What Happened on Tuesday?

By Frank Sherman

The busy news cycle didn’t give enough attention to the signing of the Inflation Reduction Act (IRA) by President Biden this past Tuesday, representing the single largest action ever taken by Congress and the U.S. government to combat climate change. It has been a long time coming since the first Congressional hearings on the topic in 1988. Not that Congress hasn’t tried. There have been plenty of false starts on legislation to tackle GHG emissions; however, various forces profiting or otherwise benefiting from the fossil fuel economy have prevailed…..until Tuesday.

While the size of the package is a fraction of the Build Back Better Act passed by the House in November, the emissions reduction components are nonetheless robust and effective. The climate solutions and environmental justice provisions in the $369-billion package will impact nearly every corner of the US economy. Given the unanimous opposition to the bill by Republicans and the slimmest of margins in the Senate, the Democratic reconciliation bill also contains some financial support for the fossil fuel sector, but, as a whole, it represents a major step forward in the fight to preserve a livable planet.

What does $369 billion buy you (EarthJustice)?

  • Accelerates the clean energy transition and lowers energy costs by…
    • Expanding access to clean energy by making clean energy tax credits more accessible and extending them by 10 years.
    • Creating jobs and increases our country’s energy security by investing $60 billion in manufacturing solar panels, batteries, and other clean energy technologies in the U.S.
    • Providing funding for low-income families to electrify their homes, including $9 billion in home energy rebate programs.
    • Removing barriers to community solar.
  • Helps transition the transportation sector away from fossil fuels by…
    • Proving tax credits for electric vehicles;
    • $3 billion for the U.S. Postal Service to electrify its fleet;
    • $1 billion for clean school and transit buses, garbage trucks, and other heavy-duty vehicles, prioritizing communities overburdened by air pollution; and
    • $3 billion to clean up air pollution at ports by installing zero emissions equipment and technology.
  • Supports communities of color and low-income who face disproportionate harms from pollution and the climate crisis with…
    • $3 billion for community-led projects;
    • $315 million for air monitoring; and
    • Reinstatement of the Superfund Tax.
  • Advance practices that make farming climate-friendly with…
    • $20 billion to help farmers and ranchers shift to sustainable practices like crop rotation and cover crops; and
    • $300 million for research into the climate impact of agricultural practices.
  • Support natural climate solutions with…
    • $2.6 billion in coastal resilience grants to fund projects;
    • $1 billion to ensure federal agencies can conduct robust environmental and NEPA (National Environmental Policy Act) reviews;
    • $250 million to implement endangered species recovery plans; and
    • $50 million to advance protections for mature and old-growth forests.

Individuals will see these benefits with a 30% tax credit for installing residential solar panels; up to $7,500 tax credit for purchasing an electric vehicle; up to $14,000 credits for home energy efficiency upgrades, including up to $8,000 to install a heat pump; and an average savings $1,800 per year on energy bills and make their costs more stable and predictable compared with volatile fossil fuel prices.

The IRA represents major progress by Congress, but more action will be needed for the US to meet its 2030 target of reducing emissions by 50-52% below 2005 levels (Rhodium Group). This restores some credibility to the US to maintain global leadership on climate change. The effort is by no means over. Eve with the IRA enshrined as law, we must advocate, and ask our portfolio companies to do the same, with federal agencies and states, as well as Congress, to pursue additional actions to close the emissions gap.

You may have missed it, but Tuesday was a great day for people and planet.

Just Transition to Clean Energy: A Virtual Conference

Seventh Generation’s 2020 Conference will look a little different than years past. 

Rather than a member meeting of networking, a panel of speakers on stage, and members, colleagues, educators, investors, advisors, and friends, we’re preparing for a virtual panel discussion, donning the style of a “Brady Bunch” title screen we all have been experiencing these past few months. 

The year, 2020, marks 50 years since the first Earth Day, and we are grappling with the effects of the climate crisis. At present, and in years past, SGI members urge utilities, among other companies, to publish decarbonization plans that meet Science-Based Targets (SBT) aiming to limit global warming to 1.5 degrees celsius. Without corporate action, this is seemingly impossible. Moving towards a low-carbon economy presents new challenges on technology and the workforce.  

This year’s annual conference: Just Transition to Clean Energy will take place virtually on October 12th, 2020. 

