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!

“E Pluribus Unum”

By Bro. Robert Wotypka, OFM, Cap.

Nothing like a splash of Latin to capture the attention of many a Catholic. Has it worked? Good. This phrase is not from the Bible. As far as I can tell, Saint Jerome, who crafted the Vulgate Latin version of the Scriptures, and who was, by many accounts, not a lot of laughs, did not need or use it. Anyone know the Latin for “From one, three?” Now that would be elegant – and theologically correct.

“Out of many, one” was the motto of these United States of America (and a hearty “Hello!” to all our international readers) until 1957, when it was replaced by “In God We Trust.” Is either motto descriptive? Or aspirational? Or both? Or neither? The phrases come to mind in the context of today’s readings, for Wednesday of the Third Week of Lent (March 27, 2019), and in the context of my attending, as the province’s Corporate Responsibility agent, the twice-yearly conference of the Interfaith Center for Corporate Responsibility, which the Province of Saint Joseph participates in through its membership in the Seventh Generation Coalition for Responsible Investing.

The revelation of God to our ancestors in the Book of Deuteronomy, as proclaimed today, is this:

‘This great nation is truly a wise and intelligent people.’
For what great nation is there
that has gods so close to it as the LORD, our God, is to us
whenever we call upon him?
Or what great nation has statutes and decrees
that are as just as this whole law
which I am setting before you today? (Dt: 4: 6-8)

Jesus engages the law, too, in Matthew’s Gospel, underscoring that it will endure, that it is binding on all generations, even in the bright and wonderful light of the Incarnation. How so? Long story short: because the covenant is enduring, the law is likewise enduring.

Scripture is speaking of the Mosaic law. But it is not so with us, not so, with regard to our relationship with the state. We change laws, and we must. Or we take what was once custom or tradition and codify it. This was the case in the transition of the national motto, which was unofficially “E Pluribus Unum” from 1782 until the official law was passed in 1957 and “In God We Trust” was adopted.

Being a nation of ever-changing laws aligns with the wisdom of the Church, which speaks of itself in the Vatican II document Gaudium et spes as being ever in need of reform Franciscan spirituality begins from the necessity of being ever open to conversion, aka reform. And this aligns with my work as the Corporate Responsibility agent, which asks companies to be ever open to reform, to turn away from doing harm when harms are identified, and to embrace doing good: good for your customers, good for your employees, good for our common home, and good for your shareholders. And long will the company prosper that finds no contradiction in this.

May I then propose a reform? It comes from “the cry of the earth,” to use Pope Francis’ image from Laudato Sí. All but a fringe-y few acknowledge the need to mitigate the harms from catastrophic climate change that’s occurring as a result of the accumulation of greenhouse gases in the atmosphere since the dawn of the Industrial Age. Power generation accounts for about a third of greenhouse gas emissions. Moving away from energy generated from the burning of fossil fuels must therefore be among the first reforms wrought in the economy and the culture.

But it won’t be easy. Every utility has the ability to source its energy as it sees fit, that is, there are few obstacles preventing a power company from choosing a coal-fired power plant over, say, a wind farm or a solar array. Whatever is built will be regulated, but there are few laws specifying what is to be built, or none in many locales. Every utility is accountable to a public utility commission – and each PUC has its own laws, across all 50 states. Oh, and then there’s the rest of the world. Some nations have laws in place to oblige utilities to move toward renewable energy sources, and some do not.

Lord, give me the wisdom to ever trust you. I do. And I discern, and I invite and welcome your discernment, that it is now time as well for E pluribus unum, with regard to energy production. Out of the many companies and utilities and nations must emerge one set of laws, grounded in care for creation and love of our common home, that will reduce greenhouse gas emissions and increase the hope that future generations will not suffer needlessly as a result of our choices.

Pope Francis also wrote in Laudato Sí that realities are more important than ideas. Would you like to see what a just transition to sustainable energy looks like? Please, go here: https://www.powermag.com/indiana-utility-will-close-coal-units-transition-to-renewables/

And let us go in peace.

Decarbonizing Electricity Webinar

SGI has been leading important work on climate change with regional utilities. Today, we hosted our first educational webinar of 2019 where we learned more about how we can advance those conversations. We hosted Dan Bakal of Ceres and Franz Litz, program consultant at the Great Plains Institute. Dan has been a key partner in our dialogues with the utilities. Franz has led innovative efforts to bring together policy makers, regulators, utilities, and NGOs to take action on climate change. In particular, he has led the building of a Road Map to Decarbonization in the Midcontinent.

We are very grateful for the presence of both our guests in this webinar, for their commitment to work on this issues, and their generosity in sharing their wisdom with us.

As always, we welcome your feedback via a confidential evaluation found here. Slides from the webinar are found here.