We Are “Out” of the Paris Accord — Really? What a Year! Signs of Great Progress in the Trump Denial Era

June 1, 2018

By Hank Boerner – Chair and Chief Strategist, G&A Institute

It was just one year ago – ah,, but it seems much longer…

WASHINGTON — The New York Times – June 1, 2017: “President Trump announced on Thursday that the United States would withdraw from the Paris climate accord, weakening efforts to combat global warming and embracing isolationist voices in his White House who argued that the agreement was a pernicious threat to the economy and American sovereignty.

In a speech from the Rose Garden, Mr. Trump said the landmark 2015 pact imposed wildly unfair environmental standards on American businesses and workers. He vowed to stand with the people of the United States against what he called a “draconian” international deal.

“I was elected to represent the citizens of Pittsburgh, not Paris,” the president said, drawing support from members of his Republican Party but widespread condemnation from political leaders, business executives and environmentalists around the globe.”

What was to follow?

A Year of Significant Progress!

Today — interesting perspectives are shared in The Washington Post on where we are one year after President Donald Trump “withdrew” from the Paris Climate Accord. The United States of America is the first – and perhaps will be the only – nation to join and then withdraw the Agreement. Sort of.

Participation in the agreement for the USA runs to year 2020 so we are “still in” (officially).  The withdrawal process will take the next three years.

By that time, there might be a new occupant in the White House. 

This nation is still in by examination of various other factors that are explained by writer Chris Mooney in the WaPo. (He covers climate change, energy and the environment, reported from the Paris negotiations in 2015, and has published four books on the the subjects he covers.)

The key points we took away from Mooney’s excellent wrap up today:

  • The Trump Administration still has no consistent message about climate change,  and no clear policy, except for the antics of EPA Administrator Scott Pruitt, with his slash & burn attacks on environmental and climate-related regulations.
  • There is a positive development: NASA Administrator Jim Bridenstine embraced climate science.  (See notes at end.)
  • There has been unrelenting attack on President Barack Obama’s skilled moves to protect the country – and the planet! – such as the Clean Power Plan.
  • But, while the White House is the cheerleader for the coal industry, market forces reward renewable energy and natural gas as powerful drivers for change.
  • Other countries are sticking with the Paris Accord, but some of those countries may find it challenging to stay the course without U.S. leadership (says John Sterman of MIT).

BackgroundThe Obama Administration agreed in Paris with many other nations to the goals of a 26%-to-28% reduction of emissions below the 2005 levels — and today the U.S. and the whole world is off that metric, writes Chris Mooney.

Even if the commitments were realized, there would be a temperature rise of 3.3 degrees Celsius (almost 6% F) over time (according to MIT’s Sterman). So the USA would have to do even more than agreed-to in Paris. (The USA is the world’s second largest GhG emitter.)

Where are we? According to the Climate Action Tracker produced by NewClimate Institute and Ecofys, the USA is on track for an 11% to 13% decrease by year 2025, which is about halfway to the Obama Administration pledge.

What may interfere: the move to rollback auto fuel efficiency standards; an analysis by Rhodium Group projects adding 100 million tons (annually) by year 2035 for auto emissions alone if the rollbacks move forward.

The good news – from the “We Are Still In” front: the states of Virginia and New Jersey are making moves to cut emissions and the states of Colorado and California are developing new electric vehicle policies.

Vicky Arroyo (director of the Georgetown Climate Center is quoted:   At least we are not losing the momentum that was feared (one year ago today).

Kate Larsen, who directs climate change research at the Rhodium Group, thinks that the country is on track to meet or even exceed the Obama-era Clean Power Plan goals — thanks to the use of lower-cost renewable fuel sources and natural gas.

Greenhouse Gas Emissions in the United States are “hardly set to explode” and the country is moving toward lower GhG emissions over time, writes Mooney.

But. What the Trump announcement did last year on June 1 was to create fog about US national policy regarding climate change. The thing we all have to face: the slow progress exhibited and achieving climate change goals (those coming out of Paris) are not compatible.

The WaPo commentary is at: https://www.washingtonpost.com/news/energy-environment/wp/2018/06/01/trump-withdrew-from-the-paris-climate-plan-a-year-ago-heres-what-has-changed/?utm_term=.782d3cb38b3f&wpisrc=nl_most&wpmm=1

Counterpoint!

The EDF – a/k/a Environmental Defense Fund – today trumpeted the Year of Climate Progress (since June 1 2018).

