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Investors Could Drive Real Fossil Fuel Investment Retreat

[fa icon="calendar'] May 13, 2014 9:00:05 AM / by Carol Pierson Holding

By Carol Pierson Holding

The sustainable investing community has a saying that their greatest achievement will be Wall Streetto put themselves out of business. The fossil fuel divestment movement could say the same: when fossil fuel companies stop their relentless drilling and all assets currently held in reserves are abandoned, drivers of the movement will be looking for work.

The way things are going with fossil fuel companies, we might be able to halt the divestment movement sooner than we think.

Last week’s news seemed to show the market moving towards an acceptance of climate change’s negative impact on corporate earnings — and a rejection of fossil fuel investments on purely financial terms.

On Wednesday, the Obama administration’s National Climate Assessment, was reported in the Wall Street Journal under the headline “Climate Change Is Harming US Economy, Report Says.” The story does not question the report or offer conflicting scientific opinions, but points specifically to greenhouse gases from energy production as the cause:

The congressionally mandated National Climate Assessment…says…that it isn't too late to implement policies to reduce emissions of greenhouse gases, such as carbon dioxide and methane, and calls on governments at all levels to find ways to lower carbon emissions, particularly from energy production.

That’s from The Journal, probably the most fiercely pro-business publication around.

But even more astonishing is the story in Forbes “Fossil Fuel-Free Index Will Help Investors Manage Climate Risks.” While the article says the fund, the FTSE Developed ex-Fossil Fuels Index Series, is aimed mainly at universities and public institutions, it does acknowledge —

“(The) concept of carbon stranded assets pioneered by the Carbon Tracker initiative contends that fossil fuel companies are overvalued by stock markets because their valuations include assets that cannot be exploited if we are to avoid runaway climate change. …Carbon Tracker sheds further light on the risks, (in its) report… Carbon Supply Cost Curves. Evaluating Financial Risk To Oil Capital Expenditures, setting out the assets most likely to be stranded and the companies best placed to adapt to a low carbon future.”

That Report calls out oil sands, Arctic and deepwater exploration as terrible investments.

Carbon Tracker’s website describes magical thinking in the fossil fuel industry: “Exxon saying there is no risk does not constitute prudent management of shareholder funds – it’s like King Canute assuming he can hold back the tide, but investors can see that a shift in energy is already coming in.”

That’s language you’d expect from activists. But Forbes, that bastion of conservatism, joins in the bashing in choosing to quote analyst Mark Lewis of Europe’s leading broker Kepler Cheuvreux: “The oil industry’s increasingly unsustainable dynamics – as manifested, for example, by ongoing capex (capital expenditure) reductions amid record-high oil prices – mean that stranded-asset risk exists even under business-as-usual conditions: high oil prices will encourage the shift away from oil towards renewables (whose costs are falling) while also incentivising (sic) greater energy efficiency.”

Forbes notes that with BlackRock — the world’s largest asset manager — participating in the fund, the anti-fossil fuel movement has gone mainstream.

Mainstream? From a reporter at Forbes, whose self-reported audience statistics place its readers at higher levels of wealth and power than any other business publication, is calling the FTS ex-Fossil Fuel Index a welcome first step in making the idea of a world without fossil fuels a mainstream notion?

Now that’s progress.

Of course there is still enormous weight on the other side of the argument. Fossil fuel companies recognize the threat to their business in the massive shifts in capital that are coming and are determined to get every last bit out of the ground ASAP. Even here in the hyper-environmental Pacific Northwest, the Black Diamond coal mine is reopening after 15 years and proposed coal ports refuse to die.

But there is growing evidence that fossil fuels are just a dumb investment. As stated in a recent report by HIP Investor, “Since 2011, the global energy sector has diverged from the S&P 500 for the first time in a decade, and dramatically lagged the S&P 500. The Coal Index (KOL) is down 28% since late 2011, and the Oil & Gas Index (BGR) is down 8% as well.”

I see the day coming when investors who hold fossil fuel stocks will be derided for poor money management. The smart money? Managers who bought renewable energy stocks early.

