Forbes: Corporate Sector and Institutional Investors Deliver a One-Two Punch to Knock Out CO2 Increases

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September 26, 2018

By Ken Silverstein

Corporate Sector and Institutional Investors Deliver a One-Two Punch to Knock Out CO2 Increases

Americans are having to hold their noses when it comes to political news out of Washington. But luckily they may breathe a little easier now that the corporate world and institutional investors are stepping up efforts to reduce CO2 releases.

At issue here is giving corporations the incentive that that they need to implement clean energy technologies — things that no doubt require capital outlays but which may ultimately add to their bottom lines and preserve the ecology for generations to come. But why do so if their federal government imposes no such demands?

That’s why companies ranging from Audi to the National Grid are presenting a plan to reduce energy use tied to the U.S. transport sector by 50% by 2050. Working under the banner of the Alliance to Save Energy and their 50x50 Commission, they have devised ways to improve both the regulatory and financial pathways to getting there. That includes aggressive leadership at the federal level that can help research and develop promising new technologies such as electric vehicles and more advanced batteries. The steady infusion of capital, for example, has driven down the price of solar panels and windmills.

“National Grid remains committed to reducing emissions in the transportation sector. We have long recognized the important role electrification will play in the Northeast's clean energy transition and its carbon emissions reduction efforts,” said Dean Seavers, President of National Grid, US. “Building new and unique partnerships to promote the adoption of more efficient vehicles will be critical to this effort and our customers will be the ultimate drivers of the shift to a clean energy future.”

Utilities, of course, have a financial stake in the evolution to electric vehicles because they would be selling the “fuel.” A successful transition, though, would reduce the country’s dependency on oil and cut lower the cost of household transportation while also giving public transport a big boost. Consider that the transportation represents about 28% of all greenhouse gas emissions, says the U.S. Environmental Protection Agency.

Others that are part of the 50x50 Commission include WGL Holdings/Washington Gas, Southern Company and Schneider Electric — as well as the trade association the Edison Electric Institute, which represents investor-owned utilities. The New York Power Authority and the Sacramento Municipal Utility District are also part of the consortium, as well as the Large Public Power Council.

General Motors, which is building a host of electric vehicles, is also a part of the group. But it opposing the Obama administration’s move to raise the mileage standard from 35.5 miles per gallon to 54.5 miles gallon by 2025. In a letter dated February 10, 2018 automakers such as Ford, General Motors and Fiat Chrysler said that the previous administration rushed through its analysis in mid 2016 that the standards should be 54.5 miles per gallon in 2025. The Trump administration has proposed a standard of 37 miles-per-gallon — a move that critics say will impede the effort to sell electric cars.

Sustainable Strategies

Meantime, California’s Governor Jerry Brown just signed legislation to require institutional investors there to report their “climate-related financial risks.” The law impacts CalSTRS and Calpers, which has said it is asking companies to cut their CO2 emissions by 80% by 2050.

Roughly $6.5 trillion is invested using such environmental, social and corporate governance criteria in the United States, according to US SIF. Globally, the amount is about $26 trillion. That’s according to Climate Action 100+, which says that companies focused on the triple bottom line — economics, environment and social — are outperforming other broader indices and they are also demonstrating that they are living their missions and ingraining their brands among their customers.

"One thing we learned,” said Janet Cox of Fossil Free California, "is that we have to bend the emissions curve back in a downward direction by 2020—if we're to have any chance of keeping global warming to 'significantly below 2 degrees Celsius,' as the Paris agreement requires.”

Implicit in the discussion is whether institutional investors should use their leverage to force corporate asset owners to take into account things like carbon emissions and climate change. In the past, those investors have been effective in getting companies to listen and to act, although critics of those policies say that the corporate fiduciaries are obliged to do what is in the financial interest of their participants.

Many pension fund managers have also asked the U.S. Securities and Exchange Commission to institute stronger reporting requirements for sustainability risks such as climate change.

The power sector, for example, needs to $2 trillion capital expansion over the next 20 years. Utilities must access the capital markets and they are well positioned to attract such investments if they pursue sustainable strategies.

“If you can’t master what is in front of you, you can’t master the future,” says Bill Johnson, chief executive of the Tennessee Valley Authority, in an interview with this writer. “Now we are thinking about what happens next. At TVA we believe in being environmental stewards.”

It’s hard to ignore the broader context of those institutional investor and corporate efforts — that the Trump administration has thumbed its nose at the climate cause and generally, pro-environmental positions. But the Paris climate agreement in combination with public demand have served as clarion calls: get on board or get left behind. Change is happening. Society is adapting. And more effective public-private partnerships could speed that up.

Wednesday, September 26, 2018