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Unprecedented floods, storms and wildfires have ravaged communities across the United States in the past two years and sapped the economic vitality of regions. Puerto Rico was devastated by Hurricane Maria while southeast Texas is struggling to recover from Hurricane Harvey, and communities in California are still reeling from deadly wildfires. The U.S. federal government’s most recent National Climate Assessment predicts more climate-fueled weather disasters will come - and more frequently - exacting a heavy toll on the economy.  The implications for investors involve both the cost of each event as well as the increasingly urgent need to address the underlying causes of climate change.   The 2017 and 2018 California wildfires and related accidents killed nearly 150 people and destroyed entire communities. Pacific Gas & Electric (PG&E), a giant publicly-traded company and the primary gas and electricity supplier to the northern half of California, filed for bankruptcy on January 29th due to well over $20 billion in potential liabilities associated with the wildfires -- what the Wall Street Journal called “The first climate-change bankruptcy”. (The utility estimates it will cost an additional $75 to $150 billion to comply with a judge’s order related to fire safety.) Utilities tend to be viewed as safe investments, but shareholders of PG&E have significant value at risk  -- as of February 27th, shares were down 56 percent over the last year. While California has especially strict liability laws related to wildfires, these developments warrant attention by investors. Ceres Analysis  As the 2019 proxy season gets fully underway, Ceres releases today its annual analysis of mutual fund proxy voting on climate-related shareholder proposals, focusing on the 2018 season. (See the data table below.) The purpose of this analysis is to shed light on which mutual fund companies take climate risks seriously, as revealed by their proxy voting on climate-related shareholder proposals. While the results show a huge range in voting practices, the trend clearly indicates that more asset managers are voting “for” climate-related proposals.    With good reason. Major new studies point to a diminishing window of opportunity to address climate change before large-scale runaway climate impacts become inevitable. The United Nations Intergovernmental Panel on Climate Change (IPCC) Special Report, released in October, underscored the necessity of a 45 percent reduction in greenhouse gas emissions by 2030 in order to protect against the worst risks associated with climate change. A month later, 13 U.S. federal government agencies released the National Climate Assessment warning that unless we sharply reduce greenhouse gas emissions, the United States can expect a significant blow to economic growth, public health and agricultural output.  An increasing number of institutional investors understand this urgency. In early December, 415 institutional investors with $32 trillion in assets under management submitted a letter to the government leaders in connection with the 24th Conference of the Parties to the United Nations Framework Convention on Climate Change in Poland (COP24). The investors urged leaders of the nearly 200 countries represented to dramatically increase their efforts to meet the Paris Agreement goals, noting that more needs to be done to improve the resilience of our economy, society, and the financial system to climate risks. Institutional Investors Display Varying Levels of Awareness of Climate-Related Risks Among other things, these developments should lead investors to ask which asset management firms understand and act upon climate risks and opportunities. The new analysis from Ceres and FundVotes (acquired in October 2018 by Morningstar), shown in the table below, is one important indicator of the range of climate change awareness displayed by the largest asset managers operating in the U.S.    The shareholder proposals analyzed ask companies to take action by, for example, setting GHG reduction goals, annually disclosing climate-related risks, and establishing mechanisms for rigorous board oversight of these risks. For a complete, sortable list of climate-related proposals at U.S.-based companies, see: www.ceres.org/resolutions.   As the table below shows, voting records range from an astounding zero percent support to 100 percent. However, when compared to last year’s data, there is evidence of strong growth in support for climate-related proposals. For example, during the 2018 proxy season, 46 percent of asset managers voted for over half of climate-related shareholder proposals tracked by Ceres, up from approximately 33 percent in 2017. In addition, only one asset manager failed to vote “for” any climate-related proposals in 2018, down from five asset managers in 2017.   Fiduciary Duty One factor driving this trend is the fiduciary legal duty that asset managers have to their clients to vote on shareholder proposals. Managers are required to vote based on consideration of whether each proposal helps to protect the economic interests of their clients. Climate change presents a rapidly growing set of economic risks for companies in nearly every sector, from oil and gas to utilities, insurers, manufacturers, retailers, and beyond. The business risks fall into several categories: physical, transition, regulatory, reputational, competitive, and legal among them.  (Barron’s published a cover story in January focusing on physical risks to S&P 500 companies from climate change.) In addition, each company contributes in its own way to systemic risks from climate change. For example, all companies emit greenhouse gases, and some contribute to deforestation or lobby against public policies to address climate change. Widely diversified investors, such as index funds and pension funds, benefit from reducing systemic risks, like those associated with climate change, that can harm the global economy and drag down portfolio-wide returns. As a result, each company that takes meaningful action to reduce climate risk or contribute to credible climate solutions (by, for example, sourcing renewable energy) helps to protect long-term returns for widely diversified investors.   