development that is especially needed in the current political environment. ICCR needs to stay true to its mission and focus on those activities that incorporate marginalized communities and their needs into the vision that guides our corporate engagements.

Fuel Economy Standards Under Threat

The Environmental Protection Agency faces an April 1 deadline to decide whether Obama-era corporate average fuel economy standards for cars and light trucks from 2022 to 2025 are attainable or should be revised. The earlier conclusion issued by the Obama EPA that no changes to the 2025 standards are needed has already been abandoned by Administrator Scott Pruitt. He also dismissed the possibility of setting standards beyond 2025. “Being predictive about what’s going to be taking place out in 2030 is really hard,” Pruitt said. “I think it creates problems when you do that too aggressively. That’s not something we’re terribly focused on right now.”

In the meantime, Pruitt signaled a showdown with California who has a waiver from the federal law allowing it to set its own air pollution requirements. California set more stringent CAFE targets for both 2025 and 2030. “California is not the arbiter of these issues. California regulates greenhouse gas emissions at the state level, but that shouldn’t and can’t dictate to the rest of the country what these levels are going to be.”

The transportation sector has taken over from electrical power generation as the leading emitter of greenhouse gases (GHG) in the U.S. SGI joined many investors within the Ceres Investor Network earlier this year to send letters to the EPA and members of Congress, as well as to GM and Ford, in support of strong Corporate Average Fuel Economy (CAFE) standards. More recently, SGI signed on to letters addressed to GM and Ford urging them to call out the Alliance of Automobile Manufacturers to end its lobbying and public advocacy that questions climate science. The Alliance efforts to roll back the CAFE standards are in opposition to the auto industry’s support of actions to reduce GHG emissions. The letter also urges Ford and GM to publicly express opposition to changes to the CAFE standards that would lead to increases in GHG emissions.

SGI members continue to advocate that business and our government leaders take immediate action to avert climate change.

SGI members score progress with utilities on climate change

This year, SGI members filed resolutions with two midwestern utilities: CMS Energy and WEC Energy Group. Each resolution aimed for the public disclosure of an assessment of the long-term business impacts of limiting global warming to under 2-degrees Celsius, as adopted by the Paris Climate Agreement.

We have great news: both resolutions have been withdrawn as the companies agreed to the main components of the resolutions. Despite the Trump administration’s decision to end the Clean Power Plan, both midwestern utilities rise to meet the challenges of climate change. In fact, CMS announced last week that they reduce carbon emissions by 80 percent and no longer using coal to generate electricity by 2040.

Sr. Ruth Geraets, PBVM of the Sisters of the Presentation of the Blessed Virgin Mary of Aberdeen, SD who led the filing of the resolution at CMS Energy said, “My congregation is concerned about climate change and the critical need to reduce greenhouse emissions because our mission calls us to care for creation. As longterm shareholders in CMS, we believe having a strategy in place to meet climate challenges head-on will improve CMS’ competitive position over the long term. We were pleased to see CMS step up to this challenge with its recently announced clean energy breakthrough goals.”

With respect to the dialogue with WEC Energy Group, on behalf of the School Sisters of Notre Dame, Central Pacific Province, Tim Dewane said, “Pope Francis has said, ‘Reducing greenhouse gases requires honesty, courage and responsibility.’ We thank WEC Energy Group for its efforts in this regard so far. We believe they are not only good for the planet, but they are also in the bottom-line best interests of the company, its customers and shareholders.”

“These two utility companies are climate leaders in the Midwest,” said Frank Sherman, Executive Director of SGI. “They recognize that market forces and their customer base are pushing them to exceed federal climate regulations and state renewable portfolio standards. Although they are big companies, utilities have a very local focus and are highly dependent on the social license granted by the communities where they operate.”

Our partners at ICCR shared a press release about this win which can be found here.

Top 10 Sustainable Business Stories of 2017

Frank Sherman, Executive Director of Seventh Generation Interfaith

We experienced a record number of extreme weather events in 2017. We also witnessed a different kind of inversion. As our government reversed environmental and social regulations, companies took voluntary actions to protect people and the planet. In a Harvard Business Review profile of the Top 10 Sustainable Business Stories of 2017, business leaders took steps to reduce climate change. As the new administration pulled out of the Paris Agreement and made an all-out assault on our air, water, climate, and land, multinational corporations joined state and local governments to declare We Are Still In. Large institutional investors such as Blackrock and Vanguard woke up to the risk of climate change in voting with faith-based shareholder proposals.

