Critical Development for CDP Responders in 2018 & 19: CDP Introduces Additional Alignment With FSB Task Force on Climate-Related Financial Disclosures Recommendations

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

Corporate ESG Data, Data, Data – it’s now everywhere and being digested, analyzed and applied to corporate equity analytics and portfolio decision-making.

Whether your public company participates in the annual round of organizing responses to the ever-more comprehensive queries from leading ESG / sustainability / CR rating agencies or not, there is a public ESG profile of your company that investors (asset owners, managers and analysts) are examining and applying to their work.

If you don’t tell the story of your firm’s progress in its sustainability journey, someone else will (and is).  And if you have not embarked on the journey yet…and there is not much to disclose and report on…you are building the wrong kind of moat for the company.  That is, one that will ever-widen and impair access to capital and affect the cost of capital.  And over time, perhaps put the company’s issues on the divestiture list for key investors.

This sounds a bit dramatic, but what is happening in the capital markets these days can be well described as a dramatic shift in focus and actions, with corporate ESG strategies, actions, programs, achievements, and disclosure becoming of paramount importance to a growing body of institutional and retail investors.

Consider these important developments:

  • The influential Barron’s editors, reaching hundreds of thousands of investors every week, beginning in Fall 2017 made coverage of corporate sustainability and sustainable investing a mainstay of the magazine’s editorial content.
  • Morningstar, the premier ranker of mutual fund performance, added sustainability to the analysis of funds and ETFs with guidance from Sustainalytics, one of the major ESG rating firms (and Morningstar made a significant investment in the firm).
  • SustainableInvest, headed  by Henry Shilling, former leader on sustainability matters for Moody’s Investor Service, noted that in 2Q 2018 as the proxy season was ending, 2018 voting was notable for the high level of “E” and “S” proposals, some achieving majority votes in shareholder voting at such firms as Anadarko Petroleum, Kinder Morgan and Range Resources.  Assets in 1,025 sustainable funds analyzed added $14 billion during 2Q and ended in June at US$286 billion; more than $1 billion was new net cash inflows, demonstrating investor interest in the products.

Significant:  according to the Harvard Law School Forum on Corporate Governance and Financial Regulations, two-thirds of investor-submitted proxy resolutions focused on having the company follow through on the 2-degrees scenario (testing) were withdrawn and company boards and managements agreed to the demand for climate risk reporting.

The FSB TCFD Impact on Corporate Sector and Financial Services Sector

The Financial Stability Board, an organization founded by the central bankers and financial leaders of the G-20 nations, created a Task Force on Climate-related Financial Disclosures (“TCFD”) to develop climate-related financial disclosures for adoption by financial services sector firms and by publicly-traded companies in general.

The 32-member Task Force, headed by Mayor Michael Bloomberg, announced financial recommendations for companies and investors in June 2017.

The essence of the recommendations:

  • Corporate boards and managements should focus on the risks and opportunities present and in the future taking into account a global temperature risk of 2-degrees Centigrade (3.5-F), and in the future, 4-C and even 6-C global temperature rises.

The risks (presented are not just to the affected companies but to the financial sector institutions investing in the company, institutions lending funds to the company, carriers insuring the company, etc.).

The risks and opportunities related to climate change should be thoroughly analyzed using the scenario testing that the company uses (an example would be projecting future pricing, regulations, technologies, and “what ifs” for an oil and gas industry company).

The company should consider in doing the scenario testing and analyzing outcomes the firm’s corporate governance policies and practices; strategies for the long-term; risk management policies and resources; establishing targets; and, putting metrics in place for measuring and managing climate risk.  Then, the next step is disclosing this to investors and other stakeholders.

Key Player:  CDP and its Wealth of Corporate, Institutional and Public Sector Data

The CDP – formerly known as the Carbon Disclosure Project – was founded almost two decades ago (2000) as a United Kingdom-based not-for-profit charity at the urging of the investment community, to gather corporate “carbon” data.

Timing:  soon after the start of meetings of the “Conference of the Parties” (or “COP”), organized by the United Nations as the Climate Change Conferences. (The “UNFCCC”.)

In the mid-1990s, the Kyoto Protocol emerged that legally-bound nations to their pledge to reduce Greenhouse Emissions (GHGs).  The U.S.A. did not sign on to the global protocol during the tenure of President George W. Bush, and the agreement reached in Paris at the COP meeting in 2015 was finally agreed to by President Barack Obama.

And then began the process of withdrawal under President Donald Trump.  The U.S.A. is now the prominent holdout (among the community of 197 nations signed on) in the global effort to address global warming before the danger point is passed.  In Paris, the COP agreed that the threshold was 2-degrees Centigrade.

Today, a growing universe of investors and many other stakeholders are increasingly focused on the role of carbon emissions in the framing of questions about what to do as scientists charted the warming of Earth’s climate.

And so — ESG / environmental data is critical to the mission of determining “what to do” and then implementing measures to address climate change challenges.

The Critical Role of CDP 

CDP over almost two decades since its founding has become the premier repository of corporate data related to climate change – with more than 6,000 companies’ data collected and shared in organized ways with the investment community.  (That includes the ESG data of half of the world’s public companies by market cap.)

The CDP emissions data focused has broadened over 16 years to now include water, supply chain, forestry (for corporates) and environmental data from more than 500 cities and some 100 states and regions available to investors.