Leaders on Climate-Related Proxy Voting Some asset managers have been aware of the profound financial and societal risks related to climate change for a number of years. One way they have demonstrated this awareness is through their proxy voting. For example, Deutsche Asset Management (now DWS) voted “for” 97 percent of climate-related proposals it faced in 2018 and 100 percent in 2017. Nicolas Huber, Head of Corporate Governance at DWS, explained that:   “In 2018, we have continued our efforts on environmental and climate change issues. In our role as fiduciaries we strive to safeguard and enhance the sustainable long-term economic value for our clients. We believe the long-term value of companies is also linked to having sound governance which would allow them to be in a better position to effectively manage material environmental and social (“E&S”) factors relevant to their businesses and potentially improve their risk-return profiles. Therefore, our focus on climate change-related proposals has yet again been robust this year and we will continue advocating the consideration of societal impact with the companies we are invested in.”   Similarly, Pacific Investment Management Company, LLC (PIMCO), an asset manager with approximately $1.7 trillion under management, decided to vote in favor of each of the climate-related proposals it faced, reaching 100 percent favorable votes in 2018, up from 49 percent in 2017.  Leaders Who Don’t Appear in the Data  A number of smaller asset managers with very strong voting records do not appear in our data due to our focus on the largest firms. Some of these firms are also leaders in their engagement activities with companies in their portfolios -- including asking other investors to improve proxy voting on Environmental, Social, and Governance (ESG) issues such as climate change. Both Walden Asset Management and Zevin Asset Management are in this category.   According to Tim Smith, Director of ESG Shareowner Engagement at Walden,  “Increasingly investors are examining the proxy voting records of their managers or mutual funds where they invest. They question whether a manager is carefully scrutinizing the opportunities to conscientiously cast their votes on important issues that affect shareholder value. While many managers and funds vote vigorously in favor of corporate governance reforms, some of these same firms still ignore the vital importance of climate risk to their portfolios by voting regularly against climate-related resolutions. It is likely a fund manager’s climate voting record will increasingly become part of their customers’ regular reviews of the services their managers provide.” Firms Showing Large Increases in Voting Support Support by Eaton Vance jumped from 47 percent in 2017 to 85 percent  in 2018.  The firm acquired Calvert Investments (one of the largest socially responsible investment firms in the United States) at the end of 2016. Fidelity Geode’s support for climate-related proposals more than doubled in 2018 to 33% compared to 2017. Geode was spun out of Fidelity in 2003 and is now hired by Fidelity to manage and vote on Fidelity’s index fund products. Fidelity and Geode, which together are likely to own well over 1 percent of many publicly-traded companies, are important voters due to their size. Fidelity itself voted in favor of only 16 percent of climate-related proposals, down from 17 percent in 2017.   Firms With Low Levels of Voting Support In our opinion, firms that vote for a low percentage of climate-related proposals raise red flags due simply to how important climate risk is for the bottom line of many companies and investment portfolios. Firms at the bottom of our ranking are Amundi Pioneer, Dimensional, Putnam, T. Rowe Price, BlackRock, Vanguard, American Century, American Funds/Capital Group, Fidelity, and JPMorgan Chase (all supported fewer than 20 percent of climate-related proposals).   For some laggards on our chart, things may not be as bleak as they seem based on the voting data alone. For example, BlackRock’s CEO Larry Fink included the importance of climate risk in his 2018 annual letter to CEOs, titled ‘A Sense of Purpose.’ In addition, BlackRock reports dialogue with 232 companies on climate change between July 2017 and July 2018. It also strengthened its proxy voting guidelines regarding climate change in January of 2019.     Even the Only Firm With Zero percent Support is Beginning to Address Climate Risk   When a firm like Voya (managing $543 billion and striving to be “America’s Retirement Company”) fails to vote for a single climate-related proposal in 2018, customers may seek an explanation.   While only time will ultimately tell, a promising sign that Voya may be positioning itself to move away from its position as a laggard on climate-related votes is that Voya Investment Management updated its proxy voting guidelines during 2018 to allow for many ESG proposals to be evaluated on a case-by-case basis.   Voya should be commended for supporting the recommendations of the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD), which provides a framework for climate-related financial disclosures and is supported by more than 500 organizations according to TCFD’s 2018 Status Report. Voya Financial’s CEO stated: “We understand the significant risk that climate change poses and we are proud to align ourselves with the Task Force – and its mission to change the way the business community approaches climate-related financial disclosure.” Given this positioning, issued in October 2018 (after the 2018 proxy season was over), it is hard to imagine Voya will vote against a preponderance of climate-related shareholder proposals during the 2019 season. This is especially true given that Voya also announced its membership in the Principles for Responsible Investment (PRI) in January of 2018.  How Can Institutional Investors Improve Their Voting? The bottom line is that climate change presents a wide variety of material investment risks and opportunities, and asset managers have a duty to consider these factors and vote their proxies accordingly.  They can improve their voting on climate-related proposals by ensuring that their proxy voting guidelines include language that encourages votes ‘For’ climate-related shareholder proposals that address important risks and opportunities for companies. A helpful, free database of proxy voting guidelines is offered by FundVotes.   Customers of firms with poor voting records may wish to contact their money manager to express concern and suggest a change in voting policies and practices. As the famous investor Jeremy Grantham suggests in his sobering and deeply insightful 2018 white paper on climate change, The Race of Our Lives Revisited, “lobby your investment firms to be a bit greener and encourage them to lean on their portfolio companies to do the same. Push them hard.”   After all, while companies have a decent chance of surviving under the protection of bankruptcy laws (despite what may happen to their shareholders) there is no option for humanity, or the global economy, to file for bankruptcy protection from climate change.   Rob Berridge is Director of Shareholder Engagement at Ceres.   

