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The Pause that Invigorates Environmental Progress

[fa icon="calendar'] Sep 25, 2013 9:13:39 AM / by Carol Pierson Holding

By Carol Pierson Holding

Last year, we had eleven weather catastrophes that caused over $1 billion in damages. This year, we’re only at one.

I know there was some severe weather this summer. The half-mile wide tornado in Oklahoma was horrifying. But along the corridors of East Coast power, the weather was, according to the Washington Post, “… a breath of fresh air compared to the previous three (the three hottest on record).”

I experienced a great summer for the first time since I moved to Seattle four years ago. InSeattle warm summer a part of the country that’s usually rainy and often cold, Seattle was often warmer than Los Angeles. We had sunshine nearly every day.

I worried that lack of disasters would take climate change out of the headlines and off the radar, both locally and nationally. Issues with potentially enormous environmental consequences, such as the Keystone Pipeline, West Coast coal trains, and pending EPA regulations on coal-burning utilities were all coming to a head. Would the nice weather reduce the will to act on these?
The evidence points to the opposite. Obama’s announcement last Friday that he would impose carbon emissions limits from coal-fired power plants is something he first talked about in his 2008 Presidential campaign. Yet the announcement just came two days ago. The EPA’s new director Gina McCarthy testified last week before the House Committee on Energy that the agency had worked with “states, utilities and other key stakeholders to develop plans to reduce carbon pollution from future and existing power plants, which are responsible for about 40 percent of America’s carbon pollution.”
The Keystone Pipeline, once deemed “inevitable” by energy titans such as Marathon Petroleum, now seems far from certain as resistance gathers strength, most recently Saturday’s 350.org “Draw the Line” protest in over 200 US locations.

Northwest coal port proposals are withdrawn one by one, as oppositional forces multiply, from the market’s 40% drop in overseas coal prices to a suit brought by the Lummi Nation claiming loss of livelihoods.

These advances in macro policy have been on the back burner for years if not decades, and suddenly they’re all heading towards climate-friendly resolution. Pro-environmental solutions are happening on the micro level too, at least out here. Walking and biking are up in our cities. Seattle commuters driving alone has fallen below 50%, joining Boston, New York, Washington DC and San Francisco, while biking, walking and public transportation use are all up. Changing commuter habits have prompted Seattle’s plan to transform parking lots to parks, and the first lot was converted to an urban Parklet just last week. To the south, ride-sharing was finally legalized in California last week, providing regulations that pave the way for other states.

It’s as if the sunshine has given us the pause we needed at just the right time. When the weather is a disaster, all we can think about is bouncing back from the catastrophe. Resilience and recovery are our priorities. When we’re not fighting for survival, we have a pause when we can reflect and evolve to the next level.

Mother Nature seems to be cooperating in other ways too. The so-called “global warming hiatusattributed to lower temperatures in the Pacific Ocean has slowed increases in surface temperatures and allowed arctic ice to grow 60% in 2013.

We have a grace period. It looks like we’re using it wisely.

Photo courtesy of trang.ng.92 via Flickr CC.

Carol Pierson HoldingCarol Pierson Holding writes on environmental issues and social responsibility for policy and news publications, including the Carnegie Council's Policy Innovations, Harvard Business Review, San Francisco Chronicle, India Time, The Huffington Post and many other web sites. Her articles on corporate social responsibility can be found on CSRHub.com, a website that provides sustainability ratings data on 8,400+ companies worldwide. Carol holds degrees from Smith College and Harvard University.

CSRHub provides access to corporate social responsibility and sustainability ratings and information on 8,400+ companies from 135 industries in 104 countries. By aggregating and normalizing the information from 270+ data sources, CSRHub has created a broad, consistent rating system and a searchable database that links millions of rating elements back to their source. Managers, researchers and activists use CSRHub to benchmark company performance, learn how stakeholders evaluate company CSR practices and seek ways to change the world.

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[fa icon="comment"] 1 Comment posted in EPA regulations on coal-burning utilities, global warming hiatus, Uncategorized, ride-sharing, Marathon Petroleum, weather catastrophes, West Coast coal Trains, 350.org, Carol Pierson Holding, Draw the Line, Gina McCarthy, Keystone Pipeline, parklet

