Welcome to Moral Money. Today we have:
A preview of this weekend’s big climate talks
Church of England teams with activist investors to reform ExxonMobil
Shipping industry’s carbon plans run aground
Starbucks’ ESG investments provide a jolt
Carbon pricing in the US?
Virtual summit sets stage for make-or-break climate talks
This weekend marks the fifth anniversary of the Paris climate accord, and all eyes will be on the UN-backed virtual Climate Ambition Summit, where countries including China and India (and, gasp, maybe even the US) are expected to announce new details on their net-zero plans.
These talks have been a cause for optimism among climate activists, especially considering the ambitious targets set out by the UK (which is co-hosting the summit). But so far, the biggest story has been from Brazil, where the nation’s environment minister drew the ire of green advocates by announcing a climate plan that reads more like a ransom note than a decarbonisation pledge.
It will be a dire weekend if the countries attending the event follow a similar track — but that seems unlikely given the deluge of encouraging announcements we have seen throughout the week.
(Pro-tip for any PR reps reading this: we understand the important symbolism of the Paris anniversary, but when everyone is spamming our inboxes on the same topic, it is harder than usual to read your pitches).
In the world of corporate sustainability, the most important bit of news has to be the fight brewing at ExxonMobil (see below for more). We also saw some corporate net-zero pledges that went beyond what we have come to expect (ie: committing to do more than plant a few trees). United Airlines investing in carbon-capture technology seems particularly noteworthy.
On Wednesday, the quarter-trillion-dollar New York State pension fund unveiled a sweeping fossil fuel divestment programme and a plan to push every other company in its portfolio to commit to net-zero emissions by 2040. A group of the world’s largest asset managers made a similar move. These initiatives will be especially important to watch, as they will ultimately answer the question of whether or not shareholder engagement can lead to meaningful climate action.
But even if this weekend’s talks are a roaring success, it would be premature to get too optimistic.
All of this action is building up to next year’s COP26 summit in Glasgow, which is still the real make-or-break moment for the climate. Things seem to be going in the right direction, but that was also the case before last year’s COP25 meeting, which ended in a huge disappointment.
Make sure to check FT.com tomorrow: we will be covering the summit closely and rolling out some great features examining what has happened since the Paris accord first came into effect. But don’t count any (green) chickens before they hatch. (Billy Nauman)
Green ‘barbarians’ join activist campaigns
Catholics and Anglicans may not have always seen eye to eye, but with the Pope endorsing conscious capitalism and the Church of England diving into the fight to reform ExxonMobil, there appears to be no schism when it comes to sustainability.
The Church of England joined forces this week with US activist investor Engine No 1, which holds $40m worth of Exxon stock, and Calstrs, the second largest pension fund in America to support their campaign trying to shake up the oil major.
ExxonMobil, which is also under attack from activist hedge fund DE Shaw, has ignored concerns about strategy governance and climate change mitigation, Bess Joffe, the Church Commissioners’ head of responsible investment, said on Thursday.
The pairing of traditional activist investing with sustainability has not happened often, but it has a bit of a history. Engine No 1’s co-founder, Charlie Penner, has tried this tactic before when he was a partner at activist firm Jana. In 2018, Mr Penner joined with Calstrs to call on Apple to address concerns that iPhones were too addictive and were interfering with children’s development.
And there is reason to believe this strategy may be deployed more often. Activists, the “barbarians at the gate”, are unloved agitators, and their profiteering can look especially improper now during the Covid-19 pandemic. But attacking companies on ESG grounds — rather than on pure financial performance — “could help activists avoid appearing insensitive to the crisis facing businesses and society”, consultancy Alvarez & Marsal said in a report.
Optics aside, traditional activists are also coming to realise that ESG “is a way of improving the fundamental operation of the financial performance of the business”, Malcolm McKenzie, a managing director at Alvarez & Marsal, told Moral Money. The question remains, however, will the Church convert the heathens to embrace sustainability or will the barbarians storm the pearly gates? (Patrick Temple-West)
Foggy regulations leave the shipping industry lost at sea
Five years after Paris, some execs in the shipping sector are still salty they never got an invite to the party, in the sense of being included in the accord.
“We were strong advocates for shipping to be a part of the Paris climate agreement. Now there’s an urgent need but no enforced environmental regulation,” said Simon Bergulf, Maersk’s head of regulatory affairs.
Only 18 per cent of transport companies have set carbon reduction plans in line with a path to keep global warming to 2C or below by 2050, according to a recent Transition Pathway Initiative report.
The industry has “normalised industry-wide evasion of corporate responsibilities” over the past 40 years, said HEC Paris Professor Guillaume Vuillemey.