The business case for adopting a sustainable business strategy never has been clearer. The National Climate Assessment and the United Nations Intergovernmental Panel on Climate Change warn of a coming economic decline unless we aggressively reduce greenhouse gas emissions within the next dozen years. Congress is considering legislation to price carbon. Consumers are increasingly interested in how companies behave on environmental, social and governance (ESG) issues. And ESG investment has doubled over the last three years and now represents $1 of every $4 invested in the United States. Indeed, Larry Fink, CEO of BlackRock, the largest asset manager in the world, told portfolio companies to realize that “profits and purpose are inextricably linked.” In turn, companies are responding to these market signals. Ceres research found that among 600 of the largest publicly traded companies in the U.S., nearly two-thirds have commitments to reduce greenhouse gas emissions, half are actively managing water resources and nearly half are actively protecting the human rights of their employees. At this unique moment, where corporate action and shareholder interest are becoming so well aligned, it should follow that companies are consistently highlighting for investors how they mitigate environmental and social risks and position themselves for success. The unfortunate reality, however, is that while nearly half of the largest U.S. companies are communicating with investors on sustainability issues, the vast majority are doing so in ways that continue to reinforce the misconception that sustainability is a “nice to do” rather than material to financial well-being. They fail to communicate sustainability as an integral part of their decision-making, as something that drives resilience, operational efficiency and innovation — and that ultimately, strengthens the bottom line. Why aren’t CEOs and CFOs jumping at the chance to talk about sustainability? For many companies, engagement with investors on ESG issues can be met with trepidation and resistance. Corporate disclosures and presentations too often presume that investors have only short-term priorities. This focus on the short-term, coupled with a lack of understanding of broader investor expectations for corporate sustainability, has led to companies reacting to requests rather than proactively sharing and highlighting ESG related information. At Ceres, we often hear from companies whose investors simply aren’t asking questions about ESG. But our latest report, "Change the Conversation," argues that companies simply can’t afford to wait for those questions to come. When companies don’t engage effectively with investors on their sustainability efforts, they miss opportunities to differentiate themselves from peers. Rather than gaining a competitive advantage, they leave the financial value of sustainability out of critical conversations. Based on insights gathered from Ceres Investor Network partners, "Change the Conversation" offers companies investor-informed recommendations for how they more effectively can provide the investment community with the information it values, and in ways investors will be likely to use it. By taking control of the narrative, companies doing the hard work of developing sustainable business strategies can demonstrate to investors how they benefit in supply-chain resilience, stranded-asset avoidance, cost savings and efficiency, improved product performance and increased employee retention. For example, in one of its most recent investor-directed disclosures, JetBlue specifically identified the immense risk that climate change poses for its business. With its operations in the Caribbean, the rise of extreme weather events such as the recent hurricanes in the region present real challenges and real business risk. While acknowledging and explaining this risk to its investors, JetBlue also talks about how it is proactively managing and preparing for more frequent and stronger hurricanes and how that sets them apart from their competitors. JetBlue describes its approach to climate change as a competitive advantage. This is an important shift — one that resonates with investors, and one we need to see more of. Risk and good governance From the company perspective, sustainable business leadership is too often defined by topping the Dow Jones Sustainability Index or by being the first company in an industry to announce an ambitious commitment to reduce greenhouse gas emissions or release a new sustainable product innovation. For investors, though, sustainable business leadership is often much simpler: Investors care about risk and good governance. What our interviews with investors in our network affirmed is that while data on ESG issues can provide a good sense of a company’s current and past performance related to material risks, context matters. Investors want to know the details of how sustainability is integrated into governance systems — at the board and management levels — in order to gain critical insight into whether the company is likely to sustain that performance into the future. For investors, though, sustainable business leadership is often much simpler: Investors care about risk and good governance. Also critical to investors is understanding how a greater focus on sustainability drives improved financial performance. Where possible, investors want to see companies quantify how investments in sustainability translate into cost savings, market expansion and revenue growth. The messenger matters, too. Investor relations teams, the C-suite, members of the board — those company representatives who speak with investors regularly need to initiate conversation on the business case for sustainability. Many investors we interviewed shared their frustrations with being channeled to the sustainability experts immediately. They explained that while sustainability officers should be part of the conversation, investors also need to hear from executives that have a common understanding of ESG and financial performance. One company we have seen deploy its C-suite as the messenger is Nike Inc. In 2017, the company announced to its shareholders that 50 percent of its growth over the next five years would be from innovation. In a 2018 video to investors, Nike’s CFO, Andy Campion, shared that sustainable innovation would be an integral part of that strategy. He reported that the company’s sustainably innovated FlyKnit technology had generated more than $1 billion since launch and is quickly approaching $2 billion in revenue growth for the company. These are the kinds of numbers that stick with investors. Communication is a two-way street, and while companies have a significant role to play by demonstrating to investors how sustainability strengthens their bottom line in both the short- and long-term, investors, too, must do their part. As companies move to implement the recommendations laid out in "Change the Conversation," they will be looking for investors to demonstrate how increased ESG integration and disclosure are rewarded in investment decision-making. Investors need to show they also understand that ESG issues are material financial matters through the questions they ask and the expectations they set for companies across their portfolios. As our world has changed, so, too, have investor expectations. Now it’s time for companies to change the way they engage with their investors. It’s time to change the conversation. This blog first appeared on Greenbiz here. 