350.org, Student Activism and the End of Reason

[fa icon="calendar'] Jun 20, 2013 10:22:55 AM / by CSRHub Blogging

By G. Benjamin Bingham

Fiduciary Duty

There were many reasons I took a leave of absence from Yale in 1970 after the National Guard lined the streets looking like aliens with their gas masks and camouflage -- there to keep the peace by shooting rubber bullets. I was not yet angry enough about the legal system and the Bobby Seal trial to join the dissenters, and the studios were too small for the big sculptures I wanted to create as a fine arts major. My lottery number was high and a year off would make me eligible for the draft and unlikely to be drafted. Once clear for a year I would be free. I also felt the hypocrisy when pacifism is expressed violently and wasn't certain I agreed with all the shouting, but at the same time I felt guilty for my inaction. My solution was to learn how to farm organically in England... practical, politically correct sculpture on a large scale. My feelings are similarly mixed now when I hear about the loud chanting that has been happening on at least 300 campuses across the country, even though I agree with their message. It is time to divest from fossil fuels and it can be done sanely and with full fiduciary reality. Why can't we just discuss it?

Unfortunately, the experts on the financial boards of endowments may one day look down on the smoldering remains of Earth, and comfort themselves by asserting that at least they did their "fiduciary duty" by putting profits ahead of people or planet! Their lack of willingness to consider the passionate pleas of students to divest is just as disingenuous as activism without real debate. A newspaper article at Swarthmore that divulged the talking points of an expert on why divestment would cost the endowment over $200 million in the next 10 years was full of stretched truths and hidden assumptions (read it here. Using the same kind of reasoning I came up with the following back of the envelope argument:

  • Since 80 percent of oil reserves can not be burned as fossil fuels (if continued life on the planet is considered important) the value of oil stocks cannot reflect those reserves as an asset; in fact they can arguably be considered a liability since the continued depletion of our atmosphere (now at 400ppm of carbon when 350 is carbon neutral!) is likely going to result in class action lawsuits. So, projected over time, the holding of oil-related stocks, now 5 percent of their portfolio (guessing) overvalued by at least 80 percent means that they will have a likely loss of 4 percent of the value of their portfolio per year for the next 10 years or $594 million (lots of similar guesswork)!
  • The bogus assumption that it will cost them dearly when leaving the best co-mingled managers now after they have done so well gives rise to another argument (a real study, but like them I am not providing the source!) that shows that over a long period of time the best 5 percent of managers in any 5-year period tend to be in the middle or tail-end of the pack in the next 5 years! If they argue that they are an exception, then I would argue that their managers are likely to be deftly shifting their portfolio anyway to stay ahead, so divestment happens regularly for financial reasons. They are used to it and should have no problem.
  • Finally, the assumption that divesting within the separately managed accounts will cost them is unfounded. In fact it could benefit them greatly if divestment catches on and big oil and coal stocks crash, but even without that consideration, the challenge we are all facing is that the universe of investments any manager considers is too small and looking outside that universe will expand diversification from the status quo, not contract it (another risk mitigation strategy). I haven't seen their "recent" study (since they did not provide a source), but there are many studies that show that, contrary to their favorite study, socially responsible criteria, including negative screening cannot be shown statistically to have an impact on performance (read about Moskowitz Prize here). Researchers in general cannot say whether negative screening has any reliable impact, positive or negative because, on average, all managers underperform their benchmarks by the amount they charge in fees.

It was particularly sad for me to watch the useless interchange at the Swarthmore Board meeting where the term sophomoric came alive on the YouTube video screen.

That said, even though no one was listening and you couldn't hear what was being said through the cheers and chants, the students did get some attention and goodness knows we need to wake up. The prospects of the Gulf Stream cooling to the point of ending its streaming warmth to Europe is becoming more imaginable as winters grow longer in Ireland and Northern Europe. We are now at 400 parts per million of carbon in the atmosphere, and despite the pleasant imagination that plants will just keep getting more lusciously leafy and eat up all the carbon while we enjoy more exotic weather on our North shores; we are beyond the neutral point of 350 ppm and if we don't do something drastic soon, well -- join us in reinventing how to invest in a world that will last.

G. Benjamin BinghamG. Benjamin (Ben) Bingham is the CEO and Founder of 3Sisters Sustainable Management. He is also the Chief Investment Officer currently focused on a Private Equity Fund called Scarab Holdings for partners in the new paradigm to foster a sustainable environment and social justice within a diverse and meaningful world culture. Read more of Ben's bio here.

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[fa icon="comment"] 2 Comments posted in activism, climate change, Divestment, Endowments, energy, G. Benjamin Bingham, students, Uncategorized, investing, Swarthmore, 350.org, Green News

Can Climate Change Activists Enlist Mainstream Investors?