Joining us to take on the questions of “what is a Just Transition?,” and “what does it mean for energy providers, employees, consumers, and investors?,” are:

These expert panelists will bring a unique set of experiences and remarks, challenging each other, and us, on the path to achieving a Just Transition. A social issue as much as a technology, climate’s intersection with human work becomes more apparent in the energy sector as the push towards electrification grows. We are lucky to have this great panel lined up for this event, and we look forward to learning all we can from them! 

It would be hard to hold this conference and not mention the impacts of COVID-19 on all those affected. While we hope our virtual conference allows for the inclusion of those previously unable to attend, we hope all are staying safe and healthy amid this pandemic.

If you are interested in attending, and haven’t previously registered, please do so here.

The webinar link and information will be sent out via Eventbrite prior to the conference date. 

Climate Change is now a Climate Crisis

By Frank Sherman

Recently, we took time to reflect on another eventful engagement season and to chart the strategic direction for the coming year.

Looking back at the 2019 engagement season and more than one-hundred climate engagements by ICCR members, we observe:

  • In a notable exception, the electricity generation sector is at a decarbonization tipping point driven by cheaper renewable energy, growing industrial and public demand, and changing public opinion. Securitization laws, distributed energy resources (e.g. rooftop solar) and community solar projects are growing in popularity. The “electrification of everything” shows promise of demand growth, energy savings and environmental sustainability. A growing number of utility companies (nine, according to NRDC) have followed Xcel’s lead by committing to carbon-neutral electricity production by 2050 or sooner.
  • In the face of regulatory rollbacks, natural gas production and distribution companies are committing to voluntary methane leakage reduction targets to salvage the ‘bridge-fuel’ story. With 6000 mid- and small-scale producers, the majors are now advocating for a stronger regulatory regime! Investors have been successful in tying support for meaningful regulation to reputational risk.
  • As investors shifted from demanding scenario assessments to Paris-compliant business plans, U.S. oil & gas companies continued to defend their business-as-usual business model while their European counterparts broke rank. A BP supported climate resolution obtained a 99+% vote while Shell agreed to set GHG reduction targets for their products as well as their operations. In contrast, CA100+ investors at Exxon Mobil recommended voting against the Board after the company omitted their GHG reduction target proposal.
  • With noted exceptions (Wells Fargo and Goldman), large financial companies are starting to assess climate risk in their portfolios. Mid-cap companies were slower to respond to our letter campaign, largely it seems, due to limited capacity to conduct broad risk assessment. Investors will connect them with tools they can use to do a straightforward climate footprint analysis.
  • Political spending and lobbying resolution votes, several of which emphasized climate change, increased to 31%.
  • Engagements calling for science based (GHG reduction) targets made slow progress in contrast to the scientific community call for more urgent action.

Impacting the climate science and changing political landscape, 2018 was the wettest year on record while wildfires in California resulted in the first climate change bankruptcy of Pacific Gas and Electric. Global carbon emissions reached a record, and the U.S. power sector reversed its’ multi-year decline.  The IPCC special report warned that countries’ pledges to reduce their emissions are not in line with limiting global warming to 1.5°C. Some are responding to the crisis – 80 countries are planning to increase their climate pledges ahead of schedule. The UK is the first member of the G7 to legislate net zero emissions, joining Finland and Costa Rica.

The 4th U.S. National Climate Assessment Report starkly warns of risks to the U.S. economy while the Trump administration’s environmental rollbacks are poised to increase GHG emissions significantly. Public opinion is finally shifting with over 70% of Americans saying climate change is a reality, with most believing human activity is primarily responsible. Republican millennials support a carbon tax 7-to-1 with 85% stating that the Republican position on climate change is hurting the party. The Midterm elections flipped the House of Representatives and 7 state governorships to Democrats. Twenty-one states have now joined the U.S. Climate Alliance committed to the Paris Climate Agreement. Four states (CA, WA, HI, NM) and Puerto Rico have targeted 100% clean energy by 2050 or sooner, with nine additional states (IL, MA, MI, MN, MS, NC, NY, PA, WI) proposing similar legislation. The Green New Deal resolution changed the conversation on Capitol Hill and the Climate Action Now Act put the House on record as supporting the Paris Accord.    

Financial markets are not immune to this crisis. Munich Re predicts climate change will price regions out of insurance. The broad acceptance of the TCFD guidelines increases pressure on companies to improve disclosure.

Considering the broader investor landscape and NGO campaigns, the CA100+ global initiative focused on large emitters and led by large asset managers, pension funds, and sovereign funds. Some ICCR members participate in the CA100+ teams while others continue parallel engagements to reinforce the message. Still others are shifting focus to mid-cap companies. We believe that more coordination is needed to increase effectiveness.