Image courtesy of  thetaxhaven 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 8,900+ companies worldwide. Carol holds degrees from Smith College and Harvard University.

CSRHub provides access to corporate social responsibility and sustainability ratings and information on 8,900+ companies from 135 industries in 102 countries. By aggregating and normalizing the information from 300+ 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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My Top Eleven Takeaways from WSJ’s Conference on Business and Sustainability

[fa icon="calendar'] Apr 3, 2012 5:25:00 AM / by Cynthia Figge

By Cynthia Figge


A week ago I attended the Wall Street Journal ECO:nomics Conference. This event was brimming with over 200 CEOs, entrepreneurs, industry experts and policymakers, discussing profitability, innovation, and smarter uses of energy. The focus was on the opportunities and risks that are quickly emerging and changing across sectors within the intersection of business and environment. While the event left me with many thought provoking questions and ideas, I wanted to share some of what caught my attention the most here:

1. We have a chance of reaching 50% renewable energy use in the 2060 timeframe, but it will take at least one of five miracles to come true, and about 200 crazy people working really hard at all five.
Bill Gates, Co-chair, Bill and Melinda Gates Foundation and Chairman, Microsoft


2. We need a rapid change to get to 50% renewable energy in 10 years. The best generalized solution would be to price CO2.
Elon Musk, Chairman and CEO, Tesla Motors and CEO and CTO, SpaceX

3. We must change our source of food – raising cattle the way we do it doesn’t work.
J. Craig Venter, Chairman and President, J. Craig Venter Institute 

4. The present and future role of natural gas is contested, but it could be the best bridge fuel as we move away from petroleum altogether. We could cut our consumption of OPEC oil by 60%.
T. Boone Pickens, Chairman, BP Capital Management and Edward G. Rendell, Former Governor, State of Pennsylvania

5. Most people believe that there is environmental damage involved in fracking, but it’s needed for the future of energy in the US. In the words of California Governor Jerry Brown, fracking is not as bad as environmentalists say, or as good as the companies say.  How do we make the best out of a bad situation? (For more on this issue, watch for the upcoming CSRHub blog on fracking as a new special issue).
Aubrey K. McClendon, Chairman and CEO, Chesapeake Energy

6. By improving ESG (environment, social, and governance) principles, sustainability can mean more cash flow and making more money. This is crucial for incenting and supporting companies with sustainability missions.
David M. Rubenstein, Managing Director, The Carlyle Group

7. Our consumption and daily habits add up, but can add up for good. For example, Robert McDonald says 4.4 billion people on the planet use a P&G product every day. Today 40% of laundry is washed in cold water – P&G has a goal of 70% in cold water. This alone would have an impact on several percentage points of the world’s GHG emissions.
Robert A. McDonald, Chairman, President and CEO, The Procter & Gamble Company

8. Selling green is about being honest. Marketers have less control over the message, and are instead are expected to be transparent and authentic.
Dara O’Rourke, Chief Sustainability Officer, GoodGuide

9. We have the technology to reduce waste and increase recycling, reaching a waste diversion rate close to 100%. But this is an area where we need very effective subsidies and incentives, and a change in culture and behavior.
David P. Steiner, President and CEO, Waste Management

10. The best companies are embedding sustainability into their innovation pipeline. It’s in everything they do and it’s part of their image and brand.
Betty Noonan, Senior Vice President, Panasonic Consumer Marketing Company of North America  

11. China had more patent applications than the US for the first time in history last year. This marks a change in innovation, transparency, and the rule of law. This will go a long way to sparking change for sustainability in China’s economy and workforce.
C. S. Kiang, Chairman, Sustainable Development Technology Foundation

These are just some of the great comments, discussion points, and reflections I heard while in Santa Barbara. There was a clear focus on natural gas at this conference, and how the abundance of a cheaper, cleaner alternative to petroleum has changed the energy market in the US. While natural gas was once thought to be a bridge fuel to a low (or no) carbon economy, that bridge appears to be getting longer.