Key user base:

  • 650-plus institutional investors with US$87 trillion in Assets Under Management.
  • Corporate Supply Chain members (such as Wal-Mart Stores) that collect data from their suppliers through CDP—a universe of 115 companies with over $3.3 trillion in combined purchasing power.

When the TCFD recommendations were being developed, CDP announced a firm commitment to align with the task force recommendations.

Following their release of the Task Force recommendations in July 2017, CDP held public consultations on a draft version of the TCFD-aligned framework. The current 2018 Climate Change questionnaire that corporations received from CDP is fully aligned with the TCFD recommendations on climate-related disclosures related to governance, risk management, strategy, and metrics and targets.

The TCFD recommendations are already aligned with the majority of CDP’s longstanding approach to climate change disclosure, including most of the recommendations for climate-related governance, strategy, risk management as well as metrics and target disclosure.

However, this year CDP has modified some questions and added new ones — the most impactful being on climate-related scenario analysis to ensure complete alignment.

Some modifications include:

The Governance section now asks for more information about oversight of climate change issues and why a company doesn’t have board-level oversight (if applicable). CDP also requests information about the main individual below the board level with the highest responsibility — and how frequently they report up to the board.

Next, in the risks and opportunities section, CDP now asks for the climate-related risk & opportunity identification, and assessment process.

As in past years, questions are posed in the Business Strategy module to allow companies to disclose whether they have acted upon integrating climate-related issues into their strategy, financial planning, and businesses.

CDP has also added a question for high impact sectors on their low carbon transition plans, so data users can gauge and further understand the sustainable and strategic foresight that these companies aim to achieve.

CDP also added a new question on scenario analysis, explaining that scenario analysis is a strategic planning tool to help an organization understand how it might perform in different future states.

A core aim of the TCFD recommendations is for companies to improve their understanding of future risks and develop suitable resilience strategies.

Finally, the TCFD recommendations highlighted five (5) sectors as the most important. In 2018, CDP rolled out sector-specific questions for the four non-financial sectors that the TCFD highlighted (they are energy, transport, materials, and agriculture).

TCFD also highlighted the financial sector – looking forward, in 2019, CDP is planning to release a financial sector-specific climate change questionnaire.

The TCFD resources for investors and corporate managers are embodied in three documents – (1) the Main Report; (2) an Implementation Annex; (3) the Technical Supplement for Scenario Analysis.  These are available at:  www.fsb-tcfd.org

G&A Institute Perspectives:

Our team has been assisting corporate managers in organizing the response to the CDP annual survey and we’ve tracked over the years the steady expansion of information requested of companies.

Our advice to companies not reporting yet:  get started!  The CDP staff members are very cooperative in assisting new corporate reporters in understanding what data are being sought (and why) and providing answers to questions.

CDP’s founding CEO Paul Simpson cautions:  “Big companies:  get better at telling those who hold the purse strings how climate risks could affect your bottom line.”

And so, our mission at G&A includes helping corporate issuers tell a better sustainability and ESG story, including the story told in the data sets communicated to 650-plus institutional investors by CDP!

CDP data is everywhere, we advise clients, including for example being part of the volumes of ESG data sets that Bloomberg LP shares on its terminals (through the terminal ESG Dashboard).

On the supply chain side, we point out that more than US$3 trillion is the collective spend of companies now addressing their supply chain sustainability factors and environmental impacts (customers see suppliers as part of their own CDP footprint).  Corporate leaders in this effort include Apple, Honda and Microsoft, CDP points out.

Resources:

CDP’s Technical Notes on the TCFD are available at: https://b8f65cb373b1b7b15feb-c70d8ead6ced550b4d987d7c03fcdd1d.ssl.cf3.rackcdn.com/cms/guidance_docs/pdfs/000/001/429/original/CDP-TCFD-technical-note.pdf?1512736184

The “A” List of CDP naming the world’s business leaders on environmental performance (160 firms) is at: https://www.cdp.net/en/scores-2017

The CDP USA Report 2017, focused on key findings on Governance, ESG and the Role of the Board of Directors is available at: https://b8f65cb373b1b7b15feb-c70d8ead6ced550b4d987d7c03fcdd1d.ssl.cf3.rackcdn.com/cms/reports/documents/000/002/891/original/CDP-US-Report-2017.pdf?1512733010

There’s an excellent interview with CDP CEO/Founder Paul Simpson at: http://www.ethicalcorp.com/disruptors-paul-simpson-atypical-activist-who-woke-c-suites-climate-risk

You can check out Henry Shilling’s SustainableInvest.com at: https://www.sustainableinvest.com/second-quarter-2018-sustainable-funds-investing-review/

 

Climate Change Risk? Nah – The Deniers & Destroyers Are At Work – White House Attempts to Roll Back Obama Legacy

Deniers/Destroyers are at work – at US EPA — the White House — hoping/wishing for rollback of rich Obama legacy positions on climate change issues…

by Hank Boerner – Chairman, Chief Strategist – G&A Institute

March 28, 2017

In classic-CNN style we bring you !!!BREAKING NEWS!!! – the Climate Change Deniers and Environmental Regulatory Protection Destroyers are at work in Washington DC today.

You’ve heard the news by now: President Donald Trump and EPA Administrator E. Scott Pruitt are preening and pompously strutting as they announce the important beginnings of what they want (and hope!) to be the rollback of important environmental and public health protections of the Obama Administration … you know, the “job killers” that were at work putting coal miners out of business.