As investors increasingly come to grips with the challenging realities, risks and opportunities of a changing climate, resource depletion and human rights, we need to change the ways companies talk with them about these issues. While it’s true that environmental, social and governance (ESG) concerns are finally being woven into the strategies of many leading companies across the globe, the ways they engage investors on these concerns too often miss the mark. Academic and investment research continues to demonstrate that serious, strategic attention to ESG issues delivers higher stock returns, incurs lower capital costs and lowers volatility risks. But too many companies fail to present sustainability as a core component of business strategy, decision making and revenue growth . Many continue to portray sustainability issues as extra-financial (i.e., merely “the right thing to do” or “good public relations”) when evidence is growing that they are in fact material to strong financial performance. These failures to communicate have real costs. When companies don’t engage effectively with investors on their sustainability efforts they miss opportunities to differentiate themselves from peers. Rather than gaining a competitive advantage, they leave the financial value of sustainability out of critical conversations. A new Ceres report, Change the Conversation, will help companies understand what investors want to know and capitalize on the opportunities to credibly present sustainability as a driver of business value . The report provides specific, investor-informed recommendations on how companies can better communicate the breadth, scope and financial value of sustainable business strategies. It also calls for deeper involvement of C-suite executives and board members as messengers of sustainable business priorities. The report’s findings are based on decades of Ceres’ work with investors and companies, and in-depth interviews with Ceres Investor Network members. These interviews include some of the world’s largest asset owners and asset managers, as well as ESG-oriented asset managers, governance experts and proxy advisors. While laying out the case for better engagement with investors on these issues, Change the Conversation makes clear that sustainability is in fact a material economic risk and opportunity and not a passing fad. The report highlights the following trends: In just the past few years, ESG-oriented investments have nearly doubled to $12 trillion in the U.S. alone, and $23 trillion globally, and more growth is expected. Some companies are already responding to rising investor interest. Recent Ceres research shows that nearly 400 of the largest publicly traded companies in the U.S. have commitments to reduce greenhouse gas emissions, more than 300 actively manage water resources and nearly 300 actively protect employees’ human rights. Studies by Harvard Business School, Morgan Stanley and Bank of America, among many others, affirm that robust sustainable business strategies provide competitive advantages in stock prices, capital costs and operational performance. ESG investing is going mainstream because, quite simply, it’s just good business. As Evan Hornbuckle, a global industry analyst at Wellington Management, shared with Ceres, “The companies that we think should win over time are the ones that understand that profitability and sustainability aren’t mutually exclusive.” In January, this viewpoint was echoed by Larry Fink, CEO of BlackRock, in his letter to corporate CEOs: “Profits are in no way inconsistent with purpose—in fact, profits and purpose are inextricably linked.” So, how should companies talk to investors about their sustainability risks and opportunities? Change the Conversation  organizes its recommendations under three guiding strategies. In broad strokes (see the full report for the detailed analysis), companies need to: Formalize sustainable business integration; Identify what to disclose and where to disclose it; Implement a proactive investor engagement strategy. The three strategies underscore a critical theme that emerged from our investor interviews: credible and meaningful communication of ESG information with investors requires that companies not only talk the talk, but are prepared to demonstrate how they walk the walk. Adopting these strategies may take a bit of culture change in some companies. As the report says, “For many companies, engagement with investors on ESG issues can be met with apprehension, skepticism and confusion [leading] to reactive, less effective interactions with interested investors.” In still too many instances, companies communicate their efforts only in CSR reports that many investors are unlikely to read, and fail to quantify the business value of their sustainability initiatives at all. (Change the Conversation cites an Accenture CEO Survey showing that more than 40 percent of CEOs could not accurately quantify the business value of their sustainability initiatives.) Companies also need to recognize that changing the conversation starts at the top. Board members, C-suite executives, and corporate secretaries all need to be competent and credible messengers on the business value of sustainability. As one of the investors Ceres interviewed put it, “If the CEO says it’s important, it carries more weight. Wall Street cares about what the person in charge has to say, otherwise how important can this be if the CEO isn’t willing to take the time to speak about it?” Ceres envisions a future where ESG and sustainability issues aren’t in a separate work stream, but are an integral component of business planning and execution that investors routinely assess and reward. By elevating sustainability as a key driver of business value, companies must and can change the conversation with investors. This blog first appeared on Mindy Lubber's Forbes blog. 

Ceres’ landmark publication, The 21st Century Corporation: The Ceres Roadmap for Sustainability, defines 20 expectations for sustainability leadership that companies should meet by 2020 to position themselves for success in a world of unprecedented social and environmental challenges. We are now less than one year away from that deadline, and we still have a long way to travel.    Ceres has assessed corporate performance on the Ceres Roadmap expectations three times since its publication in 2010, most recently in early 2018 with the release of Turning Point: Corporate Progress on the Ceres Roadmap for Sustainability. Turning Point found more companies than ever understand the business imperative of addressing sustainability risks and are taking meaningful action in many ways, including sustainable product innovations, improved supply chain transparency, a heightened focus on diversity and more ambitious commitments to address environmental and social impacts.    But incremental progress is no longer sufficient. Scientists, investors, consumers and civil society are calling on companies to lead the way toward a sustainable future, not only by making ambitious commitments but by taking bold and innovative actions equal to the pressing social and environmental challenges facing us.    What will it take to move from the turning point to the tipping point? Here are five key actions we will be looking for companies to take in the year ahead: Set business strategies to limit average global warming to no more than 1.5 degrees C. Ceres research found that nearly two-thirds of the largest U.S. companies have established goals to reduce greenhouse gas (GHG) emissions, but fewer than 10 percent of those goals meet the scale of reduction needed to avoid the worst impacts of climate change. Two sobering new climate reports, the National Climate Assessment and the Special Report from the Intergovernmental Panel on Climate Change (IPCC) make clear the economic, humanitarian and environmental crises the U.S. and the world will face if average global temperatures rise more than 1.5 degrees Celsius above pre-industrial levels. Given the estimated 12-year window we have to avoid severe climate impacts, it is in every company’s interest to align their business strategies with the latest climate science, looking to the immense opportunities that efficiency, renewable energy, eliminating deforestation, embracing the circular economy and other strategies hold for carbon reduction in operations and across global supply chains.    Strategically assess and tackle water risk. For the fifth year in a row, The World Economic Forum’s Global Risks Report 2019 names water crises among the top five highest-impact risks we face as a society. For global companies and the communities where they source, manufacture and sell products, safe and abundant long-term water supplies are no longer a given. In light of this trend companies should perform water risk assessments to understand their water impacts and exposure, and should prioritize action in those areas where they are facing---or contributing to---high water stress. Ceres’ Feeding Ourselves Thirsty report outlines the business case for water stewardship in the food industry and benchmarks the progress of over 40 of the sector’s largest companies.    Protect human rights across the value chain. In an era of increasing transparency and global attention on human rights challenges---from sexual harassment to fair wages to forced labor---companies can face significant reputational and legal risk when human rights are violated anywhere in the value chain. As we look ahead, emerging technologies will present new human rights benefits and costs for companies, whether from blockchain promising new levels of supply chain transparency, or artificial intelligence (AI) and automation offering improved productivity and quality while threatening to displace thousands or even millions of workers worldwide. Companies that utilize the UNGP Reporting Framework are ready to proactively identify both the current and emerging human rights issues that are most salient to their businesses, and to establish management systems that respect the rights of everyone touched by the business regardless of how the landscape evolves.    Put sustainability on the board agenda in order to future-proof business models. Investor expectations around management of sustainability risks continue to grow as issues like climate change, water scarcity, human rights abuses and deforestation become increasingly material for sectors across the economy. Despite this new reality, Ceres research found that fewer than a third of the largest U.S. companies had formally integrated sustainability into the oversight responsibilities of their boards of directors. In the year ahead, corporate boards will be expected to future-proof company business models and strategies by integrating oversight of material sustainability issues within their responsibility as stewards of long-term value creation. Directors can learn more in Ceres’ Lead from the Top: Building Sustainability Competence On Corporate Boards.    Make the business case for sustainability to investors. In the post-2020 economy investors will increasingly assess companies on their sustainability performance as an indicator of sound management. Earlier this month, Larry Fink, CEO of BlackRock, wrote in a letter to the CEOs of the largest companies in the world: “Profits are in no way inconsistent with purpose – in fact, profits and purpose are inextricably linked.” Companies seeking a competitive advantage will proactively educate their investors on how they are integrating sustainability into their businesses to support their long term growth, resilience and risk management. A new Ceres report coming in February, Change the Conversation: Redefining How Companies Engage Investors on Sustainability, highlights key trends in investors’ evolving expectations for corporate sustainability. The report presents nine recommendations to guide companies toward more meaningful and effective investor engagement on ESG issues, helping them to not only meet investor expectations, but also capture competitive advantage. We have no choice but to transition to a sustainable global economy in the decade to come. Urgent issues like climate change, water depletion and social inequity are putting all companies at risk, and it is time for all companies – not just a leading few –  to embrace both the responsibilities and opportunities of a sustainable post-2020 economy. 

