Corporate Secretaries and the Power of Being a Positive Gatekeeper

Positive Gatekeeper. I can’t think of a better name for corporate secretaries that help their companies understand and manage the sustainability risks and opportunities their organizations face. Thomas Niemann, Ford Motor Company’s global social sustainability manager, coined the phrase during a recent discussion I hosted for the Society of Corporate Governance, entitled “The Role of the Corporate Secretary in Sustainability.” The idea is straightforward, but crucial. The most effective corporate secretaries are those who act as a filter for the critical sustainability issues that should be raised to the board, but who also apply the filter with a strategic lens. Niemann explained that the corporate secretary helps his group most by having a thorough understanding of critical issues that affect the enterprise. This way, when those managers bring a sustainability issue to the corporate secretary, the corporate secretary is able to make the assessment about when the issue needs board attention. It’s a balancing act based on a new kind of expertise. Sustainability is a broad term – and someone in Niemann’s role deals with a range of environmental and social issues that affect the organization. However, not all these issues belong at the board level. The most effective corporate secretary plays the role of sifting though the range of issues with a materiality lens – and determining what makes sense to elevate to the board level. This task is becoming more crucial. Increasingly, corporate secretaries are expected to be more involved in their companies' sustainability functions. That’s a direct result of the evolution in the understanding of the impact that sustainability challenges, including climate change, water scarcity, and a low carbon economy, could pose to the corporate bottom line. Consider that: Studies from groups like Morgan Stanley, Deutsche Bank and Harvard Business School underline that high performing sustainability companies outperform their peers on a range of financial metrics. The ratification of the Paris climate agreement means that companies, especially those operating on a global level, will likely need to contend with growing regulations addressing issues like climate change. Investors are putting pressure on companies to address these issues proactively. During the 2016 proxy season, over 400 shareholder resolutions on climate change and other sustainability issues were filed.   So what can corporate secretaries do? On the webinar, we discussed a number of key steps to take to manage this growing responsibility: 1. Understand what sustainability means to your company.  Sustainability will mean different things to different companies and organizations develop a variety of organizational structures for tackling their specific sustainability challenges and opportunities. Whatever organizational approach a company takes, at Ceres we believe sustainability shouldn’t be considered separately or a silo, but should be integrated with corporate economic or financial performance. Every company needs to understand how they can address sustainability in the most strategic way. By monitoring all of the work and conversations (or noticing the lack of them) happening within your company around sustainability, corporate secretaries can bring the right issues to the board’s attention. 2. Understand the evolving context for sustainability.  The sustainability environment is rapidly changing. But what’s certain is the rising importance of sustainability to different groups, including markets, employees, investors and global regulators. Investors, for instance, are scrutinizing the board more closely. Peggy Foran, director at Occidental Petroleum Corporation and chief governance office, vice president and corporate secretary at Prudential Financial, said during the webinar that during the past five years, her board has heard from large investors more on environmental and sustainability issues than other issues because of their growing importance to these shareholders. Practically, a concrete way to track and keep the board up to date on this changing context among shareholders is to talk regularly with the sustainability and investor relations departments, said Stephanie Tang, senior corporate counsel and assistant corporate secretary at the Clorox Company, during the webinar. 3. Engage with internal and external stakeholders.  By partnering with areas of the company involved in sustainability activities, such as operations, human relations or communications, corporate secretaries can cultivate their understanding of their organizations key sustainability. Foran pointed out that externally, the corporate secretaries see first hand the key trends impacting not just their own company and industry, but more broadly. Corporate secretaries have a unique ability to help provide a balanced perspective that finds common ground among various constituencies and that will inform board discussions. 4. Think through when issues need to be elevated to the board level.  Corporate secretaries can use the insight they’ve gathered from internal and external engagement to educate senior management and the board on key trends and to communicate with them in a way that’s helpful and protective of their corporation. As Tang explained, as the corporate secretary, you see all of the discussions going on in the board room and you know what risks and trends the board is thinking about. That puts you in a great position to bring sustainability related issues relating to those strategies and business decisions to the board’s attention. You’re also aware of what’s not top of mind for the board that should be raised for them, based on your work with your company’s sustainability group, IR group, and stockholder engagement efforts on the corporate governance side.

Is Your Mutual Fund Company Taking Climate Change Seriously?