At least that’s some of the twisting, grasping, pretzel-elian logic that underpins the actions taken today (which in turn tells the Trump loyal voting base that yes, still another campaign promise is being carried out on their behalf).

During his early months in office, President Barack Obama signed important Executive Orders that addressed climate change issues and global warming challenges — and please here do note that these and other Presidential EOs are always based on (1) the existing statutes enacted by Congress and (2) the authority of the Office of the President.

You remember some of the key statutes involved in these issues  — The Clean Air Act (CAA); The Clean Water Act; (CWA) the foundations laid by the all-empowering National Environmental Policy Act (NEPA) …and other landmark legislation sensibly reached on a bipartisan basis over the decades since American rivers burst into flames.

Today, President Donald Trump signed [a very brief] EO with a flourish — the “Promoting Energy Independence and Economic Growth” Executive Order.

The action orders the U.S. Environmental Protection Agency to begin the [legal] process of un-doing or re-doing the nation’s Clean Power Plan, the keystone to President Obama’s actions to address global warming. (Or “climate change” if one is skittish about being on the side of the angels on this issues.)

Here is what today’s EO covers:

  • Executive (cabinet) departments and agencies will begin reviewing regulations that potentially burden the development/or use of domestic energy sources — and then suspend, revise or rescind those that “unduly burden” the development of domestic energy resources…beyond the degree necessary to protect the public interest.
  • All [Federal] agencies should take appropriate actions to promote clean air (!) and clean water (!) for the American People — oh, while following the law and the role of the Congress and the States concerning these matters. (One hopes this includes Flint, Michigan residents. We can hear great, cogent arguments in the Federal courts about all of this.)
  • Costs are to be considered — regarding “environmental improvements for the American People” — as, when “necessary and appropriate” environmental regulations are to be complied with…and the benefits must be greater than the cost.

This is encouraging, if only that it is stated to provide cover for legal challenges: Environmental regulations will be developed through transparent processes that employ the best available peer-reviewed science and economics!

  • All Federal agencies are to review actions that are described in the Trump Executive Order and then submit to the [White House] staffed departments and the Vice President their plan(s) to carry out the review for their agency.

Here’s The Important Deny/Destroy Actions

By swipe of pen, the President revoked these important cornerstones of the Obama Administration climate change legacy:

  • Executive Order 13653 (November 1, 2013) – “Preparing the U.S. for the Impacts of Climate Change.”
  • President Memorandum (June 25, 2013) – “Power Sector Carbon Pollution Standards.”
  • Presidential Memorandum (November 3, 2015) – “Mitigating Impact on Natural Resources from Development and Encouraging Related Private Investment.”
  • Presidential Memorandum (September 21, 2016) – “Climate Change and National Security.”
  • Report of the Executive Office of the President (June 2013) – “Climate Action Plan.”
  • Report of the Executive Office of the President (March 2014) – “Climate Action Plan Strategy to Reduce Methane Emissions.”
  • The Council on Environmental Quality guidance (August 5, 2016) – “Final Guidance for Federal Departments and Agencies on Consideration of GhGs and Effects of Climate Change in NEPA Reviews.”

And The Very Important Clean Power Plan…

  • A review of the EPA’s “Clean Power Plan,” to be suspended, revised or rescinded, or, new rules proposed following the steps necessary. This will affect:
  • The final rules of the Clean Power Plan (October 23, 2015) – “Carbon Pollution Emission Guidelines for Existing Stationary Sources: Electric Utility Generation Units”;
  • Final Rules (October 23, 2015) – “Standards of Performance for GhGs from New, Modified and Reconstructed Stationary Sources: Electric Utility Generating Units;
  • Proposed Rule (October 23, 2015) – “Federal Plan Requirements for GhGs Emissions from Electric Utility Generating Units Constructed before January 8, 2015”; “Model Trading Rules: Amendments to Framework Regulations”.
  • The Interagency Working Group on Social Cost of Greenhouse Gases – convened by the Council of Economic Advisors and the Director, Office of Management and Budget (OMB) — is disbanded, and the documents that established the “social cost of carbon” no longer represent public policy.

Beyond these specifics, the EO also orders the Secretary of the Interior to review its rules, and any guidance given, and (if appropriate) suspend, revise and rescind these. Included:

  • Final Rule (March 26, 2015) – “Oil and Gas: Hydraulic Fracturing on Federal and Indian Lands”;
  • Final Rule (November 4, 2016) – “General Provisions and Non-Federal Oil and Gas Rights”;
  • Final Rule (November 14, 2016) – “Management of Non-Federal Oil and Gas Rights”;
  • Final Rule (November 18, 2016) – “Waste Prevention, Production Subject to Royalties, and Resource Conservation.”

For the record: The EO is intended to (1) promote clean and safe development of “our Nation’s vast” energy sources; (2) avoid regulatory burdens that constrain production, energy growth and job creation; (3) assure the Nation’s geo-political security.

US SIF Weighs In

The influential trade association for sustainable, responsible and impact investing swiftly responded. Lisa Woll, CEO of US SIF, commented:

“On behalf of our 300 institutional members, US SIF belies the Administration should be working aggressively to reduce carbon in the atmosphere and that this Executive Order accomplishes the opposite.

“The United States is paying a high economic price from the ravages of severe drought, wildfires and storms associated with increased atmospheric levels of carbon. This is not the time to retreat from the call to protect current and succeeding generations from the catastrophic implications of further, unrestrained climate change.”

