At the Paris climate meeting known as COP21 back in 2015, 196 countries set a goal to limit atmospheric warming to below 2.0 Celsius (3.6 Fahrenheit), with a preference to not exceed 1.5 Celsius. To achieve this, the signing countries pledged to rapidly reduce greenhouse gas (GHG) emissions to achieve net-zero by 2050. Sadly, just six years later, it appears we are likely to see global temperatures exceed the 1.5 Celsius lower limit. The WMO noted that in 2020 we had already hit a 1.2 Celsius (2.16 Fahrenheit) rise.
Breaching the 1.5 Celsius rise before the decade ends was unforeseen by many in the political community, but not by scientists. The WMO’s 40% probability assessment may help make governments do more in terms of policies to accelerate mitigation and adaptation projects and programs. Let’s hope so, particularly from the largest GHG emitters – China, and the United States. And let’s hope the companies that have most profited from emitting GHGs into the atmosphere are finally brought to heel by global citizenry. The air we breathe knows no boundaries. Nor do the oceans we depend on that as primary carbon sinks continue to slowly acidify and deoxygenated.
Citizens initiatives, courts and shareholders are beginning to push back against current fossil fuel company behaviours. In the past week, a Dutch court (The Netherlands is the home of Royal Dutch Shell) ruled on behalf of 17,000 Dutch citizens, that one of the world’s largest energy companies had to meet a deadline to cut its carbon dioxide (CO2) emissions in 2030 by 45% from 2019 levels.
The court’s ruling applied not only to the company but also to its suppliers. In other words, the engineering contractors doing the exploration and extraction of oil and natural gas, the tankers involved in distribution, and the refiners and pipeline operators. The company plans to appeal arguing that it has accelerated its efforts to achieve net-zero emissions by 2050 in compliance with the Paris Agreement.
Two other energy giants, ExxonMobil and Chevron in the past week both found themselves under attack by shareholders who didn’t like the two companies’ carbon emission strategies. In the case of Exxon, the shareholders replaced two members of the board with “green” candidates. And with Chevron, the shareholders voted by 61% for more vigorous action to cut GHG emissions. These two actions were preceded this month by similar shareholder assaults at ConocoPhillips, and Phillips 66.
BlackRock, an institutional investor that owns a 6.7% stake in Exxon, joined Engine No. 1 (EN1), a hedge fund activist group, in supporting the campaign to replace two board members with greener choices. BlackRock’s Chairman and CEO, Larry Fink, had recently announced its conversion to a greener future asking companies in which it held shares to apply climate risk metrics in their business plans, to provide details and milestones to keep global atmospheric warming below 2 Celsius by century end. EN1, launched in December of 2020, has been purpose-built to apply sustainability principles to the companies in which it invests. Exxon has been a target of its efforts from the get-go.
The action of the court in The Netherlands and the shareholder revolts underway in the oil patch represent a small victory for our planet and those of us dependent on it. It cannot come soon enough considering the forecasts of the WMO.
]]>A former chief investment officer for BlackRock believes the market is not set up to go it alone in halting global warming. He is Tariq Fancy, who from 2018 to 2019 was responsible for assessing sustainable investments for the $7 trillion US assets managed by his company. In fact, he concludes that the purpose of the funds managed by BlackRock is antithetical to the notion of pursuing sustainable, environmentally responsible investment. BlackRock makes profits for its investors. It is not out to correct the evils of environmental negligence as practiced by businesses in which it holds assets.
In a recent letter published by Larry Fink, Chairman, and CEO of BlackRock, he describes the investment fund’s commitment to net-zero greenhouse gas emissions by 2050 or sooner, describing the steps being taken this year and beyond to meet that goal including tracking the companies whose assets they hold and their trajectories to achieve net-zero and helping clients of BlackRock by providing them with better tools to scrutinize portfolios and expose where there is future climate risk. Companies under-investment are being asked to disclose their business plans aligned with the goal of keeping atmospheric warming below 2 Celsius by century end.
In an article written by Dominic Rushe and published in the Guardian last March, he quotes Tariq Fancy who has an interesting perspective on the challenges that BlackRock’s commitment raises. Fancy states:
“In many cases, it’s cheaper and easier to market yourself as green rather than do the long tail work of actually improving your sustainability profile. That’s expensive and if there is no penalty from the government, in the form of a carbon tax or anything else, then this market failure is going to persist.”
Fancy believes that money in sustainable investments may have no impact on climate change and that polluters may very well be let off the hook through “greenwashing.”
Today the efforts of a large number of businesses including BlackRock to embrace environmental sustainability can be equated with greenwashing, as in trying to pull the wool over the eyes of the public or causing misdirection through false messaging.
Fancy continues, “I don’t think the public realizes we are not talking about stopping climate change…We are literally talking about selling assets so we don’t get caught up in the damage when it hits.” Fancy notes that this orientation is a natural dilemma of investment companies “not because they are evil, it’s because the system is built to extract profits.” The buying and selling of assets don’t address the type of timeline associated with the problem of climate change. While the former activity is short-term, the latter requires decades of focus, and according to a 2019 Morgan Stanley study, some $50 trillion US to get the world economy to net zero. The consequences of our delayed actions here in the present have implications on the planet for millennia. That’s why relying on a free market solution led by a company holding corporate assets like BlackRock seems problematic if not downright stupid.
The problem of greenwashing is how it confuses the conversation creating the impression that “environmentally friendly advertising” equates with actual progress in addressing climate change and sustainability. Two good examples follow of greenwashing misdirection brought to you by the fossil fuel and automotive industries.
Governments greenwash as well. The province of Alberta, Canada, instead of measuring the greenhouse gas emissions coming from its heavy oil operations, the oil sands, chooses to measure declines in carbon intensity from each barrel of synthetic crude. It never describes how growing volumes of barrels negatively offset any per barrel carbon reductions. What utter hogwash.
Fancy believes the only market force that can really impact climate change is putting a tax on carbon. He notes with such a tax, “every single portfolio manager would adjust their portfolio.” Interestingly Fancy is no longer in the investment portfolio business. Today he is running a Toronto-based non-profit, Rumie, focused on empowering online learning. He is far removed from his days at BlackRock.
As for the final question asked at the beginning of this posting, based on the current lack of action it is highly unlikely that the collective efforts of all nations will fall well short of the goal of limiting atmospheric heating to no more than 2.0 Celsius (3.6 Fahrenheit).
In a posting earlier this month, I described an Australian study looking at the face of climate change on that continent. It described a world 3 Celsius warmer in the next century. It was not pretty. With the current greenwashing and lack of commitment to real action to mitigate climate change, the Australian study could become a reality. It is not a scenario we would wish on those who follow us.
So BlackRock in its call to companies to commit to sustainability practices and net-zero will need to do even more than expose their climate risk to investors. BlackRock needs to become a proponent of using the market to put a price on carbon whether called a levy or tax or calling for a global cap and trade scheme to drive us to net-zero while making money for investors.
On a final note, in Canada last week, provincial governments who objected to the imposition of carbon pricing by the federal government, had their day in the Supreme Court and lost. Carbon pricing is now in place in my country and I hope it soon will be adopted globally. Without it, I’m not sure humanity can stop global warming this century and beyond.
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