The vast majority of climate scientists (97 percent) believe climate change is real, but what about your mutual fund company? We examined how the nation’s largest mutual fund companies voted on climate-related shareholder resolutions in 2015 and 2016. The results are revealing. While the great majority of mutual fund companies voted in favor of many climate-related resolutions (as shown on the chart below), a number of the largest firms failed to support any of the resolutions, including big-name players such as American Funds, BlackRock, Dimensional, Fidelity, Pioneer, Putnam, and Vanguard. These firms collectively manage trillions of dollars in assets, and their support of climate resolutions could contribute to majority votes for some resolutions – resulting in enormous pressure on companies to disclose their plans for addressing wide-ranging climate-related risks. Let's review why institutional investors file these resolutions and why companies should be disclosing and addressing climate-related risks. First, climate change creates profound risks for many companies and the global economy, and these risks need to be disclosed by companies, as a task force (chaired by Michael Bloomberg) of the Financial Stability Board of the G20 summarizes here. Second, virtually every country in the world has agreed to reduce climate-warming pollution significantly via the Paris Climate Agreement that formally entered into force in November. The transition to clean energy that is already well underway threatens conventional business models of fossil fuel producers like ExxonMobil and creates a substantial risk of stranded assets and devaluation. Simply put, the business case for companies to disclose and act on climate risks – whether from extreme weather and other physical risks, or carbon-reducing regulatory risks – is powerful. So why would a mutual fund company vote against nearly every shareholder resolution asking companies to disclose their risks and strategies for dealing with these powerful trends? Here we explore three possible explanations – none of them are good: The fund firm's leaders don't believe climate change is real or are ideologically opposed to admitting it's real. If your mutual fund company falls in this category, you have a problem because the firm's leaders are either not paying attention, or they are letting incorrect information guide their investment decisions and ownership practices. Either way, you should probably run for the exit.   They accept the science of climate change, but see few material risks or implications for businesses in their portfolios.  This explanation may seem similar to the first, but there is a difference here that may be tripping up these firms. Vanguard's proxy voting policies (see part five) state that Vanguard funds should abstain from voting on “philosophical” social issues because they are the purview of company management, unless they have a significant impact on the valuation of the business; and based on Vanguard’s voting record, it seems they believe climate change has no significant financial impact on companies.  Unfortunately, this logic is both deeply flawed and shortsighted. Yes, climate change is clearly a moral and political issue, but it is also a critical business issue. Coal producers, oil companies and other fossil fuel businesses face wide-ranging climate risks – regulatory risks, transitional/competitive risks and reputational risks, among them. Businesses across nearly all sectors are increasingly exposed to risks of supply chain and workforce disruptions, infrastructure damage, rising resource costs, shifting demand, brand damage, and stronger regulations intended to protect people and the planet for both today and the future. Vanguard has a legal duty to vote in the best interests of its clients, and in our opinion, they are violating that duty by failing to recognize these risks as demonstrated by their failure to vote for a single climate-related resolution tracked by our study. If Vanguard believes climate change is not a business issue simply because it's also a moral issue, you have to wonder about their judgment.   The fund firm managers believe private dialogue with companies is a more effective strategy than proxy voting.  While it is true that face-to-face discussions initiated by major investors can have a strong influence on companies, it does not remove the fiduciary duty to vote proxies conscientiously on important bottom-line issues. If you believe the company should do what the resolution asks, and you vote against it (or similar requests) year after year while engaging in dialogue about it, then you send a mixed message.  Proxy votes by major shareholders can be very effective in moving companies to action.  In addition, many institutional investors engage with companies on resolutions while also voting for them. Voting arguably adds teeth to the negotiations. And mutual fund companies generally keep their dialogues with companies strictly confidential, so there is no way for investors to understand their approach or any possible results. * Global Assets Under Management according to Investment & Pensions Europe (IPE) 2016 ranking, "Top 400 Asset Managers" Now the big kicker. Vanguard and many other mutual fund firms and investment managers – including American Funds, BlackRock, Dimensional, Fidelity and Lord Abbett – that fail to support climate resolutions have publicly stated that environmental and social issues can be material financially. They are all members of the UN’s Principles for Responsible Investment and have publicly pledged to adhere to six principles. Principle 3 specifically reads: "We will seek appropriate disclosure on environmental, social and governance (ESG) issues by the entities in which we invest." Many of the resolutions Vanguard and others vote against request this disclosure.  And BlackRock and BNY Mellon have publicly issued noteworthy papers and letters to companies on the significant investment implications of climate change. This proxy voting inconsistency has led investors to file resolutions on the issue with mutual fund companies and investment managers. As Timothy Smith, Senior Vice President of Walden Asset Management, explained: “The proxy voting records on climate change of investment firms and mutual funds are under increasing scrutiny by investors and clients. As a result, investors have filed a resolution with 5 investment firms urging them to review their proxy voting policies and record, as some vote against virtually every social and environmental shareholder resolution.” Smith continues: “It is troubling to see BlackRock, JP Morgan, BNY Mellon and others routinely vote against important shareholder resolutions seeking reasonable disclosure and goals to manage climate change. How is this consistent with their fiduciary duty to protect their clients interests?” Customers who are concerned by these poor voting practices should contact their mutual fund companies and suggest that they vote for reasonable climate-related resolutions. Resolutions filed during the 2011 - 2017 proxy seasons are available at www.ceres.org/resolutions, and more are expected to be filed in the coming months for the 2017 season.  Much is at stake, in part because an increasing number of these resolutions are receiving strong support (in the 30-40 percent range), and giant mutual fund companies can help push these votes above 50 percent, sending a powerful message to companies that stronger climate risk disclosure and action are an imperative.  