In the US SIF biennial survey of sustainable and impact investment assets, it should be noted here that U.S. money managers with US$1.42 trillion in AUM and institutional asset owners with $2.15 trillion in assets consider climate change risk in their investment analysis — that is three times the level in the prior survey in 2014.

Now — Investors – NGOs – State and local governments – social issue activists — business leaders — Federal and State courts — can push back HARD on these moves by the Trump Administration.

Otherwise, it could be drill, baby, drill — dig, baby, dig — and, hey, it’s good for us, we are assured by the Deflector-in-Chief and his merry band of wrongheaded Deniers/Destroyers in the Nation’s capital!

What do you think — what do you have to say? Weigh in our this commentary and share your thoughts – there’s space below to continue the conversation!

Global Warming – As the Phenomenon Ends, The Ice Begins? In Year 2060

by Hank Boerner – Chairman & Chief Strategist – G&A Institute

Keep your eye on 2060, when the Ice Age begins and Global Warming ends, say the folks at Samsung Chemical Coating (“SCC”) in The New York Times advertisement…

Did the headline grab your attention? It sure caught mine.

The headline and some of the content from a full-page advertisement appearing today in The New York Times, is signed by Samsung Chemical Coating Co. Ltd. (for the record, they’ve also said this is material “copyrighted” and not for re-distribution). This is Fair Use reporting for you.

The ad is a full page display in the well-read Science Times Section of the Times; titled: “When Global Warming Ends, about the year 2060, The Ice Age will Begin”).

There are five main messages for you from Samsung:

(1) (Perspectives About) the Beginning of Global Warming

(2) There is No Relationship Between the Amount of Carbon Dioxide Emissions and the Global Warming

(3) (About the) Ice Age Environment

(4) Large Extinction of Living Things (like all of us humans)

(5) (Message to) The US Government and Scott Pruitt, US EPA

Highlights:

Global Warming, says Samsung (SCC) management, is one of the natural phenomena that occurs at the end of inter-glacial periods. There is more explanation for you (according to the ad) in The Washington Post on February 28th of a “study” by Samsung. *

There is no relationship between CO2 emissions and global warming. It’s about Earth wobbling (“precession*), certain star tracks, and seas warming and rising.

The Earth’s glaciers (today’s Big Ice) will be reduced by Year 2060 at, the end of the inter-glacial period we’re in, and then the Earth will begin to form new glaciers; earthquakes and tsunami’s will occur; radiation from the sun will pummel Earth; extreme temperatures will occur; really large hurricanes will occur.

And then – oh, boy! — the New Ice Age coming about 2060 will reach to New York City, growing ever-taller over 200 years, and everything living will become extinct!  The dead critturs will eventually drift down to decay and become coal and carbon/oil for future generations (if there any) to use. There may well be; Samsung’s paid message says creatures exposed to the sun’s radiation will mutate and new species will emerge.

Finally — Samsung, while saying that nothing can be done about the catastrophe coming, thanks to the Law of Nature (and Earth wobble, stars aligning, oceans warming, pole ice disappearing, glaciers melting and then re-forming, radiation increasing, giant storms, and more) — and so,  Scott Pruitt, US EPA Administrator, “…should review the results of ]Samsung’s] study and find ALTERNATIVE (my emphasis) MEASURES to minimize the damage of the catastrophe that will occur…”

Oh, and the future of Mankind depends on Administrator Pruitt and President Donald Trump.

A key line in the ad:  “We can say that the cause of global warming is not from carbon dioxide emissions.”

The company – it’s a a privately-owned South Korean firm, according to Bloomberg LP  — has run somewhat similar ads in the past.  * We could find no mention of “the study” in The Washington Post edition of February 28, 2017 as mentioned in today’s ad.

We got to thinking: Is this a joke? (It’s not April 1st yet.)  Someone who gave up tweeting to write more long-form messages in the wee hours of the morning?  Something unusual to get us thinking? About?

Is this a planned distraction from the more pressing issues in Washington DC — like the former President spying on the new President when he was a candidate? Something really jarring to justify the drastic cuts proposed by the new administration at the US EPA?  Is this fodder for global warming deniers?

The ad is real:  I have a printed copy right here on the desk as it appears in the NYT ScienceTimes Section!

What to you think?  Let us know….

FINALLY — there is an email in the ad if you wanted to communicate with someone:

  • Heemun Kang – scck22@hanmail.net
  • or Jimin Kang or Josung Kang

** Precession:  changes that occur as equinoxes change in successive sidereal year (Oxford: sidereal — “as determined by stars”).

Dangerous Antics – Fiddling with the Future of US EPA and the Health and Safety of the American People

by Hank Boerner – Chair & Chief Strategist, G&A Institute

The Trump Administration  — Making moves now on the US EPA to destroy its effectiveness through budget cuts and ideological attacks on its missions.

In his landmark work published in 1993 – “A Fierce Green Fire – The American Environment Movement” – former New York Times journalist Philip Shabecoff explained:  the U.S. Environmental Protection Agency was created by President Richard Nixon (a Republican) in December 1970 (two years into his first term) as part of an overall re-organization of the Federal government. The EPA was created without any benefit of statute by the U.S. Congress.

