Corporate hypocrisy on climate change
The increase in public awareness of climate change is beginning to show its effects on the U.S. economy, as many now see sustainability as a key factor when making purchasing and investment decisions. In 2015, brands that demonstrated a commitment to sustainability grew by an average of 4%, while those that did not grew by less than 1%.
Concern for climate change and the growing demand for products and services with limited environmental impacts is not lost on the corporate world. Competition is fierce among businesses to portray themselves as committed to sustainability. Many of the largest companies in the U.S. have voiced support for climate action and pledged to reduce their own emissions. Despite this, there are a large number of companies who publicly decree their commitment to climate issues, but whose actions behind closed doors often contradict these stated principles
Political campaign donations
As of now, 154 of the largest companies in the United States have signed the Obama administration’s American Business Act on Climate Pledge. By doing so, they have committed to significant, company-specific plans to reduce their emissions, increase low-carbon investments, and deploy more clean energy.
While this is certainly a step in the right direction, a closer look at some of these companies’ campaign donations has led some to question whether their commitment to combating climate change is real, or if it is simply a way to satisfy consumers’ demand for climate action.
A recent report from Reuters revealed major discrepancies between the way some major companies portray themselves to the public and the way they manage their political donations. The report found that 25 of the 30 largest publicly-traded companies that signed the American Business Act on Climate Pledge made major donations to political action committees (PACs) that currently fund the campaigns of lawmakers on a list of “climate deniers”. The list was compiled by the nonprofit Organizing for Action.
The companies who made large donations to these PACs include PepsiCo, AT&T, Google, and General Electric, all of which publicly expressed their concerns about climate change and their commitments to reducing emissions. Support for members of Congress who explicitly deny anthropogenic climate change is highly inconsistent with the public persona of these companies. The hypocrisy of this behavior should be met with resistance by investors and consumers who are concerned with climate change and other environmental issues.
Shareholder resolution votes
The 2015 Paris Agreement, in which 196 countries pledged to reduce CO2 emissions enough to keep warming to below 2C, poses a clear risk to the profits of fossil fuel companies. Shareholders of these companies have a right to know, on both a moral and financial basis, the degree of climate risk associated with their investments and how this risk will be handled by the companies they invest in.
Vanguard and BlackRock, two of the largest asset managers in the world, and who together own more than 11% of oil and gas company ExxonMobil, signed on to the UN-backed Principles for Responsible Investment (UNPRI). The UNPRI seeks to promote transparency on issues related to environment, social justice, and governance within the entities its members invest in. Additionally, BlackRock recently published a report in which it stated the importance of “climate-proofing portfolios as a key consideration for all asset owners”.
This year at ExxonMobil’s annual general meeting (AGM), a shareholder resolution to assess the company’s investment plans should governments begin to implement drastic emissions-reducing policies received 38% of the vote in favor, a significant percentage for an environmental resolution. In another display of corporate hypocrisy, institutional investors with public commitments on climate issues, including Vanguard and BlackRock, went against their stated principles by voting down the resolution, despite their membership in UNPRI and public statements proclaiming the importance of action on climate issues. Other investors against the resolution were JPMorgan Chase, Capital Group, and Franklin Templeton.
These examples of inconsistency on climate action make it clear yet again that consumers and investors concerned about environmental and social issues should not rely entirely on the public statements of businesses. Political campaign donations and how a company advises its shareholders to vote on shareholder resolutions can tell us a lot about a company’s priorities. Unfortunately, this information can be difficult to find. Sometimes companies voluntarily disclose their contributions, and PACs are required by law to disclose their contributions and donors, although they often use loopholes that obscure donors’ identities. While most companies release AGM reports, it takes a lot of effort for individuals to sift through pages of shareholder voting outcomes.
At the moment, there aren’t great mechanisms for easily judging whether or not a company truly makes climate change a priority, or if they are simply paying lip service to the general public. In the meantime, people can use programs such as Green America’s National Green Pages to make sure they are purchasing from companies who are certified in their commitment to environmental and social issues. Individual investors can also learn how to divest from fossil fuels and urge financial institutions that may hold their pension or retirement funds to do the same.