HSBC to stop funding most new fossil fuel developments
LONDON REUTERS, PUBLISHED APRIL 20, 2018
Europe’s largest bank, HSBC, said on Friday it would mostly stop funding new coal power plants, oil sands and arctic drilling, becoming the latest in a long line of investors to shun the fossil fuels.
Other large banks such as ING and BNP Paribas have made similar pledges in recent months as investors have mounted pressure to make sure bank’s actions align with the Paris agreement, a global pact to limit greenhouse gas emissions and curb rising temperatures.
“We recognise the need to reduce emissions rapidly to achieve the target set in the 2015 Paris Agreement … and our responsibility to support the communities in which we operate,” Daniel Klier, group head of strategy and global head of sustainable finance, said in a statement.
HSBC said it would make an exception for coal-fired power plants in Bangladesh, Indonesia and Vietnam.
“There’s a very significant number of people in those three countries who have no access to any electricity,” HSBC chief John Flint told HSBC shareholders at the bank’s annual general meeting in London on Friday.
“The reasonable position for us is to allow a short window for us to continue to get involved in financing coal there … if we think there is not a reasonable alternative,” he said.
Aside from the coal exemptions environmental campaigners Greenpeace welcomed the move and said HSBC’s new energy strategy would prevent it from providing project finance for TransCanada Corp.’s proposed $8-billion Keystone XL oil pipeline to Nebraska.
“This latest vote of no-confidence from a major financial institution shows that tar sands are becoming an increasingly toxic business proposition,” John Sauven, executive director of Greenpeace UK, said in a statement.
Repost from the San Francisco Chronicle [Editor: Significant quote: “Studying the performance of over 2,000 companies in six sectors, the researchers discovered the stock price of companies that invested to improve sustainability in ways that were material to their businesses outperformed companies that did not.” – RS]
Investing in socially responsible companies makes sense
By Tom Kiely, Lenny Mendonca and Steve Westly, September 17, 2015
What do CalPERS, and many of the world’s largest sovereign wealth funds from Scandinavia to the Mideast have in common? They’re betting big on sustainability.
In May, the California Public Employees’ Retirement System, a $307 billion retirement fund, said it will require its asset managers to factor environmental and social risks into their investment decisions. Norway’s giant national sovereign wealth fund, with $890 billion in assets built off its oil and gas reserves, is divesting from companies that mine or burn coal. A majority of the world’s largest institutional investors — pension funds, insurance companies, sovereign wealth funds — incorporate considerations about a business’s environmental and social track record into their investment decisions.
However, too many company managers are still under the spell of the myth that shareholders are the only stakeholders who count. For decades, neo-classical economists suggested — and business schools taught — that sustainability investments unnecessarily raise a firm’s costs, creating a competitive disadvantage. Invest in anything but the bottom line, and you risk your survival we’ve been told endlessly.
Shareholder idolatry holds executives back from making the investments they should to benefit the planet and their businesses in the long-term. For every corporate leader there is a regiment of laggards.
Sure, most of the Standard & Poor’s 500 companies issue sustainability or social responsibility reports each year, but try reading those reports — they are a catalog of the tepid. Few companies integrate social and environmental factors deeply into their business strategies. U.S business organizations, such as the Chamber of Commerce, have opposed government-led efforts to reduce climate risk as overly bureaucratic and costly for business, while doing little to further business-led initiatives to improve corporate sustainability.
That’s a big mistake. For instance, in one recent study, three Harvard Business School professors showed how “firms with good performance on material (our emphasis) sustainability issues significantly outperform firms with poor performance on these issues.”
When it comes to these investments, the materiality test is crucial. Companies make all kinds of investments in sustainability and in corporate social responsibility programs. But only some of these things have a material impact on performance. The researchers looked at a set of environmental, social, and governance measures that both companies and their investors deemed material and measured their impact on stock prices.
What did they find? Studying the performance of over 2,000 companies in six sectors, the researchers discovered the stock price of companies that invested to improve sustainability in ways that were material to their businesses outperformed companies that did not.
This makes sense to a growing number of investors. Smart sustainability investments allow companies to attract better employees, improve their brands to sell more or sustain a price premium.
What should be done? Companies must do a better job of compiling non-financial data on their environmental and social performance and report it to investors and other stakeholders. Fifty percent of institutional investors surveyed by PricewaterhouseCoopers in 2014 said they were dissatisfied with the environmental-social-governance information companies provided.