Throughout the United States, momentum is building around clean transportation and the transition toward electric vehicles. From business leadership to policy action, Colorado has already taken important strides to capture the many benefits that cleaner and more efficient vehicles can bring to our state. Last month, I joined a group of Colorado business and institutional leaders, lawmakers, and government officials for an “Electric Vehicle Roadshow” around Fort Collins. Traveling in a newly converted electric bus, attendees made three different stops — Hewlett Packard Enterprise, Colorado State University, and New Belgium Brewing Co. — to see firsthand the economic and environmental benefits electric vehicles are already bringing, and can continue to bring, to the Centennial State.  At the first stop, Hewlett Packard Enterprise (HPE) proudly showcased our workplace electric vehicle (EV) charging stations. There are more than 80 plug-in EV drivers at our Fort Collins site, and each day we make full use of the four, dual-port EV charging stations.  For the past five years, I have enthusiastically educated and signed-up employees for our EV charging program and have worked hard to improve their charging experience. During that time, I have seen the demand for EV charging steadily increase among on-site employees. HPE has responded with expanded EV charging infrastructure on our site and across our global organization. As the roadshow made clear, HPE is not alone in our prioritization of EV deployment. As a longtime electric vehicle owner myself, I am thrilled to see that many Colorado businesses and institutions also recognize the value of transitioning to electric vehicles. Like HPE, many businesses and institutions are making moves to add EVs to their fleets and expand access to EV charging for their employees, customers, patients and students. Increased EV adoption will not only improve public health and reduce regional greenhouse gas emissions, it will also help drive economic development and generate significant savings for businesses and consumers alike.  Our workplace charging program makes it attractive for HPE employees to commute via electric vehicle with conveniently located EV charging stations they can easily use while at the office.  As an added benefit, having EV charging stations on-site further enables our employees to take advantage of the fuel and maintenance cost savings that come from switching away from gasoline- and diesel-power vehicles. The savings can be as much as $800 annually. Furthermore, investment in EV charging infrastructure helps attract and retain talent, especially as more people look for employers that share their values and showcase sustainability leadership by prioritizing employee benefits like EV charging. The benefits that come with expanding the number of electric vehicles on the road will extend beyond companies and individual EV owners. In fact, a recent analysis found that if around 7 percent of new vehicle sales in Colorado are EVs by 2025, the state would receive $7.6 billion in net benefits over the next 25 years — benefits that would be felt by all Coloradans in the form of lower electricity bills, reduced operating costs for drivers, and decreased greenhouse gas emissions.  Supporting the uptake of electric vehicles will also create opportunities for growth and innovation in our state, ensuring that Colorado remains a beacon for investment in clean transportation and builds upon the existing and already thriving EV manufacturing industry. Colorado businesses, institutions, regulators, and lawmakers should take steps to ensure the state remains a leader in the transition to cleaner, more efficient vehicles. Electrifying our transportation system is good for business, good for communities, and good for the economy. Douglas Hatch is a Linux engineering manager at Hewlett Packard Enterprise. This content was first published on Coloradan.com.