10 Reasons to Be Optimistic for a Low-Carbon Future

Sure, many of my friends in the climate change movement can't wait to forget 2016, the year when an incoming Trump presidencybrought new meaning to climate uncertainty. But there is a movement taking hold that is far bigger than the U.S.—I've seen it in the last year in Africa, in Europe and the U.S. Here are 10 shining lights for the irresistibility and inevitability of the low-carbon future. It's here—and there is no turning back. 1. Solar Symphony Solar costs keep plummeting, the latest record low being a 120-megawatt solar project in Chile whose power will be sold for $29.10 a megawatt-hour, less than half the coal plant bid. Solar photovoltaic costs are dropping the fastest compared to other renewables, which helps explain the record 4,300 megawatts of new solar PV capacity installed in the U.S. in third quarter '16. (That's 60 percent of new generating electric capacity installed in the US last quarter). We also saw the opening of the world's first one-kilometer road paved with solar panels, dubbed the "Wattway," this month in France. 2. A Big Dash of Disclosure Companies bottom line is money and they need to provide better information about the financial risks they face from changing climate trends and government responses. This month, a task force convened by the G20 Financial Stability Board issued final recommendations on the types of disclosure companies should be providing to investors about climate risks and opportunities. Among the highlights: all companies, especially oil & gas firms, should say how their business strategies align with the global goal of limiting global temperature rise to 2 degrees Celsius, the benchmark goal of the Paris climate agreement. 3. Prevailing Winds Wind power is often cheaper than solar, the result of more efficient and less costly turbines. In some states, including Iowa, Illinois, Kansas, Nebraska and parts of Texas, new wind turbines can generate electricity at a lower cost, without subsidies, than any other technology, according to a new University of Texas report. Texas is the king of wind, with 18,000 megawatts of capacity that on some windy days supply nearly half of the state's power. 4. Pay It Forward Pay-as-you-go solar companies, made possible by mobile phones, are the rage in Africa. M-Kopa Solar has leveraged the mobile money phenomena to sell more than 425,000 household solar systems in East Africa. With a $30 deposit and daily 50-cent payments, all by cell phone, customers get a solar panel, a couple of lights, a cell phone charger and a solar powered radio. After the first year of payments, customers own the system outright. Similar off-grid solar companies are now sprouting up across Africa and they've attracted hundreds of millions of dollars in financing. 5. Emerging No More Clean energy expenditures in emerging nations in South America, Africa, the Middle East and Africa eclipsed those in wealthier OECD countries for the first time. Some of the biggest jumps, especially for big utility-scale solar projects, were in countries like Chile, Mexico and South Africa. We also saw notable improvement in the investment environment for clean energy in many developing countries, with the top five scorers in a new Climatescope report being China, Chile, Brazil, Uruguay and South Africa. 6. Morocco Salute The fact that Morocco has phased out fossil fuel subsidies and is building the world's largest concentrated solar plant is reason alone to be on my list. But its gracious leadership in hosting global leaders at the UN climate talks in Marrakesh—and its unflagging commitment in rallying the rest of the world behind the ambitious Paris climate agreement, with or without U.S. leadership—was inspiring and profoundly important for the global climate community. 7. States Collective Power States also have crucial key role in setting policies that shape the energy mix of their economies. And judging from recent state actions, interest in using renewable energy and energy efficiency is getting stronger. Illinois and Michigan both passed clean energy laws this month that will boost investment, create jobs and save money. And yesterday, Ohio's governor took a major step to lift a freeze on the state's energy efficiency and renewable energy standards. California's Jerry Brown has also announced he'll work directly with other nations to fight climate change. In all four states, clean energy measures have strong support from the business community.   8. All Renewable Fortune 500 companies are sourcing renewable energy at levels that did not seem conceivable just a few years ago. With prices dropping and states making it easier to provide green power, industry giants such as Walmart, Google, Apple and Mars all made the plunge to power all of their operations with 100 percent renewable energy. Google, which already has commitments to source 2,600 megawatts of wind and solar for its global operations, plans to hit its 100 percent target in 2017. 9. Unleashing the Money Investor resolve on the low-carbon future is undoubtedly growing. Citigroup is seeing exponential growth in lending and financing for low-carbon and other sustainable business activity, including $48 billion of sustainable financing in 2015 alone. Yes, that's $48 billion. Even more inspiring is Deutsche Bank's groundbreaking strategy to provide billions of dollars of capital to clean energy businesses in sub-Saharan Africa. The project, recently approved by the UN Green Climate Fund, will combine public and private capital to provide up to $3.5 billion in financing for household solar, solar mini grids and other off-grid clean energy businesses. 10. Christmas Elves: Kate Cincotta left a lucrative aerospace job to start Saha Global, which is providing clean water and solar power to the "poorest of the poor" in northern Ghana. The Boston nonprofit now has 93 water businesses, all run by local women, who are providing clean water to nearly 50,000 Ghanaians. Donn Tice, founder of Frontier Energy, spends his time working with African governments to remove policy barriers that are limiting the sale of off-grid solar products. Last spring he persuaded Sierra Leone's government to eliminate import duties and sales taxes on certain solar appliances. Actions like this are critical in bringing clean affordable power to millions of Africans who live today with no energy except high-polluting kerosene lamps and charcoal. Read the post at EcoWatch