Parts of programs, departments and regulations were pulled from 15 different areas of the government and cobbled together a single environmental protection agency intended to be the watchdog, police officer and chief weapon against all forms of pollution, author Schabecoff explained to us.

The EPA quickly became the lightning rod for the nation’s hopes for cleaning up pollution and fears about intrusive Federal regulation.

As the first EPA Administrator, William Ruckelshaus (appointed by Richard Nixon) explained to the author in 1989: “The normal condition of the EPA was to be ground between two irresistible forces: the environmental movement, pushing very hard to get [pollution] emissions no matter where they were (air, water)…and another group on the side of industry pushing just as hard and trying to stop all of that stuff…” Both, Ruckelshaus pointed out, regardless of the seriousness of the problem.

We are a half-century and more beyond all of this back and forth, and the arguments about EPA’s role and importance rage on.

Today we in the sustainability movement are alarmed at the recklessness of the Trump White House and the key Administration officials now charged with responsibility to protect the environment and public health in two key cabinet departments: The EPA and the Department of Energy.

The ripple effects of the attacks on climate change science are in reality much larger: The Department of Defense (which has declared climate change to be a major threat long-term); the Department of Interior, overseeing the nation’s precious legacy of national parks and more; the Department of Agriculture (and oversight of tens of millions of acres of farmland); the Department of Commerce; the Department of Justice..and on and on.

The destruction could start early: The Washington Post (with its ear to the ground) is closely watching the administration and reported on February 17th that President Donald Trump planned to target the EPA with new Executive Orders (between two and five are coming) that would restrict the Agency’s oversight role and reverse some of the key actions that comprise the Obama Administration legacy on climate change and related issues.

Such as: rolling back the Clean Energy Plan (designed to limit power plant GhG emissions), which required states to develop their own plan as well. And, withdrawing from the critical agreement reached in Paris at COP 21 to limit the heating up of Planet Earth (which most of the other nations of the world have also adopted, notably China and India).

The destroyers now at the helm of the EPA also don’t like the Agency’s role in protecting wetlands, rivers etc. (The Post was expanding on coverage originally developed by investigative reporters at Mother Jones.)

Mother Jones quoted an official of the Trump transition team: “What I would like to see are executive orders implementing all of President Trump’s main campaign promises on environment and energy, including withdrawal from the Paris climate treaty.”

And, in the Washington Post/Mother Jones reportage: “The holy grail for conservatives would be reversing the Agency’s ‘so-called endangerment finding,’ which states that GhG emissions harm public health and must therefore be regulated [by EPA] under the Clean Air Act.”

Think about this statement by H. Sterling Burnett of the right-wing Heartland Institute: “I read the Constitution of the United States and the word ‘environmental protection’ does not appear there.” He cheered the early actions by the Trump-ians to give the green light to the Keystone Pipeline and Dakota Access Project.

On March 1st The Washington Post told us that the White House will cut the EPA staff by one-fifth — and eliminate dozens of programs.

A document obtained by the Post revealed that the cuts would help to offset the planned increase in military spending. Cutting the EPA budget from US$ 8.2 billion to $6.1 billion could have a significant [negative] impact on the Agency.

We should remember that in his hectic, frenetic campaigning, Donald Trump-the-candidate vowed to get rid of EPA in almost every present form – and his appointee, now EPA Administrator (Scott Pruitt) sued EPA over and over again when he was Attorney General of Oklahoma, challenging its authority to regulate mercury pollution, smog (fog/smoke), an power plant carbon emissions (the heart of the Obama Clean Energy Plan).

In practical terms, the Post explained, the massive Chesapeake Bay clean up project, now funded at $73 million, would be getting $5 million in the coming Fiscal Year (October 1st on). Three dozen programs would be eliminated (radon; grants to states; climate change initiatives; aid to Alaskan native villages); and the “U.S. Global Change Research Program” created by President George H.W. Bush back in 1989 would be gone.

Important elements of the American Society have tackled conservation, environmental, sustainability and related issues to reduce harm to human health and our physical home – Mother Earth – over the past five decades: Federal and state and local governments; NGOs; industry; investors; ordinary citizens; academia.

Today, the progress in protecting our nation’s resources and human health made since rivers caught fire and the atmosphere of our cities and towns could be seen and smelled, is under attack.

The good news is that for the most part, absent some elements of society, the alarms bells are going off and people are mobilizing to progress, not retreat, on environmental protection issues.

American Industry – Legacy of Three Decade Commitment to Environmental Protection – The Commitment Must Continue

The good news to look back on and then to project down to the 21st Century and Year 2017 includes  the comments by leaders of the largest chemical industry player of the day as the EPA was launched and key initial legislation passed (Clean Air Act, Clean Water Act, and many more)  – that is the DuPont deNemours Company.

Think about the importance of these critical arguments – which could be considered as foundational aspirations for today’s corporate sustainability movement:

Former DuPont CEO Irving Shapiro told author Philip Shabecoff: “You’ve have to be dumb and deaf not to recognize the public gives a damn about the environment and a business man who ignores it writes his out death warrant.”