EDF members and environmentalists immediately began the counter-attack in June 2017 and in EDF’s words, that led to a year of extraordinary climate progress. The organization presents a timeline on line.  Highlights:

  • June 5, 2018 – EDF helps launch a coalition of organizations, businesses and state and local civic and political leaders to pledge “We Are Still In!” – today there are 2,700 leaders participating.
  • On to July 2017 – California Governor Jerry Brown signs into law an extension of the state’s cap-and-trade program out to 2030.  The state is the sixth largest economy in all of the world!
  • September – North of the border, Ontario Province links its cap-and-trade program to the California-Quebec carbon market, creating a huge market covering 580 million tons of emissions. Sister province British Columbia intends to increase its carbon tax for April 2018 through 2021.
  • Nine Northeastern US States in the Regional Greenhouse Gas Initiative complete their second program review and agree to reduce emissions by 30% from 2020 to 2030.
  • Halfway around the world in December 2017 China announced its national carbon market (to be largest in the world); this will start with electric power and expand to seven other industrial sectors. (So much for the Trumpian claim China is doing nothing to meet Paris Accord conditions.)
  • We move further into 2018 and the Federal Energy Regulatory Commission (FERC) rejects the DOE coal and nuclear proposal.
  • Despite shouts and threats and Trumpian boasting, the U.S. Congress adopts the 2018 budget in March 2018 that leaves the EPA budget mostly intact (EPA Administrator Scott Pruitt wanted to cut the agency’s budget by 30%. Other environmental / energy agencies see budget increases.)
  • April – the UN’s International Maritime Organization adopts a climate plan to lower emissions from container ships, bulk and oil carriers, by at least 50% below 2008 levels by 2050.
  • Also in April — In the key industrial State of Ohio, the Public Utilities Commission approves AEP’s Electric Security Plan – this, EDF points out, will enhance and diversify the state economy, unlock millions in funding, provide customers with clean energy options and overall, will reduce pollution.
  • Next door, in April, the Illinois Commerce Commission approves the state’s Long-Term Renewable Resources Procurement Plan to have a pathway for electric utilities to produce 25% of power from renewable sources by 2025 and put incentives in play for development of wind and power.
  • April — EDF President Fred Krupp gives a TED Talk, outlining the plan to launch methane-detecting satellites in orbit above Earth to map and measure oil and gas methane emissions. The data and information gathered will help countries and companies spot problems, identify savings opportunities and measure progress.
  • April sure was a busy month – Canada issued policies to cut oil and gas emissions by 40% to 45% at new and existing facilities. This was part of a pledge made in 2016 (when President Obama was in office) for the USA, Canada and Mexico to decreased such emissions in North America by that amount by 2025.
  • On to May – and recently-elected New Jersey Governor Phil Murphy – a former Goldman Sachs exec – signed into law the plan to cut GhG emissions by almost half by 2030 (hey, that’s twice what the Clean Power Plan would have required!). The Garden State will require 50% of NJ electric needs to be met from renewable sources.
  • And on to May – ExxonMobil announced plans to reduce oil and gas methane emissions by 15% and flared gas volume by 25% — worldwide – by 2020.

Yes – a remarkable year, kicked off on June 1st 2017 by a vindictive head of state set on reversing the significant progress made under his predecessors.

But many individuals, companies, investors, civic organizations, NGOs proclaimed: We are still in.  The movement represents city halls, board room, college campuses, investors, and more…interests representing US$6.2 trillion (one-sixth of the entire American economy) have signed on to the We Are Still In declaration — https://www.wearestillin.com/we-are-still-declaration

Have you?

Notes:

The New York Times story by Michael Shear, June 1 2017 is at: https://www.nytimes.com/2017/06/01/climate/trump-paris-climate-agreement.html

The American Institute of Physics info on NASA, embrace of climate change consensus: https://www.aip.org/fyi/2018/bridenstine-embraces-nasa-science-climate-change-consensus

We Are Still In information at: https://www.wearestillin.com/

The Media – And Sustainability & CR Thought Leadership, For Both Topic-Focused and Mainstream Media Coverage

by Hank Boerner – Chair, G&A Institute

The “media” that we choose to get our news, commentary, research results, even crossword puzzles, movie reviews, the latest scientific papers and maybe information about what our friends are up to (such as “social media”) are usually self-selected.  

We tune in to what we want to read or watch or listen to…for information / education / entertainment…and it also helps to define us in many ways.

So here at G&A Institute as we broadly monitor for content related to both our day-to-day and long-term focus areas (the list of topics and issues is long), when we see these things pop up in “not-the-usual places,” we are cheered.

This weekend, for example, we picked up on the following, which were encouraging in that senior management publications are read beyond the folks involved in sustainable investing and corporate sustainability or ESG issues and topics.