Businesses and States Are United on Clean Energy

You may not know it from the headlines, but Washington is not the only energy game that matters these days. Companies that buy massive amounts of energy and states that set the policies that shape the energy mix of their economies – whether with clean energy or climate-warming fossil fuels – also play a major role. Corporate and state efforts are driving the country’s extraordinary progress in growing the economy while reducing carbon pollution. Since 2000, according to the Brookings Institute, the U.S. GDP has grown by 30 percent while carbon pollution has fallen 10 percent. And, judging from business and state actions in recent weeks, interest in using more renewable energy and energy efficiency is getting stronger and shows no sign of abating. From Mars Inc.’s pledge to expand wind energy to Smithfield Food’s goal to slash its carbon pollution to Google powering all of your map and email requests with emissions-free energy, we have seen a steady drumbeat of new and strengthened green commitments by iconic American businesses. Many of them have announced plans to power 100 percent of their operations with wind and solar. Others are greening their global supply chains with renewables and more efficient water use. Perhaps the biggest breakthrough was Google’s announcement last week that it will power all 100 percent of its global operations with renewables by 2017. That’s 2,600 megawatts of wind and solar energy from one company alone – enough power for all of San Francisco. And further adding to this momentum are state lawmakers – both Democrats and Republicans – who are enacting critical state policies that will accelerate these clean energy gains, while adding thousands of new jobs. Just last week in Michigan, the legislature approved a bipartisan law that strengthens energy efficiency efforts and boosts the state’s renewable portfolio standard. The new law, backed by major giants like General Mills and Nestle, increases the state’s renewable energy goal from 10 to 15 percent and removes artificial caps on efficiency investments – meaning utilities can now do more to help consumers save money on their electricity bills. “Our energy will be more affordable, more reliable and more green,” said Gov. Rick Snyder (R-Mich.) of the new law. Even before passing the new law, the state’s old renewable energy standard had generated $3 billion in new investments while the efficiency provisions have saved ratepayers $1 billion on their electric bills. Illinois passed an even more sweeping energy law this month, which strengthens renewable energy, energy efficiency, low-income rooftop solar and solar job training efforts. While the overall renewable goal remains at 25 percent, it includes a far bigger focus on distributed energy and community solar projects, which will allow customers (whether homeowners or not) to invest in small-scale solar projects. The clean energy provisions are expected to generate tens of thousands of jobs and more than $12 billion in private investment, including $750 million for low-income solar programs. So why all this clean energy love from state lawmakers and U.S. businesses? The answer is pretty simple: first, wind and solar energy costs are plummeting, making them cost competitive in many parts of the country with natural gas and other fossil fuels. Solar photovoltaics (PVs) have seen the biggest price drops – more than 50 percent since 2010 – which helps explains the record 4,300 megawatts of new PV capacity installed in the US in third quarter 2016 alone. This astounding number represented 60 percent of total new electric generating capacity additions last quarter in the US. Second, businesses, now more than ever, are clamoring for renewable energy because it is cleaner and less prone to volatile price swings than fossil fuels. Ten major Michigan businesses, including JLL, Staples and Worthen Industries, made this exact point last month when they sent a letter to Michigan lawmakers calling for stronger renewable goals, citing the “significant economic opportunity” and “competitiveness.” Businesses are pushing for similar clean energy policies in Ohio and Virginia. Just last month, Microsoft, Walmart and Ikea and 15 other companies wrote to Virginia lawmakers calling for policies to expand access to renewable energy from utilities and third-party sellers. The US business community is firmly united behind the inevitability, irresistibility and irreversibility of clean energy, and policies that will hasten that transition. As 365 U.S. businesses wrote to the President-elect last month, “We want the US economy to be energy efficient and powered by low-carbon energy. Failure to build a low-carbon economy puts American prosperity at risk.” Read the post at Forbes Sustainable Capitalism Blog

