States v. Companies: The Anti-Woke Crusade
There have been at least 44 bills and new laws introduced in 2022 from 17 Republican-led states aimed at companies issuing policies on climate change, gun control, diversity and other social issues, with abortion support being a likely next target, according to a Reuters report this week. This is a marked increase in the push to punish “woke” companies in conservative states, where only a dozen of such measures were proposed in 2021.
To quickly decode the word “woke,” Merriam-Webster defines it as a slang word describing being “aware of and actively attentive to important facts and issues, especially issues of racial and social justice.” We’ve seen this term weaponized in recent months, such as in Florida's recently passed “Stop Woke Act,” which prohibits employers operating in Florida from administering diversity training with topics that make employees “uncomfortable.”
In Texas, JPMorgan Chase & Co, Bank of America, and Goldman Sachs (GS.N) have been sidelined from the municipal bond market due to laws passed last year barring firms that "boycott" energy companies or "discriminate" against the firearms industry. A Texas Republican lawmaker has announced plans to introduce legislation banning companies from providing out-of-state abortion coverage, saying, “No corporation in Texas will be allowed to subsidize abortions or abortion travel in any manner.”
Similarly, earlier this year in Florida, Disney’s opposition to the states ‘don’t say gay’ law prompted retaliation when the state removed the company’s special tax staus.
Last month, West Virginia threatened to bar big banks from state banking business after the State Treasurer determined they were “engaged in a boycott of energy companies.” In an interesting turn of events, those same banks are citing climate activists’ criticism of their business practices as evidence they’re not boycotting fossil fuels. Morgan Stanley’s Chief Legal Officer Eric Grossman went as far to cite the bank’s designation as a “Dirty Dozen” top fossil fuel financier from the Rainforest Action Network.
Corporate responsibility has now become political football. The historical alliance between big business and conservative politicians has been shattered and now business leaders find themselves facing off with hostile state governments.
This has been coming for some time: Pushed by shareholders, employees and others, corporations have increasingly enacted progressive policies under the banner of CSR - or corporate social responsibility. Simultaneously, state governments have become more polarized due to gerrymandering that left many many election districts solidly red or blue. This means candidates must be further to the right or to the left or face a primary challenger that will be. And now, company policies that appear to be “woke” make an easy target for right wing politicians looking to score points with the base of their voters.
Where this battle ends up is anyone’s guess, but it's not a stretch to see the “woke wars” affecting where companies choose to locate and do business.
Germany established an 80% renewable electricity target by 2030 into law setting a new high bar for the world. The United States achieved a more ignominious top spot in a new study that revealed its carbon emissions had inflicted nearly $2 Trillion in damages on the world - higher than any other nation.
This result puts even more pressure on the US to reduce its carbon emissions on the heels of the Supreme Court decision restricting the government's authority to control greenhouse gasses from US power plants.
But don’t count out the feds entirely. In the two weeks since the Supreme Court limited the federal regulatory powers to curb greenhouse gases, it’s now clear that the EPA has some climate action tools left in the tool box. Gina McCarthy, White House climate change advisor said: “While the Court sided with special interests trying to take the country backwards, it did not take away E.P.A.’s ability to regulate greenhouse gasses and protect people from pollution.”
Scope 3 Battle Lines Drawn
Scope 3 has become one of the most hotly debated issues in the SEC’s climate disclosure proposal. Scope 3 emissions are the indirect emissions created up and down companies’ supply chains and often comprise the vast majority of a company's carbon footprint.
Critics argue that measuring scope 3 emissions is too complex and costly. Supporters counter that accounting for scope 3 emissions is essential as they constitute the vast majority of the overall footprint. BlackRock, an apparently ESG-centric asset manager, argued against ExxonMobil embarking on scope 3 measurements “given the methodological complexity, regulatory uncertainty, and double counting” and asked the SEC to soften their approach. Conversely, another investment firm, Cardano, said, “we favor scope 3 (disclosures), and we think the SEC’s got it right.”
Despite the noise, the number of companies reporting on Scope 3 emissions has tripled in the last year in response to the upcoming SEC climate rule. Kristina Wyatt’s Full Disclosure newsletter dives into the details.
The Over Exploitation Crisis
A report released this week by the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES) shows that humans are still “overexploiting wild species and habitats,” leading in many cases to biodiversity loss and widespread species extinction. The report builds on a comprehensive 2019 report that found human activities had placed one million plant and animal species at risk of extinction.
But what if preserving these ecosystems actually helped fight climate change? Nature-Based Solutions (NBSs) are “well-managed ecosystems [that] could provide effective and feasible solutions to the increasing climate threat” by increasing carbon absorption or avoiding further greenhouse gas loss from land and oceans.
Ecosystem preservation efforts got some positive news this week when the rare Spix’s macaw, a Brazilian bird that had once gone extinct outside of captivity, made a dramatic comeback thanks to a remarkable international rescue effort. After a rapid population decline in the 19th and 20th centuries, this beautiful bird was brought to international attention by the animated children’s film Rio, about a macaw named Blue. Support from around the world poured in following Rio’s success, and now the species is back to thriving in its homeland of Brazil. Perhaps a few more films would help other endangered species.
Missed last week's ESG & Climate News? Check it out now and stay in the know: July 8, 2022.
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