It is always interesting to see how a change in a key issue around energy, or any topic under the sustainability umbrella, can change how we perceive the challenges and the solutions. This is one of the reasons why in our sustainability reporting and aggregation of data, CSRHub allows users the ability to filter the data they see. A key issue, like natural gas, is the type of specific wedge point that may shift our understanding of sustainability and CSR.


Cynthia Figge, Cofounder and COO of CSRHub is a forerunner and thought leader in the corporate sustainability movement. In 1996 she co-founded EKOS International, one of the first consultancies integrating sustainability and corporate strategy. Cynthia has worked with major organizations including BNSF, Boeing, Coca-Cola, Dow Jones, Noranda and REI to help craft sustainability strategy integrated with business. She was an Officer of LIN Broadcasting/McCaw Cellular leading new services development, and started a new “Greenfield” mill with Weyerhaeuser. She serves as Advisor to media and technology companies, and served as President of the Board of Sustainable Seattle. Cynthia has an MBA from Harvard Business School. Cynthia is based in the Seattle area.

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CSRHub Co-founder Cynthia Figge to attend WSJ Eco:nomics Conference

[fa icon="calendar'] Mar 20, 2012 5:30:00 AM / by CSRHub Blogging

 

CSRHub Co-founder Cynthia Figge will join top CEOs, entrepreneurs, industry experts, and policymakers at this Spring's Wall Street Journal's Eco:nomics Conference. Held in Santa Barbara, the conference focuses on the opportunities and risks of environmental capital that are quickly emerging and changing across various sectors. WSJ's Eco:nomics unique atmosphere includes working groups, rather than speeches, rigorous analysis, and discussion and debate in the pursuit of real solutions. 

Highlights from the upcoming sessions will include interviews with Bill Gates, philanthropist and chairman of Microsoft; Governor Jerry Brown of California; visionaries Dean KamenElon Musk, and Craig VenterRobert McDonald, chairman and CEO of The Procter & Gamble Company; T. Boone Pickens and former Pennsylvania governor Ed Rendell; venture capitalist Vinod Khosla; and Waste Management CEO David Steiner. The program will cover issues that directly impact the business world: new solutions and innovations, the aftermath of the disasters in the Gulf and in Japan, the uncertainty of subsidies, funding and regulation coming out of Washington, and other vital topics.


Cynthia Figge will represent CSRHub at the three-day conference from March 21 to 23. For updates from Cynthia, follow CSRHub on Twitter at @CSRHUB

 

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Dayanu

[fa icon="calendar'] Apr 25, 2011 3:45:21 PM / by Bahar Gidwani

By Bahar Gidwani

4733159891_8745478efb In the Jewish Passover service (a holiday that ends this Tuesday at sundown), there is a song called “Dayanu.”  The word means “it is enough” and the song suggests that God has been sufficiently kind to us and that we should be grateful and not ask for more. A concept that is common across many faiths around the world.

I thought of this song when I read a Wall Street Journal opinion page article by Bob Dudley, the CEO of BP.  It was titled “The Lessons of Deepwater Horizon,” and it recounted the steps BP has taken since the disaster that occurred a year ago, in the Gulf.

These steps included:

  • Paying claims ($20 billion set aside for this so far, but only $5 billion paid).
  • Cooperating with investigations.
  • Adding a central safety and risk-management organization that, in theory, has the power to stop unsafe behavior.
  • Linking management and employee rewards to safety.
  • Reviewing working platforms and platform designs to try to bring them up to a consistently higher standard of performance and safety.
  • Contributing $500 million to research on the effects of the spill.
  • Joining the Marine Well Containment Corporation, a group that aims to prevent future spills.

Should those who track BP be singing, “Dayanu?”  Has it done enough?

I looked at the comments made about this article on the WSJ site.  There were only 18 threads and 35 comments (a surprisingly small number, given the importance and controversial nature of both the event and the article).  My simplified summary of the reaction is:

  • Some feel BP is employing standard PR means to smooth things out; some feel it has made significant changes.
  • Some feel the event could have been prevented; some feel it couldn’t.
  • Some blame BP; some blame our regulatory system.  Interestingly, some feel our regulatory system was too weak, while others feel that we pushed BP into dangerous territory by preventing it from drilling more in shallower waters.

