{"id":92749,"date":"2017-05-22T12:00:46","date_gmt":"2017-05-22T11:00:46","guid":{"rendered":"https:\/\/www.transcend.org\/tms\/?p=92749"},"modified":"2017-05-21T14:57:20","modified_gmt":"2017-05-21T13:57:20","slug":"how-boring-old-pension-funds-might-curb-global-warming","status":"publish","type":"post","link":"https:\/\/www.transcend.org\/tms\/2017\/05\/how-boring-old-pension-funds-might-curb-global-warming\/","title":{"rendered":"How Boring Old Pension Funds Might Curb Global Warming"},"content":{"rendered":"
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Jay L. Clendenin\/Los Angeles Times\/Getty Images<\/p><\/div>\n

18 May 2017 – <\/em>If civilization still exists a century\u00a0from now, Earth ought to throw a parade for pension funds. For all their fiscally conservative stodginess, the people tasked with safeguarding your nest egg are forcing the financial world to pay attention to climate change.<\/p>\n

Last week, some retirement funds and church endowments, along with BlackRock, the world\u2019s largest investment manager, approved<\/a>\u00a0a proposal that Occidental Petroleum begin researching and reporting its\u00a0climate-related vulnerabilities<\/a>. Shareholders of other petroleum companies have petitioned for climate risk disclosure before, but no one\u2019s ever\u00a0pushed through a vote. These aren\u2019t save-the-planet activist shareholders, either. They\u2019re investment companies whose business is ensuring they have enough money to pay out future financial obligations.<\/p>\n

Occidental Petroleum is one of the nation\u2019s\u00a0largest oil companies. Not surprisingly, it opposed the proposal. But the vote needn\u2019t have happened. BlackRock1<\/sup>, and other investors, had been asking the company for more than a year to voluntarily disclose its risk. Occidental demurred, saying it already considered the long term risks climate change poses to its business. The rigor of those reports dissatisfied many investors. So they passed a measure calling on the company to, among other things, issue annual reports (starting in 2018) on how things like\u00a0the Paris agreement\u2014which seeks to limit global warming to 2\u02daC\u2014will impact its its business.<\/p>\n

The investment community\u2014despite its cold-as-money reputation\u2014wields\u00a0significant planet-saving power, says Sangwon Suh, a professor of environmental science and management at UC Santa Barbara. \u201cThis is an example of what I call the Trojan strategy, which is where socially-responsible investors can actually make a change in the company\u2019s decision making,\u201d he says. In a December, 2016, op-ed for the Huffington Post<\/a>, Suh wrote that this \u201cTrojan strategy\u201d was probably the most effective. By contrast, divestment is a strategy where climate-conscious investors pull their money out of environmentally subpar companies. Suh points out that this just makes those shares available for other, morally-ambiguous investors.<\/p>\n

But BlackRock, with $5.4 trillion in global assets, is not predominantly concerned with social responsibility. It\u2019s worried about protecting its clients\u2019 assets. Retirement funds\u2014like those that predominantly made up the bloc of shareholders that voted in favor of the Occidental climate risk disclosure\u2014manage smaller funds, but have similar responsibilities. A 2015 white paper outlining\u00a0climate risks to investment portfolios<\/a> made BlackRock\u2019s stance clear: \u201cYou may or may not believe man-made climate change is real or dismiss the science behind it. No matter. Climate change has arrived as an investment issue.\u201d<\/p>\n

Rising seas and higher temperatures might not directly impact an oil company, but government regulations could. In late 2015, nearly 200 governments made a pact to act against climate change when they signed the Paris agreement. During the 2016 campaign, Donald Trump promised to cancel or renegotiate this country\u2019s commitment. As president, however, he\u2019s repeatedly<\/a> postponed<\/a> doing anything, probably because fulfilling his promise could place\u00a0the US at a diplomatic disadvantage. Key\u00a0trading partners like China, Canada, and the European Union remain committed to their Paris goals.<\/p>\n

But from an investing standpoint, those commitments aren\u2019t absolutes. The EU could disintegrate, China\u2019s economy could go crawling back to coal, and Canada could\u00a0ditch progressive Justin Trudeau in favor of someone hell-bent on\u00a0slurping Alberta\u2019s\u00a0tar sands dry. And the US could renege on\u00a0Paris, inspiring others to do the same. Point is: How are these retirement funds and investors so sure climate will be a risk?<\/p>\n