For its part, Maersk has been working with the International Maritime Organization and the Science Based Targets initiative to steer the industry towards implementing meaningful carbon plans. “But we are disappointed with the [IMO’s] ambition and it is moving too slow,” Mr Bergulf said.
By the end of the decade, Maersk has committed to having the “first zero-carbon ship on the sea”. But for Mr Bergulf, having just one carbon-neutral ship in a fleet of 700 isn’t enough. “The lifetime of a ship is 25-30 years, so we’re already behind.” (Kristen Talman)
Can Republicans learn to love Paris?
Is there any chance of a bipartisan deal to curb climate change under the leadership of US president-elect Joe Biden? Could the Republicans ever embrace the Paris accord? Those are questions provoking speculation among environmentalists in America right now. And while the answer seemed “definitely not” under the administration of Donald Trump, the Aspen Institute has published a report this week on America’s economic future that covers environmental policy — and lays the ground for some policy dialogue.
Co-chaired by Hank Paulson (pictured), the former Republican Treasury secretary and Erskine Bowles, the former Democratic White House chief of staff, the report underlines the severity of climate change threats and calls for a series of measures that promote decarbonisation and reduce emissions through radical behaviour change. It acknowledges that there needs to be regulatory action — but also calls for amplified private sector incentives through the introduction of a carbon “dividend” (better known as a “tax” sugar-coated to sell to voters).
Many of these ideas have been laid out before by groups such as the bipartisan Climate Leadership Council and, more recently, by the G30 report co-written by Janet Yellen (incoming Treasury secretary). But the Aspen report is a good reflection of the rising drumbeat of concern on both sides of the political aisle — and the degree to which some voices in the Republican party are calling for some rightwing policy response.
Don’t discount more moves in this respect soon. After all, Roberton Williams from the CLC notes recent years have shown the degree to which the Republican party can change (ie embrace Trump); change might yet occur in the other direction, he suggests, as the cost of climate change becomes clear. “Conservatism and conservation [in the sense of environmental protection] have the same root,” he notes. Here’s hoping. (Gillian Tett)
Starbucks paints a cup-half-full picture of ESG investments
Starbucks was an ESG convert long before the acronym became as ubiquitous as overpriced lattes, and has remained a vocal advocate even as critics questioned whether its tax bills and impact on smaller coffee shops jarred with its social responsibility claims.
That history and a lot of frothy talk about its passion for a “planet-positive” future leave many sceptical, but this was a landmark week for the chain’s environmental, social and governance commitments.
Starbucks’ biennial investor day pitched its recent increases in baristas’ wages and eco-friendly investments in everything from oat milk to regenerative agriculture as nothing short of key to its growth strategy.
The group also differentiated itself from a peer group that has been slow to diversify boards of directors by announcing that Mellody Hobson would be its next chairperson, becoming only the second black woman (after Ursula Burns at Xerox) to chair an S&P 500 company.
Speaking to the FT before the event, chief executive Kevin Johnson admitted that investments in wages and environmental initiatives had contributed to its quarterly loss at the depths of the Covid-19 crisis but said that they also built trust — as much with shareholders as with employees and customers.
In China, he noted, “they call this the good-good” — both good for the company and good for the planet.
But how much pushback did he get from shareholders for spending their money this way? “None. In fact the opposite. We had our largest shareholders say ‘we fully support what you’re doing’. They understand the importance of our culture.”
You wouldn’t expect a Starbucks CEO to say that there was any trade-off between people, planet and profits but the fact that its shares hit a new high this week adds an extra shot to his argument. (Andrew Edgecliffe-Johnson)
Grit in the oyster
CDP, formerly the Carbon Disclosure Project, on Wednesday published its list of companies that are leading on environmental transparency. More than 9,500 groups participate in CDP’s questionnaire on climate change, forests and water security, but concerningly, more than 3,700 failed to disclose any data when requested by investors or customers. Ouch.
Last call for your long-term insights
Thanks to all the readers who have sent in their insights into how to combat short-termism for our first Moral Money Forum report, which will appear early next year. If you’ve not yet shared your thoughts on how investors and companies can encourage long-term behaviour in a world of short-term pressures please do so here.
Thirty of the world’s biggest asset managers, which collectively oversee $9tn, have set a goal of achieving net-zero carbon emissions across their investment portfolios by 2050 in a move expected to have huge ramifications for businesses globally, the FT’s Attracta Mooney wrote today. The group, which includes Fidelity International, Legal & General Investment Management, Schroders, UBS Asset Management, M&G, Wellington Management and DWS, said they would work with their clients to cut emissions across their investments.
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