The pressure on fossil fuel companies to adopt more sustainable and transparent business strategies is mounting, as shareholders’ concerns grow over future carbon emission cuts and a resulting plummet in the value of fossil fuel investments.
Last week, investors representing nearly US$2 trillion in assets urged the US financial regulator to act on climate risk.
59 institutions warned that global efforts to cut emissions could affect fossil fuel demand, and therefore the value of oil and gas companies.
The letter, coordinated by advocacy group Ceres, points out that Exxon Mobil, Chevron and Canadian Natural Resources are failing to seriously analyse the threat, and called on the Securities and Exchange Commission (SEC) to demand better reporting throughout the industry.
Mindy Lubber, president of Ceres, said:
By failing to hold the fossil fuel industry to the same disclosure standards as other industries, the SEC is allowing the sector to hide its true level of risk.
This prevents cash flowing to the low carbon projects “we desperately need,” she added.
According to estimates from Ceres, the worst impacts of climate change will take an extra “clean trillion” dollars a year.
The decrease in the oil price over the past year has forced oil majors to cancel or postpone projects worth billions of dollars.
At the same time, analysts at MSCI calculate investors that eschewed coal, oil and gas holdings outperformed conventional funds in the past five years. The fossil free portfolios grew 69.9% over the period, compared to 62.2% for the rest.
London think-tank the Carbon Tracker Initiative estimates oil and gas companies are planning US$1.1 trillion of spending on high cost, carbon-intensive projects in the next ten years.
Ceres argues curbs on emissions will only dampen oil demand and the sector’s profitability in future.
Scientists estimate that 75% of known fossil fuel reserves needs to stay in the ground in order to avoid an average global temperature rise by 2 degrees.
This also threatens people’s pensions, which are substantially invested in the sector.
Last Thursday, Bill McGrew, portfolio manager for California’s public pension fund and signatory to the letter, told BP’s board: “Long-term investors need assurance.”
In a separate letter, New York State and New York City’s retirement funds, worth more than US$300 billion, endorsed Ceres’ campaign.
Furthermore, chief executives from 43 companies including Volvo, Accenture, BT, Philips, Swiss RE and Unilever have released a letter to delegates at the World Bank/IMF spring meeting, calling on global governments to agree on an effective climate pact in Paris this December.
The CEOs representing businesses that generated revenues of US$1.2 trillion in 2014 write:
We are already taking action. We stand ready to work with the international community to deliver practical solutions.
At BP’s AGM last week, 98% of the fossil fuel giant’s shareholders voted for a resolution asking BP to publish regular updates on how its strategies were affecting climate change from next year, making it one of the first global oil companies to disclose such details.
Growing the economy, cutting carbon
In an interview with the Carbon Brief, last week, Jeremy Oppenheim, New Climate Economy’s programme chair, explained:
[O]verwhelmingly – not all the time but overwhelmingly – the practical evidence on the ground is that taking thoughtful, pragmatic action on climate integrated into better energy systems, better cities, better land use works in almost every context.
The New Climate Economy project is aimed at finding ways to build economies that are able to grow and cut carbon emissions at the same time. Researchers investigate independently and objectively both into economic models, as well as sustainable economies in practice, e.g. in ‘cleaner’ cities.
When asked about his ‘desert island’ must-have, Oppenheim replied:
It’s to integrate climate into key economic and investment and policy decisions […] however boring that sounds […] it’s the way forward.
I don’t think we should be demonising anybody. I think we should be inviting companies, investors, governments into the conversation to say look, you’ve made these commitments, you want to be part of the solution, help us understand how you see that so we can all learn.
Because I think what we’re in is […] a dynamic learning process.
Meanwhile, demands for fossil fuel divestment from the public are growing continuously.
Over the past weeks, 182,000 people have signed the Guardian’s petition asking the Wellcome Trust and the Bill and Melinda Gates Foundation to divest from fossil fuels. The Wellcome Trust’s responded with a blog post, as well as a reply published in the Guardian.
In these replies, the trust’s director Jeremy Farrar argues that Wellcome has a greater influence on fossil fuels by engaging with them as shareholders, rather than through divestment, pointing towards recent shareholder resolutions for more sustainable business practices at Shell and BP, such as the aforementioned vote at BP’s annual general meeting.
However, Divest London countered the argument by pointing out that, while these resolutions are being passed, Shell is progressing with arctic drilling and BP has sold off, shut-down or vastly underfunded the majority of its renewable energy projects.
Farrar said that the trust does not rule out future divestment if engagement proves ineffective.
On last Saturday, 100 activists responded to Wellcome’s reply with a protest action, turning themselves into a ‘human oil spill’ at the Wellcome Collection in London.