The fact is, said CEO Shapiro (who was a lawyer), “DuPont has not been disadvantaged by the environmental laws. It is a stronger company today (in the early 1990s) than it was 25 years ago. Where the environment is on the public agenda depends on the public. If the public loses interest, corporate involvement will diminish…”

His predecessor as CEO, E. S. Woolard, had observed in 1989: “Environmentalism is now a mode of operation for every sector of society, industry included. We in industry have to develop a stronger awareness of ourselves as environmentalists…”

And:  remember, warned Dupont CEO Shapiro: “…if the public loses interest corporate involvement will diminish…”

Today let’s also consider the shared wisdom of a past administrator as she contemplated the news of the Trump Administration actions and intentions:

Former EPA Administrator Gina McCarthy (2013-2017) said to the Post: “The [proposed] budget is a fantasy if the Trump Administration believes it will preserve EPA’s mission to protect public health. It ignores the need to invest in science and to implement the law. It ignores the history that led to the EPA’s creation 46 years ago. It ignores the American People calling for its continued support.”

Consider the DuPont’ CEO’s comments above … if the American public loses interest.  At this time in our nation’s history, we must be diligent and in the streets (literally and metaphorically) protesting the moves of this administration and the connivance of the U.S. Congress if our representatives go along with EPA budget cuts as outlined to date.

# # #

About “A Fierce Green Fire: The American Environmental Movement,” by Philip Shabecoff; published 1993 by Harper Collins. I recommend a reading to gain a more complete understanding of the foundations of the environmental movement.

A decade ago I wrote a commentary on the 100-year evolvement of the conservation movement into the environmental movement and then on to today’s sustainability movement in my Corporate Finance Review column.  It’s still an interesting read:  http://www.hankboerner.com/library/Corporate%20Finance%20Review/Popular%20Movements%20-%20A%20Challenge%20for%20Institutions%20and%20Managers%2003&04-2005.pdf

 

 

News From the Sustainability Front as The Trump White House Makes Controversial Moves on ESG Issues — Actions and Reactions

by Hank Boerner – Chair/Chief Strategist – G&A Institute

February 23, 2017
Forward Momentum! – Sustainability 2017

Are you like many of us having sleepless nights and anxiety spells as you watch the antics of the Trump White House and the creeping (and similarly moving-backwards) effects into the offices of important Federal agencies that the Administration is taking over?

Consider then “other news” — and not fake news, mind you, or alt-news — but encouraging real news that is coming from OTHER THAN the Federal government.

We are on track to continue to move ahead in building a more sustainable nation and world — despite the roadblocks being discussed or erected that are designed to slow the corporate sustainability movement or the steady uptake of sustainable investing in the capital markets.

Consider the Power and Influence of the Shareowner and Asset Managers:

The CEO of the largest asset manager in the world — BlackRock’s Larry Fink — in his annual letters to the CEOs of the S&P 500 (R) companies in January said this: “Environmental, social and governance (ESG) factors relevant to a company’s business can provide essential insights into management effectiveness and thus a company’s long-term prospects. We look to see that a company is attuned to the key factors that contribute to long-term growth:
(1) sustainability of the business model and its operations; (2) attention to external and environmental factors that could impact the company; (3) recognition of the company’s role as a member of the communities in which it operates.

A global company, CEO Fink wrote to the CEOs, needs to be “local” in every single one of its markets. And as BlackRock constructively engages with the S&P 500 corporate CEOs, it will be looking to see how the company’s strategic framework reflects the impact of last year’s changes in the global environment…in the ‘new world’ in which the company is operating.

BlackRock manages US$5.1 trillion in Assets Under Management. The S&P 500 companies represent about 85% of the total market cap of corporate equities.  Heavyweights, we would say, in shaping U.S. sustainability.

* * * * * * * *

As S&R investment pioneer Steve Viederman often wisely notes, “where you sit determines where you stand…” (on the issues of the day).  More and more commercial space users (tenants and owners) want to “sit” in green spaces — which demonstrates where they “stand” on sustainability issues.

Consider:  In the corporate sector, Retail and other tenants are demanding that landlords provide “green buildings,” according to Chris Noon (Builtech Services LLC CEO). The majority of his company’s construction projects today can easily achieve LEED status, he says (depending on whether the tenant wanted to pursue the certification, which has some cost involved). The company is Chicago-based.

This is thanks to advances in materials, local building codes, a range of technology, and rising customer-demand.

End users want to “sit” in “green buildings” — more than 40% of American tenants recently surveyed across property types expect now to have a “sustainable home.” The most common approaches include energy-saving HVAC systems, windows and plumbing. More stringent (local and state) building codes are also an important factor.

Municipalities — not the Federal government — are re-writing building codes, to reflect environmental and safety advances and concerns. Next week (Feb 28) real estatyer industry reps will gather in Chicago for the Bisnow’s 7th Annual Retail Event at the University Club of Chicago to learn more about these trends.

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Institutional investors managing US$17 trillion in assets have created a new Corporate Governance framework — this is the Investor Stewardship Group.

The organizers include such investment powerhouses as BlackRock, Fidelity and RBC Global Asset Management (a dozen in all are involved at the start). There are six (6) Principles advanced to companies by the group that including addressing (1) investment stewardship for institutional investors and (2) for public corporation C-suite and board room. These Principles would be effective on January 1 (2018), giving companies and investors time to adjust.

One of the Principles is for majority voting for director elections (no majority, the candidate does not go on board). Another is the right for investors to nominate directors with information posted on the candidate in the proxy materials.

Both of these moves when adopted by public companies would greatly enhance the activism of sustainable & responsible investors, such as those in key coalitions active in the proxy season, and year-round in engagements with companies (such as ICCR, INCR).

