Institutional Investors Uniting Against Emissions

Institutional Investors Uniting Against Emissions

Just Twenty Companies Responsible for Half of Power Sector’s Carbon Emissions in the US

According to a press release posted by New York City Comptroller Scott M. Stringer, a coalition of some of the largest institutional investors, representing $1.8 trillion in assets, sent a joint letter setting a deadline for 20 of the nation’s largest utilities to achieve net-zero carbon.

We are not doing that well fighting climate change. And the risks that this poses not only to electric utilities and their assets on the ground, but also to investors who are shareholders in those assets, is not being lost on this group of very powerful investors. As such, these investors demanded that the 20 largest publicly traded electricity generators in the U.S. commit to achieving net-zero carbon emissions within six months and begin accounting for how they will accomplish this and align their corporate management to support this goal.

Comptroller Stringer, on behalf of the New York City Employees’ Retirement System, Teachers Retirement System of the City of New York, and the New York City Board of Education Retirement System, said “The climate crisis is an imminent threat not only to our planet, but to pensions systems, and ultimately, our beneficiaries. Delaying climate action is like denying climate change – it’s not an option for these companies or for anyone else. These are the biggest power producers and polluters in our country, which is why decarbonization is not just a moral imperative, it’s a financial necessity. This initiative makes clear that mobilizing for the planet goes hand-in-hand with protecting our pensions, and we need these commitments now.”

The 20 signatories to the letter include some of the biggest institutional investors in the world:

California Public Employees Retirement System Interfaith Center on Corporate Responsibility
Committee on Mission Responsibility Through Investment of the Presbyterian Church U.S.A. Local Authority Pension Fund Forum
Conference for Corporate Responsibility Indiana and Michigan (CCRIM) Nathan Cummings Foundation
Connecticut Retirement Plans and Trust Funds New York City Board of Education Retirement System
Dana Investment Advisors New York City Employees’ Retirement System
Domini Impact Investments New York State Common Retirement Fund
Ethos Engagement Pool International Seventh Generation
Friends Fiduciary Interfaith Coalition for Responsible Investment
Hermes EOS Teachers Retirement System of the City of New York
Hermes Investment Management TrilliumAsset Management
Illinois State Treasurer

Through their letter, not only have these investors asked the board chairs of these 20 utilities to make the net-zero commitment within the next six months, they have laid out four key governance reforms which the targeted utilities need to implement in advance of their 2020 proxy statements towards achieving the net-zero target, if they don’t want the collective voting force of the letter’s signatories to start taking remedial action against their board chairs. The utilities will need to:

  1. Identify who on the board is responsible for overseeing execution of the net-zero transition.
  2. Develop and publish a detailed transition plan to achieve net-zero emissions from electricity generation by 2050 at the latest, with clear near-term benchmarks and plans for 2025 and 2030.
  3. Incorporate transition milestones into executive compensation metrics.
  4. Disclose how political, lobbying and trade association activities will be brought into alignment with the net-zero commitment.

We believe that these kinds of actions are going to be increasing and pressures will be mounting steadily for better alignment between corporate action and the goals enumerated by the Paris Conference that are required for us to maintain temperature rise to no greater than 1.5 degrees Celsius.

About the Author:

Valerie Gardner
Ms. Gardner earned a JD/MBA and was a co-founder, CFO and General Counsel of two high tech companies. Ms. Gardner co-founded Tiemann Investment Advisors, LLC with Dr. Tiemann in 2002 to pursue investment management advisory work for individuals at an institutional level. Ms. Gardner has identified climate change as a major risk for long term investors and has worked to develop methodologies for managing and reducing the carbon risks of client portfolios.

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