Efforts to make methane emissions reduction targets the norm have been limited to the oil & gas majors and larger natural gas producers. The EPA’s proposed rollback of the New Source Performance Standards regulating oil and gas emissions will further erode the regulatory floor, especially as the EPA now proposes to deregulate methane. We look forward to publication of an EDF study on methane measurement and mitigation and Union of Concerned Scientists has formed a working group to study CCS.  

Efforts towards a Just Transition have born fruit as investors and companies have a growing awareness of the unintended, negative consequences that decarbonization has on people. We made a good start with last October’s investor statement, representing $3.7 trillion in assets, and the CA100+ framework, which includes just transition questions; however, most companies lack the policies and practices to address these issues. Addressing the needs of employees, customers and local communities will accelerate transition rather than deter it.

Recalling Fr. Mike Crosby’s prophetic statement, “We are at a Kairos moment,” we look forward to developing with our allies a new strategy statement regarding future engagement of the oil & gas sector to help investors differentiate between fossil fuel companies making progress and those protecting business-as-usual models. Rollout will be stepwise with more guidance forthcoming. Finally, alongside our allies, we have reviewed a draft climate change principles which reflect an increased urgency and stepped up action.

Finally, let us turn to our 2020 engagement strategy. Given our progress in recent years within the electric utility sector, we expect to expand engagements further into mid-cap companies and push for net-zero carbon targets. We will collaborate with NGO’s and other partners to engage the state utility commissions and give input on the Green New Deal. ICCR is planning a multi-stakeholder Roundtable in December to discuss the challenges of decarbonization and promote a just transition.

Investors engaging the financial sector are promoting a shift from simply assessing climate change risk to their own operations to assessing the climate-related risk they facilitate through their lending and underwriting. Coordinating with the Climate Safe Lending Initiative, they plan to engage the top five U.S. banks and some regional banks in 2020 on climate risk. Investors will ask banks to follow the TCFD recommendations, complete a climate impact assessment, pledge no new fossil fuel investments, and ultimately, decarbonize their portfolio (Banking on Climate Change: Fossil Fuel Finance Report Card 2019). Planned for early September, an investor brief and webinar will educate interested investors. As well, we will ask smaller banks to join the Platform Carbon Accounting Framework to calculate their carbon footprint.

Our methane work will continue to promote best practices in measurement and management to minimize methane leakage. We plan to engage companies on including their “non-operated assets” (i.e. joint ventures) in their methane targets, and step up engagement of distributors and retailers to source “sustainably produced” natural gas. At the same time, we recognize that natural gas can no longer be viewed as a “bridge fuel” to clean energy and agree that no new gas power plants can be justified given the climate crisis. On the other hand, replacing industrial and residential uses of natural gas remains a challenge.

It is clear that we recognize the increased urgency and need to step-up our demands. Within ICCR, we reflect this by the change to our Program name from Climate Change to Climate Crisis. This can no longer be considered a gradual change. We are in crisis mode so we need to respond differently!

ICCR Conference Highlights

By Ann Roberts, Dana Investment Advisors

As always, the ICCR March Conference was an energetic gathering of investors and allies, and attendance was record-breaking. One noticeable change from past conferences was a movement toward a more holistic approach to addressing shareholder concerns, echoing the overarching theme of Pope Francis’ Laudato Si’ that everything is connected. For instance, impact on human rights—the S in ESG–is threaded through all the issues we work on, and it is vital to consider this when advocating for specific changes in environmental and governance issues, as well as social.

Vonda Brunsting, Program Manager, The Just Transition Project, Harvard University

Some highlights include discussion of the Just Transition, which concerns the consequences of transitioning from fossil fuels on stakeholders (loss of jobs in the switch to renewables, loss of tax base for communities, etc.)—merging the E and the S. Worker-driven social responsibility (WSR) efforts such as the Fair Food Program and Milk with Dignity were also discussed. We are asking companies to switch from a mindset of company risk to worker risk. If something is bad for the worker, it is bad for the company. The final session on racial justice was particularly impactful as it reminded us that wealth is created by ownership of assets. Contrary to what politicians and others try to tell us, jobs are not the answer to closing the racial wealth divide. Our tax policies favor capital over labor, which disproportionately helps white people and penalizes minorities.

Most of all, this conference once again confirmed for us that there is strength in numbers. We are better together—and we are all connected.