Let’s face it: water gets no respect next to diamonds. Water has a far more critical role in our economy, yet most of us would gladly take the sparkling diamond over a bottle of water. That is, until the water runs out. “The diamond-water paradox,” or “The Paradox of Value”, first pondered by the founder of modern economics, Adam Smith, in the 1700s (and featured much more recently on the US National Public Radio program Planet Money), is due to the widely held perception by investors that water is an abundant and endless resource with minimal value. But in a world of rising global water demand and climate-driven water stresses, that’s a risky bet. More than ever, water’s true value as a finite and precious resource is starting to be realised, and a growing number of investors are paying attention. There are plenty of examples of water risk. Campbell Soup Company took a hit in its quarterly earnings recently, due to an acquisition of a California fresh food company that was pummeled by the California drought. Smithfield Foods and other meat producers sustained widespread losses in North Carolina – and more public criticism and legal exposure – from devastating flooding caused by Hurricane Florence. European Development Fund and other European utilities temporarily shut down their nuclear plants last summer due to heat waves and resulting increases in water temperature that can no longer be used for cooling. The long-term signals are no better. At least one study shows the majority of the world’s groundwater resources are now potentially depleted beyond recovery. A 2017 MSCI analysis of food companies in the All Country World Index noted that $459 billion in revenue may be at risk from a lack of water available for irrigation or animal consumption. Another $198 billion is at risk from changing precipitation patterns affecting current crop production areas. Population growth and deepening climate impacts – as evidenced by the recent US Climate Change Assessment – further compound these water risks. Agricultural water use accounts for 70 percent of global human demand but water is a vital input for industries across the economy, including in apparel, beverages, electric power, mining, and technology. All face wide-ranging water risks – physical, regulatory and reputational – with material bottom-line impacts. In fact, more than 600 global companies surveyed in 2016 expected wide-ranging water risks to materialise in the next six years. Dozens of investors with significant assets under management are working together to advance methods for analysing investor water risks, including portfolio water footprinting, scenario analysis, and stress testing as part of Ceres’ Investor Water Hub. More than 40 asset owners and managers, including State Street Global Advisors, contributed to the development of the open-source Ceres Investor Water Toolkit, a first-ever comprehensive resource to evaluate and address water risks across multiple investment portfolios. Investors are also engaging directly with companies with medium to high water risk exposure, many of them in the food and agriculture sectors. In 2018, investors filed a shareholder resolution with Tyson Foods, one of the world’s largest meat producers, requesting that it adopt a water stewardship policy to reduce pollution from its suppliers. After the resolution was supported by 63 percent of independent shareholders, the company committed to improving water, soil and fertiliser practices on 2 million acres of its supplier land. This is just one example of the more than 100 water-related shareholder resolutions that have been filed over the last four years. As investors further integrate water’s multiple economic and political dimensions into their analyses, companies are receiving clearer expectations from their shareholders. Increasingly, these expectations extend beyond disclosure of water data. Investors are pushing high-impact industries to protect and preserve fragile water ecosystems, achieve zero liquid discharge from factories, and support governments and local stakeholders in restoring degraded watersheds. These higher expectations are timely and closely align with United Nations Sustainable Development Goal 6, which seeks to ensure available and sustainable management of water for all people by 2030. Some fund managers are setting ambitious quantitative targets in this regard: witness ACTIAM, which has set out to achieve “water neutrality” for its $64 billion portfolio by 2030. ACTIAM defines water neutrality as investing in companies that “consume no more water than nature can replenish, and cause no more pollution than is acceptable for the health of humans and natural ecosystems”. Water represents tremendous risks – and opportunities – for major companies and investors. Yet, most are still not paying enough attention to this increasingly material issue. Adam Smith’s Paradox of Value still holds water on Wall Street, for now, but the rationale for it is leaking more and more with each passing day. This content was originally posted on Top1000Funds.com.

This week’s changing of the guard in California offers a chance to reflect on the many accomplishments over the past eight years but also prepare for the critical road ahead.  As California Gov. Gavin Newsom begins his term in office, we are particularly encouraged by apparent shared priorities around critical sustainability  issues such clean water and continuing the state’s climate leadership.   In his inauguration speech, Newsom praised California for leading on climate: “Where Washington failed on the epochal challenge of climate change, California led, extending our cap-and-trade system and setting bold targets for lowering greenhouse gas emissions, then beating them.”   Emissions from California as of 2016 met the state goal of decreasing them to 1990 levels.  The state’s  cap-and-trade system was strengthened and continues, as was its low-carbon fuel standard. California laid a foundation to build on this progress by passing legislation to aim to derive 100 percent of its electricity from clean energy by 2045.   And yet the global predicament of climate change is more alarming and urgent than ever.  As reported this week, US emissions rose in 2018, reversing recent downward trends.  The 91 scientists answering to the United Nations Intergovernmental Panel on Climate Change issued a report predicting catastrophic levels of flooding, heat waves and, drought await us in just a couple decades if society globally doesn’t control global warming to keep it to way below a 2-degree Celsius rise, ideally no more than a 1.5 degree Celsius rise.   Thirteen federal government agencies came out with the National Climate Assessment describing a severe hit to economic growth, life expectancy, and health if greenhouse gas  emissions are not brought down.   Luckily, 3,628 entities across the United States have said they are committed to working to keep emissions from rising and to fulfilling the terms of the Paris Agreement whether or not the federal government is a participant. The We Are Still In coalition includes 2,160 companies and investors, 280 cities and counties, 40 faith groups, 347 colleges and universities, tribes, health care organizations and 10 states including California. Ceres is thrilled to be co-leading mobilization efforts for this coalition to build a low-carbon economy and steer the US to meet the goals of the Paris Agreement.   California can’t rest on its laurels. As Newsom said, “the eyes of the world are upon us.”  The world needs to know that the determined work of taming emissions is well underway.  The world needs to know that applying market-based forces to create a sustainable low-carbon economy is succeeding  – albeit slowly – and that much more needs to be done. California can show the way with smart implementation of its 100 percent clean energy goal, and more.   Newsom’s impassioned speech also addressed problems in all corners of California. He called out rural communities saying, “I see you, I care about you and I will represent you with pride.”   He said safe and clean drinking water is one of the human needs falling short for some Californians, many in rural communities. Later in his first week, Newsom issued a budget proposal that helps to address the issue.    Here in California, as many as one million people are exposed to unsafe drinking water from their taps. The state Water Resources Control Board said residents served by 300 small water utilities and some private water wells face contamination from arsenic, nitrates and other toxins, mostly because these small utilities are lacking sufficient funds to fully operate water treatment equipment. Their water in turn has failed to meet federal safe drinking water standards, exposing up to 1 million people to unsafe drinking water.   We are glad to see that Newsom’s budget includes establishing a Safe and Affordable Drinking Water Fund, “consistent with the policy framework” of a proposal the California legislature weighed for nearly two years but never voted on. It would provide a way to ensure all state residents have safe water coming from their taps. We are hopeful. The fifth largest economy and tech center of the world can surely solve this problem.  From providing access to clean drinking water to lowering greenhouse gas  emissions from transportation and buildings, to safeguarding climate laws from federal rollback, California lawmakers have their work cut out – and we do too.   We are ready. We know that the policies California enacts reverberate throughout the nation and often around the world. The state’s  cap-and-trade system is a model to the world with a number of jurisdictions trying to emulate it. And  California’s clean cars program has been adopted by 13 other states – or more than a third of the US car market.   It will not be easy, but strong leadership can  lead us to a better  economy and a brighter California for all. Gov. Newsom, if you’re ready for this task, we are all in, too.  