Fuel Economy Rules a Bogeyman for Long-Term Trends in Auto Industry

  • December 21, 2016
Written by Dan Luria and Alan Baum The debate over the future of fuel efficiency policies is generating a lot of noise. But for consumers, these policies generate savings at the pump. Opponents of maintaining fuel economy regulations, however, cite affordability as a chief concern. Auto manufacturers, they say, will pass on the cost of meeting the regulations to their customers, and rising vehicle prices will prevent many middle-class Americans from purchasing new vehicles. As Mitch Bainwol, of the Alliance of Automobile Manufacturers, said recently: “Well-meaning regulatory action risks increasing compliance costs to the point that additional safety and fuel-efficiency technologies put new vehicles out of financial reach of the average new car purchaser.” We completely disagree; fuel economy rules are simply today’s convenient bogeyman to blame for what are really long-term trends in the American consumer marketplace. In reality, today’s new vehicles are increasingly out of reach for many middle- and low-income Americans for reasons that have little to do with government standards.  First, a shift toward trucks (including crossovers) has led to higher average prices, which for new vehicles have risen from $28,133 in 2009 to $34,230 in 2016.  Second, a stronger economy has led to more robust demand, which supports higher prices. But by far the majority of the increase in prices owes to the addition of luxury features, such as comfort and entertainment. The rise in crossover sales and more demand for luxury features are a result of growing U.S. income inequality that favors upper-middle class and upper-income buyers in the new car market. Automakers understand this trend and have modified their offerings by adding luxury features to more models and by creating more high-end versions in every segment. And the average buyer of new vehicles, whose income is 175 percent of the median U.S. household, is clearly willing to pay for these features. True, today’s vehicles have safety features like seat belts and airbags. But those regulation-driven items are not the source of most of the price increases. Even today’s base models include air conditioning, power locks and windows, cruise control, and 6-speaker sound systems, features unheard of for base models several decades ago when vehicle ownership was at an all-time high. Many higher-end models are also offered with more efficient powertrain packages, and many of today’s more affluent new-vehicle buyers willingly pay extra to get those packages. The rising level of feature content is occurring across automakers’ fleets. In every segment, high-end variants have been introduced or expanded in the last few years. And sales of these “higher-trim” level models have been increasing significantly faster than overall sales.  The share of these high-trim models is often more than 25 percent, as compared to less than 10 percent in the past. If the industry were concerned with “affordability,” why did it choose to add so many features to its entire model line-up?  The answer, quite obviously, is that upper-middle class and wealthy buyers wanted – indeed, insisted on – these features, and those buyers are a growing share of the market.  That’s because, since 1980, and particularly after 2000, almost all of the income gains from U.S. economic growth went to higher-income families. Opponents of government regulation of fuel economy, emissions, and safety cynically argue that such regulation threatens jobs. Strikingly, the UAW and other unions have made the opposite argument – that regulation often results in innovation, investment, and more jobs. Strong job growth at many U.S. suppliers of fuel-saving technologies – among them BorgWarner, Bosch, Continental, Eaton, Delphi, and Owens Corning, to name just a few – convinces us that the unions are right and the trade associations wrong. Nor are dealers harmed by the market’s trend toward a richer new vehicle sales mix.  True, there has been a narrowing of the gap between invoice and transaction price (which is the dealer’s “profit”), but that’s because of how automakers set invoice prices and not because of regulations. Meanwhile, buyers priced out of the new vehicle market have greatly expanded the used car and truck market, where dealers make more profit per unit sold --on average, over $300 more per vehicle on used than on new-vehicle sales. Are today’s new cars and trucks less affordable for households at, near, and below the median income?  Absolutely. But that reflects changes in the U.S. income distribution and the profit maximization strategies of the automakers, which have chosen to restrict production capacity and drive the market toward higher-margin, higher-trim level models. That strategy has resulted in record industry profits, and in substantial job growth at both automakers and suppliers.  Fuel economy standards are not free, but they are hardly a primary driver of why new vehicle prices have outpaced median income. Alan Baum is Principal of Baum & Associates, an automotive forecasting and research consultancy. Dan Luria is an independent industry analyst. Since 1990, Baum & Luria have collaborated on a respected quarterly forecast of North American vehicle, engine, and transmission sales and production. Read the post at The Hill