Well, BlackRock and other fund managers read direct climate signals from various economic sectors\u2014say, property insurance, which is seeing rising premiums due to the uptick in severe storms. They also get feedback from a growing number of clients interested in sustainable investing.<\/p>\n

Finally, climate policy isn\u2019t a monolith\u2014Paris might not encompass the whole world, but many countries with strong, resilient economies will carry on with their pledges. Let\u2019s say, for instance, Norway places\u00a0a moratorium on oil drilling. Any oil buried below that nation (and its territorial waters) is stranded. \u201cThere\u2019s a small risk of this actually happening, but a huge impact if it actually does happen,\u201d says Suh. \u201cAnd investment companies look at total risk, which is chance times impact.\u201d<\/p>\n

Gigantic investors like BlackRock wield\u00a0great\u00a0leverage over a lot of different companies. But even BlackRock\u2019s 7.8 percent share in Occidental Petroleum wouldn\u2019t have been enough to force the company to disclose climate risk on its own. The major push came from smaller funds, like the California Public Employees\u2019 Retirement System and the Texas Teachers\u2019 Retirement System. These are tiny players compared to BlackRock\u2019s $5.4 trillion stake in Occidental\u2014CalPERS holds\u00a0a mere $203 billion in assets, and Texas Teachers just $133 billion. But combined, these and the other pension and endowment managers held\u00a0enough shares to push the vote nearly to the brink. Occidental hasn\u2019t disclosed the actual votes, but a similar climate risk vote at last year\u2019s shareholders meeting narrowly failed. Reports are that BlackRock\u2019s weight pushed it through this year.<\/p>\n

Of course, not every shareholder that voted in favor did so out of purely financial reasons. The Nathan Cummings Foundation<\/a>\u2014which co-introduced this year\u2019s resolution\u2014proudly proclaims its activist bent. And CalPERS is known to have progressive values. Even BlackRock isn\u2019t totally cold to ideology. A spokesperson explained that the values of its clients\u2014who are increasingly interested in sustainable investment\u2014goes into its financial calculus. \u201cBut none of these groups are doing this solely to save the environment or the world,\u201d says Suh. \u201cTheir primary concern is whether or not their money is at risk.\u201d<\/p>\n

And they aren\u2019t alone. More than\u00a01,500 institutional investors are members of the UN-supported Principles for Responsible Investment, which lists accounting for climate risk among its six tenets. \u201cTogether, they represent more than $60 trillion in combined assets,\u201d says Suh. Maybe retirement saving isn\u2019t so boring after all.<\/p>\n

Related Video:<\/strong><\/p>\n

King Tides Show Us How Climate Change Will Threaten Coastal Cities<\/strong><\/p>\n

httpv:\/\/www.youtube.com\/watch?v=5cZGlIi1myA<\/p>\n

Seawall-topping king tides occur\u00a0when extra-high tides line up with other meteorological anomalies. In the past they were a novelty or a nuisance. Now they hint at the new normal, when sea level rise will render current coastlines obsolete.<\/em><\/p>\n

1<\/sup> UPDATE 05\/18\/17 7:30pm ET \u2014 Corrected from BlackWater, which is a private military company (now named Academi).<\/p>\n

_______________________________________________<\/p>\n

More Climate Finance:<\/em><\/p>\n

The Government\u2019s Top Financial Regulator Is Investigating ExxonMobil<\/a><\/em><\/strong><\/p>\n

Watch Shell\u2019s 1991 Video Warning of Catastrophic Climate Change<\/a><\/em><\/strong><\/p>\n

If Exxon\u2019s Punished for Climate Change, It\u2019ll Be for Lying to Investors<\/a><\/em><\/strong><\/p>\n

Go to Original \u2013 wired.com<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

18 May 2017 – Last week, some retirement funds and church endowments, along with BlackRock, the world\u2019s largest investment manager, approved a proposal that Occidental Petroleum report its climate-related vulnerabilities. These aren\u2019t save-the-planet activist shareholders, but investment companies. More than 1,500 institutional investors are members of the UN-supported Principles for Responsible Investment, which lists accounting for climate risk among its six tenets.<\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[146],"tags":[],"class_list":["post-92749","post","type-post","status-publish","format-standard","hentry","category-economics"],"_links":{"self":[{"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/posts\/92749","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/comments?post=92749"}],"version-history":[{"count":0,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/posts\/92749\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/media?parent=92749"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/categories?post=92749"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/tags?post=92749"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}