No waiting for SEC action here, if the Commission moves away from investor-friendly policies and practices as signaled so far. And perhaps – this activism will send strong messages to the SEC Commissioners on both sides of the aisle.

Remember:  $17 trillion in AUM at the start of the initiative — stay tuned to the new Investor Stewardship Group.  These are more “Universal Owners” with clout.

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Not really unexpected but disappointing nevertheless:  The Trump Administration made its moves on the Dakota Access Pipeline (DAPL), part of the Bakken Field project work, carrying out a campaign promise that caters to the project’s primary owners (Energy Transfer Partners**) and other industry interests, S&R investors are acting rapidly in response.

The company needed a key easement to complete construction across a comparatively small distance. Except that…

  • The Standing Rock Sioux Tribe says the route would cross their drinking water source, impact their sacred sites, and threaten environmentally-sensitive areas;
  • would violate treaty territory without meeting international standards for their consent; (this is the 1868 Fort Laramie Treaty, which according to the U.S. Constitution, should be the supreme law of the land);
  • and ignore alleged shortcomings in the required environmental review (under the National Environmental Policy Act – NEPA).

These are “abuses”, and banks and financial services firms involved may be complicit in these violations by the nature of their financing, S&R investors note. Their involvement in the project financing could impact their brands and reputations and relationships with society. And so S&R shareholders are taking action.

Boston Common Asset Management, Storebrand Asset Management (in Norway) and First Peoples Worldwide developed an Investor Statement to Banks Financing the DAPL. The statement — being signed on to by other investors — is intended to encourage banks and lenders to support the Rock Sioux Tribe’s request for re-routing the pipeline to not violate — “invade” — their treaty-protected territory. The violations pose a clear risk, SRI shareholders are saying.

The banks involved include American, Dutch, German, Chinese, Japanese, and Canadian institutions.  They in turn are owned by shareholders, public sector agencies, and various fiduciaries — “Universal Owners,” we would say.

The banks include: Bayerische Landesbank (Germany); BBVA (Argentina); Credit Agricole (France); TD Securities (Canada); Wells Fargo; ABN AMRO (The Netherlands); Bank of Tokyo-Mitsubishi UFJ; and Industrial and Commercial Bank of China, and others.

The shareholders utilizing the Investor Statement say they recognize that banks have a contractual obligation with the respect to their transactions — but — they could use their influence to support the Tribe’s request for a re-route…and reach a “peaceful solution” acceptable to all parties.

As The Washington Post reported on January 24th, soon after the Trump Administration settled in, President Trump signed Executive Orders to revive the DAPL and the Keystone XL pipelines. “Another step in his effort to dismantle former President Barack Obama’s environmental legacy,” as the Post put it.

One Executive Order directed the U.S. Army Corps of Engineers to “review and approve in an expedited manner” the DAPL. Days later the Corps made their controversial decision, on February 7th reversing course granting Energy Transfer Partners their easement. This week the remaining protestors were removed from the site (some being arrested).

The sustainable & responsible & impact investment community is not sitting by to watch these egregious events, as we see in the Investor Statements to the banks involved. The banks are on notice — there are risks here for you.

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May be what is happening in the asset management and project lending activities related to the project is the IBG / YBG worldview of some in the financial services world:  I’ll Be Gone / You’ll Be Gone when all of this hits the fan one day.  (Like the massive Ogalala Aquifer being contaminated by a pipeline break. The route of the extension is on the ground above and on the reservation’s lake bed.  Not to mention the threats to the above ground Missouri River, providing water downstream to U.S. states and cities.)

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Energy Transfer Partners, L.P:  (NYSE:ETP)  This is a Master Limited Partnership based in Texas.  Founded in 1995, the company has 71,000 miles of pipelines carrying various products. The company plans to build other major pipelines — the Rover Project — to carry product from the shale regions (Marcellus and Utica) across the Northern U.S. state east of the Mississippi.  ETP LP acquired Sunoco (remember them?).

Mutual Funds – Bond Holders – other key fiduciaries with brands of their own to protect — are funding the operations of ETP LP.

Brand names of equity holders include Oppenheimer; Goldman Sachs Asset Management; CalPERS; JPMorgan Chase.  Bond holders include Lord Abbett, PIMCO, Vanguard.  There are 567 institutional owners — fiduciaries — with some 45% of ownership, according to Morningstar. Partners include Marathon Petroleum Company (NYSE:MPC) and Enbridge (NYSE:ENB). (Bloomberg News – August 2, 2016 – both firms put $2 billion in the project and related work.)

The Partnership used to have an “Ownership” explanation on its web site — now it’s disappeared. But you can review some of it in Google’s archived web site pages here: http://webcache.googleusercontent.com/search?q=cache:http://www.energytransfer.com/ownership_overview.aspx&num=1&strip=1&vwsrc=0

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We are seeing in developments every day (like these above with non-governmental strategies and actions) that hold out promise for corporate and societal sustainability advocates and sustainable investment professionals that with — or without — public sector support, the Forward Momentum continue to build.

We’ll share news and opinion with you — let us know your thoughts, and the actions that you / your organization is taking, to continue the momentum toward building a better future…a more sustainable nation and world.

Out the Seventh Generation, as the Native American tribes are doing out in the American West in protecting their Treaty lands.  In that regard we could say, a promise is a promise — the Federal and state governments should uphold promises made in treaties.  Which are covered as a “guarantee” by the U.S. Constitution that some folk in politics like to wave around for effect.