In a way, the response fits back into Passover. There is a famous section during the service where participants list various reactions that children could have to God’s rescue of the Jews from Egypt.  The lesson is not that one reaction is correct, but that we should listen to all answers and views, learn from them, and be more attentive as a result to the benefits of freedom.

In our system, the CEO of BP has the right to speak, anyone who wishes has the right to comment, and each of us has the responsibility to listen to the discussion and learn from it.  Perhaps some other companies that have significant environmental and safety risks will pay attention to these conversations and avoid making similar mistakes in the future.  If so, then we can tell BP, Dayanu.


Bahar Gidwani is a Cofounder and CEO of CSRHUB. Formerly, he was the CEO of New York-based

Index Stock Imagery, Inc, from 1991 through its sale in 2006. He has built and run large technology-based businesses and has experience building a multi-million visitor Web site. Bahar holds a CFA, was a partner at Kidder, Peabody & Co., and worked at McKinsey & Co. Bahar has consulted to both large companies such as Citibank, GE, and Acxiom and a number of smaller software and Web-based companies. He has an MBA (Baker Scholar) from Harvard Business School and a BS in Astronomy and Physics (magna cum laude) from Amherst College. Bahar races sailboats, plays competitive bridge, and is based in New York City.

Inset photo courtesy of SkyTruth.

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The First Cap and Trade for Carbon Emissions . . . Almost

[fa icon="calendar'] Apr 11, 2011 5:15:00 AM / by Carol Pierson Holding

By Carol Pierson Holding

2356372732_b46a272377 Too bad for California. State voters passed the most ambitious climate bill in the country, AB32, which mandates emissions reductions to below 1990 levels—not up to Kyoto levels, but still the best in the U.S.—and also implements a cap and trade program for carbon emissions.

Voters then reinforced their support when they voted down a bill sponsored by two big oil refinery companies (check out their environmental ratings here — Tesoro and Valero). That bill would have disingenuously tied reducing emissions to employment, by delaying implementation until the state’s unemployment dropped to 5.5%...for four consecutive quarters. Voters could not have been more clear.

But the California Superior Court differed. Last month, San Francisco Judge Ernest Goldsmith ruled in favor of delaying the cap and trade portion of the bill. His rationale: that the California Air Resources Board violated state environmental law by failing to properly study alternatives such as a tax on emissions, a solution that is clearly economically and politically infeasible.

The irony is that the group that petitioned the court to delay cap and trade are environmental activists represented by The Center on Race, Poverty and the Environment. And I can see their argument: why not use this legislation to bring awareness to the disproportionately high levels of pollution in lower income neighborhoods? What I can’t see is why Judge Goldsmith is concurring. Or, for that matter, why anybody is against cap and trade.

I posed this question last night to a die-hard conservative capitalist who dismissed cap and trade as “collectivism,” which makes as much sense as his argument against climate change: “The scientists who support the idea are all making a living on research grants to prove it exists,” an idea he claims he picked up from the Wall Street Journal editorial pages. And you know those Journal readers, nothing will change their minds—not even the facts.

The facts are that we tried cap and trade in the 1990s to reduce acid rain and it worked so well that even that bastion of capitalism, The Economist, crowned it "probably the greatest green success story of the past decade” in 2002. The Environmental Defense Fund did the analysis: 100% compliance among refrigeration and aerosol manufacturers. Power plants jumped in too, taking advantage of the allowance banking provision to reduce SO2 emissions 22 percent below mandated levels. And the cost of the program was less than one-fifth of projections.

Picture 4

Ironically, the leader of the ozone trend-analysis team Professor Michael Newchurch cautioned that the ozone layer would not be out of danger until we addressed the lower stratosphere as well, where 80% of the ozone exists…and is being destroyed by greenhouse gases.

I give up.


Carol Pierson Holding is a writer and an environmentalist; her articles on CSR can be found on her website.  

Inset photo, Creative Commons courtesy of docentjoyce.

Inset chart, "The Cap and Trade Success Story," courtesy of the Environmental Defense Fund.  

 

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