One of Jay Clayton’s primary objectives as Chairman of the U.S. Securities and Exchange Commission (SEC) is to ensure that every day retail investors—“Mr. and Mrs. 401K”—as he often refers to them, are able to invest in young, innovative companies through the public markets. He, along with his appointed Director of Corporation Finance, Bill Hinman, laments the sharp decline in initial public offerings (IPOs) over the last several decades, and point to that trend as evidence of a lack of opportunities for everyday investors to benefit from investments in growth-stage companies. As a result, Mr. Hinman and Chair Clayton have been examining how the SEC can help to encourage IPOs while still maintaining the proper oversight necessary to protect investors—both elements of the SEC’s multiple responsibilities. Last month I joined several other investors that make up the Ceres Investor Network on Climate Risk and Sustainability for an SEC roundtable on the proxy process to discuss shareholder engagement through the shareholder proposal process. This is the process by which investors can propose and vote on non-binding resolutions for companies to consider. During the discussion, opponents of shareholder resolutions, including the U.S. Chamber of Commerce, tried to use Chair Clayton’s desire to promote IPOs as an excuse for undermining the existing shareholder resolution process. However, as I and others on the panel explained, it would be a mistake to justify the restriction or elimination of non-binding shareholder resolutions on such grounds. Efforts that focus on restricting shareholder rights in the name of expanded public markets are a distraction from the much larger forces at work in the economy that continue to discourage IPOs. Start-ups today have much easier access to private funding, which has reduced their reliance on IPOs to raise capital. Since 1992, private capital investment in startups four or more years past their first financing round has increased by a factor of 20. Venture capital funds have provided 40 percent of the increased capital, with private funds, hedge funds, mutual funds, and other private investors providing the rest. From 2006 to 2015, annual venture capital investment more than doubled in size to $77.3 billion, and the number of companies with VC-backing increased by 47 percent in the same period. This shift was facilitated in part through regulatory changes such as the National Securities Markets Improvement Act of 1996 and the Jumpstart Our Business Startups Act of 2012. In addition, more growth-stage companies are choosing to be acquired instead of pursuing an IPO. According to a recent report by Ernst & Young, more than 4,800 private companies were acquired in 2016, compared with about 1,950 during the IPO peak in 1996. Acquisitions are also not limited to small companies—in 2016 there were 387 acquisitions of firms with a valuation of more than $100 million. In the first half of this year alone large mergers totaled $2.5 trillion according to Thomson Reuters—that’s trillion with a ‘t.’ On the other hand, there is no evidence to think shareholder proposals have any impact on companies’ decisions to launch an IPO. On average, between 2004 and 2017, just 13 percent of Russell 3000 companies received a shareholder proposal in a particular year. In 2016, there were fewer than 1,000 total shareholder proposals filed at all reporting companies. Fewer than 9 percent of Russell 3000 companies that have had an IPO since 2004 have received a shareholder proposal. Opponents of shareholder proposals argue they are abused by so-called activist investors, and that this concern is what is holding back the number of IPOs. But there is little evidence of “abuse” by investors. Since 2010, shareholders re-submitted proposals on environmental and social issues only 35 times after receiving under 20 percent of votes for two or more consecutive years. This affected only 26 companies. From 2004 to 2017, the Chevedden, Steiner, and McRitchie families, some of the most prominent activist investors, submitted 14.5 percent of 11,706 proposals. On average, 40 percent of shareholders voted in support of these shareholders’ proposals when they went to a vote, hardly indicative of frivolous or fringe proposals. In fact, shareholder proposals can often strengthen companies. Corporate managers benefit from investor input on environmental, social, and governance (ESG) issues. Major investors like BlackRock and State Street recognize the importance of ESGs, and today more than 25 percent of assets under management in U.S. markets are managed with some form of ESG strategy according the U.S. Social Investment Forum. In some cases shareholders identified systemic risks facing companies long before senior management or boards did. Shareholder proposals provide a mechanism through which the ultimate providers of capital can meaningfully and democratically promote material input to management and boards. There is no one single reason why the number of IPOs has decreased from the height of the dot-com boom, but the decline simply cannot be attributed to shareholder proposals. If the SEC is determined to increase the number of growth-stage IPOs, there are any number of ways it can advance those goals. Changes to investor rights and shareholder proposals should not be one of them. Jonas Kron is Senior Vice President and Director of Shareholder Advocacy at Trillium Asset Management, LLC. Trillium Asset Management is a member of the Ceres Investor Network. This post is based on a Trillium memorandum by Mr. Kron. This content was originally posted on the Harvard Law School Forum on Corporate Governance and Financial Regulation.  