Companies Set A Higher Bar For Climate Risk Disclosure

A new capital markets solution is opening up in the battle against climate change—and business is leading the charge. Under the leadership of former New York City Mayor Michael Bloomberg, a global industry initiative just released its much-anticipated guidelines for voluntary climate risk disclosure by companies and investors in financial filings. The guidelines, released Wednesday, of the Task Force on Climate-related Financial Disclosures, are a big deal because they were developed by business for business. The task force was created by the G20 with one specific goal: to cut through the confusion in the market around financial reporting on climate risk by providing a single set of concrete, workable guidelines for all industries. The TCFD’s guidelines will help standardize how climate risks and opportunities are analyzed by companies, and generate critical information for investors to help them make better decisions. They are a powerful statement by some of the world’s largest corporations that climate change is a systemic material risk that requires clear and efficient disclosures. With these proposals, business leaders from across our economy are saying that all parts of the capital markets need to be engaged on climate change and that the way to do that is through uniform analysis and disclosures by investors and companies alike. We support the TCFD’s efforts because they include a level of corporate involvement and support from G20 nations that we haven’t seen before. We have worked for decades to advance corporate disclosure of climate change risks on behalf of investors, and the lessons we have learned have been incorporated into the task force’s work. In fact, I met with task force members in London in February to outline the work we have done with investors and companies to make corporate disclosure a mainstream practice. The TCFD ended up incorporating the pioneering work we have done in corporate sustainability reporting with the Global Reporting Initiative and the U.S. Securities and Exchange Commission. The TCFD’s robust guidelines—developed by major investors and companies, including Blackrock, Unilever, and Axa—have 11 specific recommendations for all industries, divided into four topics: governance, strategy, risk management, and metrics and targets. They include: All companies should benchmark strategic and financial planning using a two-degrees Celsius economic scenario as their baseline for analyzing climate risks and opportunities. This recommendation is based on the Paris Climate Agreement’s goal of limiting global warming to two-degrees Celsius, It is a critical piece in the puzzle of understanding the real impacts of global warming on business and investments, which we strongly advocated for with our investor partners worldwide. All companies should disclose information related to water, energy usage and efficiency, land use, and revenues from products and services designed for a low carbon economy. All asset owners and asset managers should assess and disclose the climate risks in their portfolios, which is the first-ever global recommendation for investors. Healthy markets and strong economies are built on transparency. By having more consistent, more comparable disclosure about the risks and opportunities of climate change, investors, banks, and insurers can make better, more informed decisions about where to put their money. Disclosure is now more critical than ever. No matter the political winds in Washington, climate change is real and its impacts are being felt across our global economy. Climate risks affect 72 out of 79 industries or 93 percent of the capital markets worth $27.5 trillion, according to a recent report by the Sustainability Accounting Standards Board. While the TCFD’s initiative promotes voluntary disclosure, we believe its guidelines can be part of the groundwork for the mandatory disclosure that regulators need to move towards. Mandatory disclosure is the only way to ensure that reporting is truly comparable and consistent. For instance, it provides a basis that financial regulators or stock exchanges in any country can use as it considers providing guidance or rules on climate risk disclosure. The SEC’s 2010 guidance on climate risk disclosure still provides a strong model for guidance by other securities regulators, and the TCFD recommendations add useful information that investors have asked companies for—like two degrees scenario planning—that’s fully aligned with disclosure rules in the U.S. and abroad. The demand for more information is clear. That’s why 45 institutional investors representing $1.1 trillion in assets under management called for stronger climate risk disclosure in response to the SEC’s request for public comments on a wide range of disclosure topics. And more than 140 legislators from more than 30 countries called on the world’s stock exchanges to take note of the TCFD recommendations and update their climate disclosure practices. It is only by measuring these risks that our markets and economies can manage them. The TCFD guidelines are a profoundly important step forward in that direction. Read the post at Forbes Sustainable Capitalism Blog

Marrakech Climate Talks Show There is No Turning Back on Clean Energy Transition

As the dust settled on the arid grounds at the closing of COP22 in Marrakech – with the ripple effects of the monumental U.S. election hovering in the air – a sense of determination and resolve persisted. Nearly one year after the world came together to forge the groundbreaking Paris Climate Agreement and only weeks after the accord officially entered into force in record time, the conversation has shifted to concrete action. The just-concluded climate talks here reflected a shared understanding of the need to supercharge the already irreversible global clean energy transition. And no one was waiting around for the U.S. to decide its next move.  Even as some fretted that political developments in the U.S. might chill early-stage implementation of the Paris Agreement, the opposite occurred. As the tremendous economic and social costs of climate change continue to mount, and as the window of opportunity for stabilizing the climate shrinks fast, talks among country delegations, cities, states, companies, investors, labor leaders and civil society took on a renewed sense of urgency in accelerating forward. Underscoring that climate action makes good economic sense, more than 360 U.S. businesses and investors – from small enterprises to more than a dozen Fortune 500 firms, including household names such as DuPont, Mars, Kellogg’s, General Mills and Levi Strauss – came forward to express strong support for staying the course on the Paris accord and continuing to advance complementary clean energy policies and investments. This call was heard resoundingly throughout the tented corridors of the Marrakech climate negotiations. It was not lost on the negotiators that these businesses are backing up their words with concrete action, stepping up corporate investments in clean energy and lowering the carbon impacts of their operations and supply chains. Many of the companies, in fact, have committed to source 100 percent of their electricity needs from renewable power. Leading investors from around the world, including New York State’s $185 billion public pension fund and Citigroup, outlined what they are doing to step up efforts to manage carbon risk exposure in their investments while also seizing burgeoning low carbon investment opportunities. Citigroup’s Michael Eckhart described impressive progress towards its 10-year commitment to finance $100 billion of low-carbon and other sustainable business activity. The bank provided $48 billion of sustainable financing last year alone, double from $24 billion in 2014. Pete Grannis, a top official at the New York State Comptroller’s Office, discussed their $2 billion low-carbon index fund that was launched last year. He said the 2016 election results will not affect their fund’s interest in capturing low-carbon opportunities: “The die has been cast, there is no turning back.” Further demonstrating that the transition to a clean energy economy is irreversible, nearly 200 nations together issued Marrakech Action Proclamation calling for the stepped-up ambition that is needed to limit temperature rise to well below 2 degrees Celsius and avert the worst impacts of climate change. At the same time, some 47 members of the Climate Vulnerable Forum – including low-lying island nations facing some of the most immediate existential threats from rising seas – inspired the world by collectively agreeing to aim for 100 percent renewable energy within the next couple decades. So, now that the dust has settled in Marrakech and COP22 has come to a close, what’s next? Beyond the well-understood need to focus on increasing the speed and scale of clean energy transition, one strikingly pervasive thread from the global climate negotiations was the focus on the need for a truly inclusive approach to clean energy transition. As this year’s climate talks revealed, there is a burgeoning global commitment to ensure that the transition from carbon-intensive energy to clean, low-carbon energy is just and fair, and leaves no one behind.