FYI — this is Article VI:  “This Constitution, and the Laws of the United States which shall be made in Pursuance thereof; and all Treaties made, or which shall be made, under the Authority of the United States, shall be the supreme Law of the Land, and the Judges in every State shall be bound thereby…”

Quo Vadis, The Peoples’ U.S. EPA — Where Now in the Trumpian Era?

by Hank Boerner – Chair/Chief Strategist – G&A Institute

February 22, 2017

Quo Vadis (where are we going) with our Environmental Protection Agency?

The leader’s baton is passed and the U.S. EPA has a new head of agency.  E. Scott Pruitt got passed the opposition mounted to his nomination by President Trump and is now the 14th Administrator of the Agency. He was the Attorney General of the State of Oklahoma.

Where he mounted more than a dozen attacks in the courts against the Federal protector of land, air, water and more.  The cases are still pending; Administrator Pruitt has not yet  said he would recuse himself from the proceedings.

The lawsuits challenged EPA on various rules dealing with mercury pollution, carbon emissions, smog, protecting of waters and wetlands, and more.

The EPA Highlights outreach today proclaimed that Scott Pruitt “…believes promoting and protecting a strong and healthy environment is one of the lifeblood priorities of the government…and EPA is a vital part of that mission…”

And — “…as Administrator, Mr. Pruitt will lead EPA in a way that our future generations inherit a better and healthier environment while advancing America’s economic interests…”  We are on notice, I would say.

Meanwhile, hundreds of current and former EPA employees had urged the U.S. Senate NOT to ratify the nomination (450-plus signed on).  In Chicago, at lunch time, possibly imperiling their careers at the Agency, EPA Region 5 employees poured out of the office and into the streets at lunch time in protest.

More than two dozen environmental groups also challenged his qualifications.

The Washington Post yesterday reported that on his first day in office Administrator Pruitt “made clear that he intends to step back from what he sees as the Agency’s over-reach during the [President Barack] Obama years.  “The only authority that any agency has,” he told a noontime gathering at EPA, “is the authority given to it by Congress.  We need to respect that…”

Oh yes, Administrator Pruitt was speaking in the Rachel Carson Green Room at EPA (named for the author of Silent Spring, which helped to launch the modern environmental movement).  Perhaps someone passed along her book to the new leader.

The Administrator did say, according to the Post, that the EPA and the nation could do a better job of being both pro-energy and pro-environment.  Time will tell, we could say, as the actions and proclamations and loud and whispered orders come down from on high at EPA in the days ahead.

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for clues as to what may be ahead with Scott Pruitt at the helm, we could look to a commentary that the new EPA Administrator published on Public Utilities Fortnightly — ” The Methane Myth”  Incompetence and overreach at the EPA… (July 2012).

He wrote:  “,.,,my views on energy policy might be discounted as a simple ploy to bolster the energy industry at the expense of environmental stewardship and responsibility. That perspective would be misguided. I do strongly support energy producers and their role in the nation’s economic sustainability, but this issue isn’t about oil. Nor is it about natural gas or hydraulic fracturing. This is about a wayward federal agency arbitrarily using unsubstantiated, inaccurate, and flawed data to achieve a specific policy objective…”

And…”…The agency’s actions are at best incompetent, and at worst reprehensible. They have a very real effect on families, businesses, communities, and state economies. Without justification, they erode the states’ ability to self-regulate, and they stifle exploration of domestic energy sources, putting our national energy security at risk..”.

There’s more for you to read and process at: https://www.fortnightly.com/fortnightly/2012/07/methane-myth?page=0%2C0

The post is by  E. Scott Pruitt – Attorney General of Oklahoma

and Chair, Republican Attorneys General Association

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One of the pioneer environmental protection associations is the NRDC – founded in 1970 as the Natural Resources Defense Council by attorneys and students.  There are now 2 million members in the group.  The group explained its opposition to AG Pruitt’s appointment in a post on its web site:

Pete Altman:  “It could be his consistent record of siding with industry over public health, frequently choosing positions which benefited companies funneling money to Pruitt’s campaign, his PAC or groups he was raising money for (see here, here and here.) Or that he’s a climate denier. Or that his record includes no positive environmental achievements—as colleague John Walke tweeted yesterday, out of more than 700 press releases from Pruitt’s office, not one touts any action to enforce environmental laws…”

NRDC and other of its peer NGOs and SRI investors and state officials will be watching the EPA actions VERY CLOSELY in the days ahead, we can say with some assurance.

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Late afternoon – Feb 22 — No sooner did I finish and post the above then the news came in —The Washington Post today (2-22-17) is reporting that “thousands of emails detail EPA head’s close ties to fossil fuel industry.”

In response to a legal action by the Center for Media and Democracy, thousands of the AG’s emails were released.  The communications highlight, the Post report says, close relationships between AG Pruitt and fossil fuel interests.

“The emails show Pruitt and his office were in touch with a network of ultra-conservative groups…many receiving backing from billionaire brothers Charles and David Koch, owners of Koch Industries, a major oil company…”

More in the late breaking story for you at: https://www.washingtonpost.com/news/energy-environment/wp/2017/02/22/oklahoma-attorney-generals-office-releases-7500-pages-of-emails-between-scott-pruitt-and-fossil-fuel-industry/?utm_term=.7f34f5c67cd1&wpisrc=nl_evening&wpmm=1