Building on more favorable clean energy economics and the resulting increases in corporate clean energy uptake, three main factors suggest 2019 could be a game changer, writes Ceres' Winston Vaughan. This post originally appeared on Utility Dive. 2018 was a difficult year to find good news when it comes to climate change. The dire predictions announced by climate scientists in report after report played out in real time as we witnessed unprecedented wildfires and storms devastating communities. As scientists issued a clarion warning that avoiding catastrophic climate impacts requires slashing carbon pollution within the next decade, President Trump remained determined to move in the opposite direction. His ongoing efforts include rolling back policies that would reduce carbon emissions, imposing tariffs on solar panels, and threatening to cut subsidies for clean energy. Globally, in a reversal of recent slowing trends, carbon emissions hit an all-time high. Yet behind the scenes, a seismic shift is quietly taking place, a shift that might hold the key to our future. Clean energy is not only weathering these storms, it is thriving. While the Trump Administration prepares to exit the Paris Climate Agreement, across the country, the "We Are Still In" coalition — more than 3,600 cities, states, companies, colleges and universities, faith communities and other institutions across the U.S., collectively representing 154 million people and $9.46 trillion in GDP — have publicly committed to the Paris Agreement, and they’re backing up that commitment with action. Last year, U.S. companies signed contracts for more than 6,400 megawatts of renewable energy, an all-time record and more than double the amount companies purchased the year before. Once dominated by silicon valley tech companies (including Facebook, whose 22 deals in 2018 accounted for more clean power than all corporate buyers combined in 2016), last year's list of corporate renewable energy buyers represented a growing diversity of industries and geographies. New buyers in 2018 included: Lowe's, the North Carolina-based home improvement superstore chain Kohler, the Wisconsin-based plumbing fixture manufacturer Brown Forman, the nearly 150-year-old Kentucky-based maker of Jack Daniels Whiskey J. M. Smucker, the Ohio-based jam company Even Exxon, the multinational oil and gas giant, signed a major deal for wind and solar energy to power its facilities in Texas. While the climate benefits of using low-cost wind energy to power oil and gas extraction pale in comparison to the negative climate impacts of ongoing extraction, processing and burning of those fossil fuels, such a move by an oil giant shows just how strong the business case for clean energy has become. In other sectors, entire industries are moving. In telecom, where electricity consumption accounts for a large share of the industry's carbon emissions, renewable energy is quickly becoming the norm. T-Mobile led the way with its commitment to 100% renewable energy (and a highly publicized call-out of its competitors). The much larger AT&T followed suit by signing several deals worth approximately 1,000 megawatts of power in 2018 — enough to make it the second largest corporate renewable energy buyer this year, across all sectors. And Verizon, the largest of the three telecoms, recently committed to 50% renewables by 2025, well shy of T-Mobile's 100% commitment but exceeding AT&T’s 20%. Elsewhere in telecom, Comcast has announced that it is working towards 100% renewable energy, even as it has yet to commit to a timeline for achieving that goal. In short order, much of America's vast communications infrastructure will be running on renewable energy. It's not just the need for climate leadership to fill the void left by the federal government that is powering this clean energy boom. More than anything, clean energy just makes good economic sense. According to financial advisory and asset management company Lazard's "Levelized Cost of Energy and Levelized Cost of Storage 2018" analysis, utility-scale wind has dropped in cost by 69% over the last 9 years, and utility-scale solar has dropped by 88% in that same time period. As a result, the cost of electricity from both wind and solar is now "at or below the marginal cost of conventional generation." Put more simply, clean energy is now cheaper than the dirty stuff. It’s important to note that these trends, while positive and encouraging, do not make up for the federal government’s backpedaling on climate. The scale of the challenges ahead requires a global response, and that must eventually include the U.S. Government. But as these trends continue, cheap renewable energy gives us a powerful and enduring tool for driving substantial reductions in carbon emissions. Building on the foundation of these ever-more-favorable clean energy economics and the resulting increases in corporate clean energy uptake, I see three main factors coming together that suggest this new year has the potential to be a game changer. The first is that climate science, and the reality on the ground, have become clear enough to spur widespread recognition of the urgent need to reduce emissions. Last year’s storms, droughts and fires in the U.S. alone made it clear that climate change is already imposing very real costs on communities, businesses and our financial system. The call for action is starting to grow louder and more urgent. The second is that the trends toward lower clean energy prices are irreversible. Tariffs and tax policy can have an impact but they can’t change the fact that the wind and sun that power renewable energy, unlike coal or gas, have no variable fuel costs. As renewable energy technologies continue to improve and the industry continues to scale up, renewables will inevitably win out in every marketplace. The only question is whether that will happen fast enough, together with other elements of the transition to a low-carbon economy, to avoid the worst impacts of climate change. Lastly, but perhaps most importantly in the short run, 2019 is the final year before tax credits for wind and solar begin to ramp down. While the ongoing decline in costs is expected to ensure that renewables will remain competitive even after those tax incentives go away, the impending phase-out of the tax credits is likely to create a sense of urgency to get more big clean energy deals done. In 2019, the question many companies will be asking is "how much will it cost us if we can't get our renewable energy deal done this year?" So despite the dire climate science and challenging climate politics, private sector leadership and the resilience of the clean energy industry provide good reasons to be encouraged as we look forward to the new year ahead. Together, they have given us the tools we need to make 2019 a turning point in the transition from the fossil age to the clean energy age. This post originally appeared on Utility Dive.

As the dust settles in Poland after the COP24 international climate negotiations, the true scope and scale of our challenge has come into plain view. The window of opportunity to avoid the worst human and economic impacts of climate change is closing rapidly. As recent reports from the Intergovernmental Panel on Climate Change and the U.S. National Climate Assessment make clear, we are in an all-hands-on-deck situation that requires an unprecedented transformation of our global economy. With their ability to redirect the flow of capital and their influence as both shareholders and policy advocates, investors are absolutely critical to catalyzing the necessary changes. What’s more, given the myriad risks associated with owning high-carbon assets and the boundless opportunities embedded in the transition to a low-carbon economy, they have a clear fiduciary duty to do so. As the National Climate Assessment highlights, climate change stands to take a 10 percent bite out of the U.S. economy, as well as devastate thousands of lives, if we fail to act. That’s why I called for 2018 to be The Year of Investor Leadership on Climate at the beginning of the year. And while we still have a long way to go, we are seeing significant progress. Read the rest of Mindy's Executive Perspective on Reuters Sustainability