In Focus:   MIT Sloan Management Review

This is the publication of the prestigious Massachusetts Institute of Technology’s MIT Sloan School of Management.  “Share Your Long-Term Thinking” was one feature article. Companies need to be more forthcoming about their strategies for long-term value creation when they communicate with investors — especially about ESG issues, write authors Tim Youmans and Brian Tomlinson.

Their observation is that over the past five years, CEOs have faced mounting pressure to produce short-term profits. CEOs do think about the long-term, have long-term plans (detailed and extensive) and these typically are closely held.  Result: corporate strategy and practice are not captured in investor communications.

They then offer six reasons why long-term plans should be disclose and how to do that.  One of these is to help investors understand ESG issues through the eyes of management — because a majority of investors see ESG factors as financially material and expect sound management of material ESG factors to deliver better performance over the long-term. 

Tim Youmans is engagement director for Hermes Equity Ownership Services and Brian Tomlinson is research director for the Strategic Investor Initiative at CECP.

They conclude for the magazine’s audience (aimed at corporate executives and senior managements in the main): “The long-term plan is a new tool in the regular sequence of periodic corporate-shareholder communications and represents an unprecedented opportunity for leading companies and investor together to drive sustainable value creation and help to clarify the role of the corporation in a sustainable society.”

That is not all for the MIT Sloan Management Review audience in the Spring 2008 issue.

“Why Companies Should Report Financial Risks From Climate Change” is another feature — this from Robert Eccles and Michael Krzus.  They  focused on the Financial Stability Board’s Task Force on Climate-related Disclosures [recommendations].

“Investors and the rest of the world is watching to see how companies will respond to the TFCD recommendations” — the ask here is that company managements will expand their disclosure to report on the risks and opportunities inherent in climate change in such documents as the 10-k.

Boston Common Asset Management LLC and ShareAction organized a campaign with institutions representing US$1.5 trillion in AUM participating to pressure financial institutions (especially banks) to implement the recommendations.

Companies should follow the recommendations, authors Eccles and Krzus argue, because this could lead to evolving better strategies to adapt to climate change — and be able to explain these strategic moves to the their investors.

They focus on the oil and gas industry, looking at disclosures in 2016 by 15 of the largest industry firms listed on the NYSE.  A few have made good progress in adhering to the TCFD recommendations (so there is not a “blank slate”); there is work to be done by all of the companies in enhancing their disclosures to meet the four top recommendations (in governance, strategy, risk management and metrics and targets areas).

Their article is an excellent summation of the challenges and opportunities presented for such companies as BP, Chevron, ExxonMobil, Sinopec, Statoil, Total, and others in oil & gas.

Bob Eccles is a well-known expert in corporate sustainability and sustainable investing and is visiting professor at Said Business School at the University of Oxford. Mike Krzus is an independent consultant and researcher and was a Fellow of G&A Institute.

Wait, there’s more!

The magazine’s columnists had important things to say as well.

Kimberly Whitler and Deborah Henretta penned “Why the Influence of Women on Boards Still Lags,” applauding the rise of the number of women on boards and offering two important criticisms — the growth rate is slowing and boards do that do have female members often limit their influence.

Although there are measurable positive results of female board inclusion — they cite Return on Equity averaging 53% higher in the top quartile than in the bottom — women still are not making more rapid inroads with fewer reaching the most influential board leadership positions, even with more women on boards than 10 years ago.

The authors set out ways for making more progress in board rooms.  And they advise: “For real, lasting change that wins companies the full benefits of gender-diverse decision-making, boards need to look beyond inclusion — and toward influence.”

Kimberly Whitler is assistant professor of business adminstration at the University of Virginia’s Darden School of Business; Deborah Henretta is an independent board director on the boards of Dow Corning, Meritage Homes Corp, NiScource Inc and Staples (she was a Proctor & Gamble executive).

There is much more for executives and board members in the issue, which has the overall theme of: “In Search of Strategic Agility – discover a better way to turn strategy into results.”

The content we outlined here is powerful stuff (our own technical term) to crank into corporate strategy-setting, and savvy execs are doing just that, as we see here at G&A as we pour through the more than 1,500 corporate reports we analyze each year with titles such as Corporate Sustainability, Corporate Responsibility, Corporate Citizenship, Corporate Environmental Sustainability, and more.

And so it is very encouraging when we wander beyond the beaten path of reading the reliable staple of sustainability-oriented and CSR-oriented media to see what the senior management thought leadership media are doing!

We recommend that you read through the Spring 2018 Strategy magazine from MIT Sloan.  Link: https://sloanreview.mit.edu/