How Big Food Companies Are Committing to Sustainable Water

As articles flood my inbox assessing the environmental implications of the stunning election of Donald Trump last week, it is clear that California’s resolve to tackle water and climate issues must continue full steam ahead. Clearly the election doesn’t change California’s severe drought, and nor will it change the proactive steps that many companies are taking to adapt to the new normal of ever-scarce water resources. Big food companies that source from California’s fertile Central Valley remain committed to sustainable sourcing. As Jerry Lynch, chief sustainability officer at General Mills, put it recently, “The challenges facing our company and our planet are more pressing than ever, so we have to build resiliency in our supply chains to ensure that we can continue to serve the world by making food people love.” Last year, General Mills pledged to cut greenhouse gas emissions across its supply chain by close to 30 percent over the next decade. And last month, the food giant joined with six major brands in making significant commitments to work with their growers to help them improve their water stewardship through a new collaborative initiative, the AgWater Challenge. Spearheaded by Ceres and the World Wildlife Fund, the AgWater Challenge is designed to spur food company leadership on water sustainability. That kind of leadership is critical as California’s drought catches up with the farmers that supply these big brands. Recent USDA data showed that cash receipts dropped a startling $9.5 billion in 2015 – or roughly 17 percent from farm earnings in 2014. Compare that to the previous year when crop revenues declined a mere $480 million, or 1.4 percent from 2013 levels. While multiple factors contributed to this steep decline in earnings, tighter water supplies played a role. So what did these seven brands do to be recognized as AgWater Stewards? Companies participating in the Ceres-WWF AgWater Challenge submitted detailed sustainable sourcing and water stewardship plans adhering to criteria set by the two organizations. The participants that met minimum criteria, including setting a time-bound goal for completing a water risk assessment across their supply chains, were recognized as AgWater Stewards. Yet their work is not done. Being truly sustainable is hard. The issues are complicated and often overwhelming, and it takes time for a big food company that sources from growers all over the world to achieve real impact. For this reason, WWF and Ceres consider the companies’ water stewardship plans to be a work in progress – and the two organizations will issue a progress report on the companies’ pledges one year from now. Let’s take a look at some of their pledges, and what they mean for California. First there’s WhiteWave Foods, the producer of Horizon Organic milk, Silk plant-based beverages and other brands, which was recently acquired by the French food company Danone. WhiteWave sources dairy products and almonds from California’s San Joaquin region and further north and is working on water projects in the Sacramento and Feather River basin. As part of the AgWater Challenge, WhiteWave committed to develop a robust, time-bound roadmap for agricultural water stewardship by 2018, addressing challenges of dairy, soy and almond production in areas of greatest water risk, including California’s Central Valley. The company is already collaborating with the Bonneville Environmental Foundation and Sustainable Conservation on groundwater recharge projects, and has committed to further supporting and scaling such projects that restore freshwater systems for almond and field greens farmers in its supply chain in California. And I’m especially excited that White Wave joined Ceres’ Connect the Drops Initiative and will be joining with dozens of other companies to advocate for sensible water policies in the state. Then there’s the Kellogg Company, which on a global level is committed to responsibly sourcing its 10 priority ingredients, including rice, wheat, corn and fruits like sultana grapes and strawberries using water and fertilizer use as key indicators for sustainable production. It’s following metrics developed by Field to Market to do this. Kellogg is also supporting 17,000 suppliers, millers and farmers in water-stressed regions by providing financial aid and agronomic assistance. In California, it’s focusing its work with growers in the Fresno region, one of California’s more water-strapped counties. And General Mills is developing water stewardship plans by 2025 for the company’s most material and at-risk watersheds in its global value chain.It’s currently partnering with local stakeholders on sustainable sourcing in several high-water-risk regions, including the Los Angeles and San Joaquin watersheds, through both collective action and policy advocacy – including the California Water Action Collaborative and Ceres’ Connect the Drops campaign. General Mills is also participating in the development of Groundwater Management plans at the basin level in California. These brands participating in the AgWater Challenge are some of the biggest commodities buyers in the world. With agriculture using 70 percent of the world’s freshwater resources, and 80 percent of developed water resources in California, they have a business responsibility to preserve the resources that sustain those systems. And they are owning up to that responsibility as they acknowledge their bottom-line risks. We hope that more will join Ceres-WWF AgWater Challenge. The resiliency of their supply chains is in jeopardy now more than ever as climate deniers take up residence in the White House. Read the post at Water Deeply  