China accelerated their sustainability efforts, stepping into the leadership position given up by the U.S., by committing to cut coal by 30% and cancelling 103 coal plants; making big moves in electric vehicles; and becoming the world’s largest solar producer. As the U.S. administration moved to relax fuel efficiency standards, GM, Ford and Volvo announced major investments in electric vehicles (EV). France, India, Britain, Norway, and China commitment to ban diesel and gas vehicles over the next couple of decades helped push EV sales up 63% globally last year!

Business leaders like Apple’s Tim Cook stood up stating that sustainability that isn’t about philanthropy, but rather about the core business and its role in society. Companies supported state attorney generals’ suit of the administration’s immigration ban and discrimination based on sexual orientation.

Looking ahead at 2018, author Andrew Winston predicted that “Millennials and Gen Z will continue to push for purpose and meaning in work and life”. Companies will set more aggressive sustainability goals and embrace “clean labels” (…like Walmart, Target, and Panera did in 2017). The #metoo movement against sexual harassment will move beyond media and politics to the corporate suites.

Happy New Year!

We Are Still In

Frank Sherman, Executive Director of Seventh Generation Interfaith

This month, EPA Administrator Scott Pruitt announced the Administration’s intent to repeal the Clean Power Plan. This was President Obama’s signature policy to curb greenhouse gases (GHG) emissions from electrical power plants, the cornerstone of the US plan per the Paris Climate Accord.

Shortly after the EPA announcement, the We Are Still In coalition announced that the US will be represented by a robust delegation at the upcoming 23rd Conference of the Parties (COP23), including a US Climate Action Centre and a US Delegation of Climate Leaders as an indication of support for the UN climate talks. The We Are Still In movement is a coalition comprised of approximately 2,500 mayors, governors, state attorneys, business leaders, investors and other prominent climate actors who declared that they will continue to support climate action to meet the Paris Agreement. The coalition represents $6.2 trillion of the US economy and more than 130 million Americans, i.e. approximately 40 percent of the US population.

This Clean Power Plan (CPP) was passed by the Obama EPA to meet the requirements of the Clean Air Act. Repeal of the CPP will be fought in the courts. In the meantime, the We Are Still In coalition believes the US can still meet the GHG reduction targets in spite of the repeal of the CPP. GHG emissions in the US are down over 11 percent since 2005, with the power sector down 24 percent. Over the same period, US GDP was up 12 percent, proving that economic growth and GHG emissions can indeed be decoupled.  With natural gas prices depressed, declining renewable energy cost, aging coal plants, increased availability of electric vehicles, and growing public support for climate action (e.g.  the Yale Climate Communication Center reports that over 60 percent of Trump voters support regulating GHG and over 70 percent support renewable energy), this trend will continue.

Christiana Figueres, former Executive Secretary of the United Nations Framework Convention on Climate Change, has declared:

Paris is everyone’s deal. It belongs to cities, businesses, nongovernmental organizations, and all of global civil society as much as it belongs to nation-states. So when President Trump attempted to destabilize the process by announcing his intent to withdraw, there was no domino effect of despair. Instead, he unleashed an inspirational counter-movement in support of the Paris Agreement, which is embodied so beautifully in the We Are Still In Campaign.

Businesses and Investors Need to Act on Climate Now

Alicia Seiger writes in The Stanford Social Innovation Review:

The business case for acting on climate change has never been stronger, and the need to act has never been more urgent. For the past three years, worldwide carbon emissions from fossil fuels have stayed flat while gross domestic product (GDP) has grown, demonstrating that emissions and economic growth aren’t inextricably linked. Decoupling emissions and growth is just the first step. To stay within the carbon budget for 2 degrees Celsius warming—and avoid the most catastrophic impacts of climate change—global emissions have to start falling by 2020. While the President of the largest economy in the world blows headwinds at progress, business leaders and investors must act to bend the emissions curve.

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How do you speak to a climate denier?

–Frank Sherman, Associate Director Seventh Generation Interfaith Coalition for Responsible Investing

Climate change was on center stage at last week’s ICCR conference in Grand Rapids. Watching environmental regulations built up over many years being weakened or eliminated in Washington, leading to the U.S. exit from the Paris Climate Accord, has been painful. Especially considering the fact that the poorest people on our planet who had nothing to do with causing this problem will bare the blunt of the consequences.

But how do you speak to a climate denier?

(Complete text of How do you speak to a climate denier?)