[fa icon="calendar'] Nov 19, 2012 2:24:01 PM / by Carol Pierson Holding

By Carol Pierson Holding

On November 7 in Seattle, 350.org launched its “Do the Math” campaign to target college and university investment funds to divest of fossil fuel stocks. While this strategy is bound to raise awareness among college kids, I initially questioned if there was enough money at stake to actually influence behemoths like Exxon.

The audience at the kick-off was not a radical crowd. Like the Keystone Pipeline protests, attendees were about half college students and half veterans of previous divestment efforts. I walked in with two such veterans, now oceanographers in their 60s.

Ticket demand in Seattle was so intense that the event had to be moved to Benaroya Hall, where 2,000 seats sold out within days. Seattle was just the first city in a 21-city tour, all of which have had similar responses. The numbers and passion should be enough to spark college divestiture. But that still begs the question: will divestiture by colleges have any meaningful impact?

College and university endowments are about $400 billion, and given the high returns in fossil fuel, most no doubt hold these stocks.

On the other side of the equation is $27 trillion, or the value of 2,795 gigatons of fossil fuel reserves identified by financial analysts at the The Carbon Tracker Initiative.

In other words, even if all university endowments held only fossil fuel stocks and every stock was divested, it’s still only 1.5% of the value of underground carbon holdings.

So the question is, where else can this movement go?

350.org is using apartheid as its forebear, but in many ways, the comparison is inapt. South African manufactured goods and natural resources, even diamonds, could be sourced from other nations. Unlike the energy industry, substitutes were already available. Even more important, apartheid is a political issue and disruption would be limited to South Africa.

With fossil fuels, life itself would be disrupted. To name just one example: oil is the heart of global transportation systems, driving the auto industry, refineries, retail gas stations, encompassing hundreds of millions of jobs around the world. As the American Petroleum Institute says in its current ads, fossil fuels = jobs, energy, growth and security.

Even these seemingly unassailable arguments have holes. As Naomi Klein said this week to Bill Moyer, right now, fossil fuel companies don’t pay for the real harm in carbon waste. Hurricane Sandy’s direct economic loss is estimated at $50 billion so far. Swiss Re put total losses from Katrina, including loss of productivity, at $250 billion. Both extreme- climate events affected jobs, energy, growth and most certainly security.

What starts with college campuses could well move on to larger sustainable investment pools. Bloomberg News reported last week that—

“Institutional investors are now employing sustainable investing strategies in more than $3.7 trillion of investments -- a 22 percent increase in two years. Hospitals, retirees, pensions, banks and religious institutions used sustainable and responsible investing (SRI) strategies for $1 out of every $9 invested in the U.S. at the end of 2011.”

And the divestiture movement could spread even beyond SRI. Colleges and SRI funds use their shareholder clout to influence the actions of companies. But Lisa Woll, CEO of SIF, the SRI industry association that reported the results, credits another less selfless reason: clients are protecting themselves against risk.

Risk plays a much more important role in today’s post-great recession investment environment. Now, indices like the Dow Jones Sustainability Index are integrated into financial and management performance analysis. Blue-chip financial media from the Financial Times to the Wall Street Journal hold annual SRI conferences. Bloomberg added sustainability metrics to its analysis. Data providers such as CSRHub provide sustainability metrics to corporate supply managers and consumers when they are making purchase decisions.

The risk of what might happen in terms of fossil fuel liability for climate disasters could start to dissuade investors, especially with students and grumpy green grandparents taking to the streets. The SIF report on SRI investments found that climate change is already an issue for 23 percent of institutional asset owners using sustainability criteria. Institutional investor assets guided by environmental concerns increased 43 percent from 2010, to $636 billion.

Still chump change next to $27 trillion in carbon assets, but we’re starting to approach some numbers that could cause hurt. And hurt forces change, not just with carbon producers but with regulators. We used moral condemnation to drive divestment of tobacco companies, even after some funds lost value due to apartheid divestiture, and regulators stepped in where they’d been reluctant in the past. Are fossil fuel companies next?

Photo courtesy of Georgie R via Flickr CC.

Carol Pierson Holding writes on environmental issues and social responsibility for policy and news publications, including the Carnegie Council's Policy Innovations, Harvard Business Review, San Francisco Chronicle, India Time, The Huffington Post and many other web sites. Her articles on corporate social responsibility can be found on CSRHub.com, a website that provides sustainability ratings data on 6,000 companies worldwide. Carol holds degrees from Smith College and Harvard University.


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[fa icon="comment"] 2 Comments posted in American Petroleum Institute, climate change, divest, Do the Math, fossil fuel, Katrina, university endowments, Uncategorized, 350.org, Carol Pierson Holding, hurricane sandy, SRI, The Carbon Tracker Initiative

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