Businesses Renew Their Call to Increase Clean Energy Standards in Michigan

Last week, while many were focused on the election, the Michigan Senate passed an energy package that has the potential to move clean energy forward in the state. With only seven weeks left in the legislative session, there is an opportunity to further strengthen these bills before they head to the House. 10 major businesses with a significant presence in Michigan—Ben & Jerry’s, Brewery Vivant, Crystal Mountain, Eileen Fisher, General Mills, JLL, Nestlé, Rockford Brewing Company, Staples and Worthen Industries—are calling on state lawmakers to strengthen the state’s renewable energy and energy optimization standards, and ultimately help bring more investment and jobs to Michigan. In the letter to lawmakers, businesses call for an increase in the state’s renewable energy standard by at least five percent and endorsed a bipartisan proposal for a 15 percent RPS by 2021. “We recognize the significant economic opportunity presented by renewable energy and energy efficiency standards and urge the legislature to strengthen Michigan’s renewable energy and energy optimization standards,” the businesses write. They also urged lawmakers to retain language from the existing renewable energy standards, including requirements that ensure renewable energy is generated in Michigan and that independent power producers generate a portion of clean energy in the state. Indeed, without these changes, the proposed Senate bills will not drive economic development and new investment. Investment in clean energy helps reduce costs for ratepayers and prevents utilities from needing to build new power plants. A Ceres report shows that strong renewable portfolio standards help utilities transition to renewable energy and reap energy efficiency savings. New analysis also found that in 2014 alone, energy efficiency generated over 3,100 new jobs and over $200 million in new income in the state. The proposed 15 percent renewable energy standard will spur additional economic growth throughout the state. Michigan can do more to increase clean energy deployment. Businesses are calling on lawmakers to invest in the future.

It's All About Building A Clean Energy Economy

Last week, while U.S. voters were casting their ballots, Walmart announced plans to double its renewable energy goals – to 50 percent, by 2025 – and to buy half of its electricity from a Texas wind farm. On Wednesday, one day after the election, General Mills, Staples and a half-dozen other companies sent a letter to Michigan lawmakers urging them to boost the state’s renewable portfolio standard, which has already attracted $3 billion in clean energy investment in the state. These examples are important reminders that, no matter who the president is, business leaders are committed to a clean energy future. While this week’s U.S. election is creating legitimate distress, we should refrain from thinking it will completely thwart climate action and the clean energy economy in the U.S. and around the world. But we should also learn from the election. The voting results are a clear signal that we must do a better job communicating with the American public and others around the world about complex issues like climate change. We need to find more common ground and inclusiveness in tackling this global threat and its far-reaching job and technology-related implications. With the economy at stake and the facts on our side, I remain optimistic. As it relates to building a clean energy economy – there is no confusion. It is now cheaper to cut carbon emissions and use renewable energy than it is to continue to rely on fossil fuels. It is true in Minnesota and Colorado, where wind power is out-competing fossil fuel power plants. It is also true in Morocco and Kenya, where solar and wind power is far cheaper than importing oil. What is especially important now is that leading investors, businesses and world leaders continue seizing on these enormous opportunities by following the visionary path forged by COP21. The drive to decarbonize the U.S. energy economy will continue regardless of the actions that our next president takes – or doesn’t take – because of the rapidly expanding deployment of clean energy solutions by states, cities, and businesses across the country. While there are divisions between Democrats and Republicans on climate policy, there has been bipartisan support for investments in clean energy as well as in climate resilience. Working with investors and companies in our networks, we will be moving swiftly to make the case for such investments to the new administration and Congress, including support for new infrastructure initiatives that President-elect Donald Trump has already pledged to put forward. We will also work with our bipartisan allies in Washington to protect key measures, such as the Clean Power Plan and vehicle fuel economy standards, which are up for review early next year. The business case for climate action will always hold and climate science will remain incontrovertible — regardless of who is in the White House.  Short-term political and economic changes can detract from our momentum, but the low carbon transition is irreversible, irresistible and inevitable. There is no turning back. Read the post at Forbes Sustainable Capitalism Blog