June 10, 2022 - ESG and Climate News
Sustainability Decoded has landed!
Fellow podcast fans, we are excited and proud to bring you the inaugural episode of our new podcast, Sustainability Decoded with Tim and Caitlin. Sustainability Decoded features a series of unstructured interviews with ESG leaders, where we balance deep dives into the complex world of ESG (me) with explainers that help listeners understand (Caitlin) and, therefore, engage. Much like we do with this ESG and Climate newsletter, we aim to inform and explain the latest trends in ESG and sustainability.
In this first episode, we are joined by Susan Mac Cormac, a Partner at the international law firm Morrison & Foerster, where she chairs the firm’s Energy and Social Enterprise and Impact Investing practices. ‘Suz’ is a global leader in sustainable business and we break down how companies are held accountable for their social and environmental impact — beyond their mission, value statement, and sustainability reports — and how we can move from being “doomers” to actually effecting positive change. Along the way, Suz gives some precious tips on how to lead and succeed in the ESG field.
Divest or Engage
One of the issues we discussed with Suz — whether divestment or engagement is the best means of reducing fossil fuel use – is hotly debated in the sustainability world. Strict divestment is a straightforward strategy heralded in some corners of climate activism as key to mitigating climate change. This week the Financial Times held on to that maxim, saying “We can only escape this trap and achieve the greatest good for our wealth as well as for future generations by exiting fossil fuels.”
While divestment from fossil fuels is an easy answer, the transition to a low carbon economy is a more nuanced problem. We featured a study in last week’s newsletter from private equity firm The Carlyle Group, which concluded that divestment raised the cost of capital for fossil fuel companies while doing very little to reduce the demand for oil and gas. Similarly, BlackRock CEO, Larry Fink, recently espoused similar reasoning saying to investors that do divest “well, somebody else is (investing), so you're not changing the world” and that divestment is “not changing the demand curve” for fossil fuels, but, “changing the supply curve, which leads to higher inflation.”
Oil and gas states like Texas are starting to fight back against fossil fuel divestments by imposing retaliatory divestments from firms that boycott fossil fuel – forcing firms like BlackRock and others to deny they are boycotters.
A Hybrid Approach
The ‘divest or engage’ dichotomy was in focus this week with a new Financial Times Moral Money Forum report, ‘To engage or divest: How should investors clean up the world’s dirtiest companies.’ The report took an in-depth look at the pros and cons of each approach, concluding that a hybrid approach is a better solution – essentially applying conditions to accessing capital. An excerpt from the report explains: “Investors can deny a company funds by refusing to refinance or roll over corporate debt unless certain environmental or social conditions are met, such as accelerating the transition to renewable energy or achieving a workforce gender balance. Andreas Hoepner of University College Dublin compares this to a homeowner looking to refinance their property who finds that the bank insists on home insulation as a condition of a fresh loan. ‘You would insulate your house because you need someone to refinance it,’ says Hoepner.”
We’re a week into Pride Month, a time when the global LGBTQIA+ community and allies come together to celebrate gains and continue the fight for equal rights. While Pride Parades around the world mark progress toward full equality, the battle against regressive policies rages on.
On one front in the battle, businesses are being called out for practicing “rainbow capitalism” – defined as embracing gay pride symbols while supporting anti-gay politicians or political campaigns. This week, Popular Information released a list of 25 companies that have collectively donated more than $13 million to anti-LGBTQIA+ politicians and campaigns over the past year – defined as receiving zero ratings on the latest Congressional scorecard produced by the Human Rights Campaign (HRC).
This ‘name and shame' list highlights the tough position companies can find themselves in when it comes to aligning political contributions with their ESG positions. The dilemma was best highlighted by a Ford Motor Company Statement in the report: “Ford proudly supports our LGBTQ+ colleagues, customers and community. Contributions…are bipartisan and take into consideration many issues that are important to meeting the needs of our customers, our team and our company.”
Missed last week's ESG & Climate News? Check it out now and stay in the know: June 03, 2022.
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