Business leaders need to step up and champion these efforts.
Also, executives should act like leaders in policy debates. In early June, 80 companies, including U.S.-based Coca-Cola and Mars, pressed the British government to fight for strong action against climate change in international talks, and to aggressively push for a long-term low-carbon plan for the United Kingdom.
Where are U.S. business leaders on this?
Business leaders should propose a concrete plan for pricing carbon, for instance. After all, more than 150 companies already factor a carbon price into their business planning decisions, according to a recent study by CDP, a sustainability measurement organization. Executives have the public clout to elevate the debate on carbon pricing, and the experience to propose pragmatic frameworks for getting this done.
Corporate executives need to stop thinking of sustainability as a political discussion, and see it for what it is: good business.
Tom Kiely is a member of the Standards Council of the Sustainability Accounting Standards Board. Lenny Mendonca is a consultant to leaders in the public and social sectors. Steve Westly, a former state controller, is managing director of the venture capital firm the Westly Group.
Investor Q&A: Why the Rockefeller Brothers Fund is divesting from fossil fuels
IFC SUSTAIN Magazine, Thursday, February 26, 2015 – 2:00am
Rockefeller and oil go together like Starbucks and coffee.
So it took most people by surprise when the Rockefeller Brothers Fund (RBF) announced in September that it would divest from fossil fuels and invest in cleaner alternatives.
In a recent Q&A, Rockefeller Brothers Fund President Stephen Heintz explained what led to the decision, how the foundation is restructuring its investments and how he expects others to react.
IFC SUSTAIN: Can you explain what led to your decision to divest from fossil fuels?
Stephen Heintz: Combatting climate change with grant dollars alone is no longer sufficient.
Since 2010, the RBF has been working to invest a portion of our endowment (10 percent) in companies that are advancing sustainable practices and clean energy technologies. During Climate Week in September, we announced that the RBF has launched a two-step process of fossil fuel divestment.
IFC SUSTAIN: Can you describe how you are divesting?
Heintz: Our first step was to exit from investments in coal and tar sands oil, two of the most carbon-intensive fossil fuels. The second step of our process has been to undertake a detailed analysis of our remaining fossil fuel exposure (oil and gas) and to develop a plan for further divestment.
We are working to balance our deep concern over fossil fuels with the Fund’s longstanding mandate that our assets be invested with the goal of achieving financial returns that will maintain the purchasing power of our endowment, so that future generations will also benefit from the foundation’s charitable giving.
IFC SUSTAIN: Do you think other investors will follow your lead?
Heintz: Yes, we are very confident others will join this effort. Globally, we need greenhouse gas emissions reductions of at least 80 percent by 2050. We can only get there by leaving the bulk of coal, oil and gasin the ground and by transitioning to clean energy without delay.
Yet the stock price of a fossil fuel company is linked to its reserves. These are stranded and unburnable assets whose economic value is diminished — a reality that investors now understand and are starting to consider in their investment decisions.
Clear evidence of the increasing number of investors recognizing the urgency of this issue and acting on it can be seen in the growing numbers of institutions and individuals who have signed onto the Divest/Invest Philanthropy pledge.
IFC SUSTAIN: How do you think this pressure from investors will affect extractive companies?
Heintz: The pressure from this movement of investors is, we feel, adding weight to the critical conversation about policy — national, international and corporate — on addressing climate change with an urgency that is proportionate to the challenge.
Capital market and regulatory conditions are uniquely material to the viability of extractive businesses. Investor pressure on companies is a part of a larger discussion that will increasingly influence commodity prices, the cost of capital, and global regulatory agendas, which will have an impact on the operations of these companies.
By putting our money where our mouth is, we have been part of an effort that has taken the question of stranded assets from a hypothesis of activists to a mainstream consideration within capital markets and even central banks (see, for example, recent Bank of England statement).
IFC SUSTAIN: What specific changes can extractive companies reasonably make to address climate change and continue to attract investors?
Heintz: Concretely, companies can look at how to be good stewards of shareholder capital and commit to a candid assessment of how to best use their resources. Borrowing to invest in long-term risky projects that require $140 per barrel of oil to break even is difficult to justify.
Responsive companies will focus on returning capital to shareholders instead and migrate from a growth-at-all-costs (regardless of future profits) mindset. Extractive companies can begin to redeploy CAPEX from searching for more reserves to diversifying their businesses by investing more aggressively in renewable energy.
IFC SUSTAIN: Looking into the future, how do you think your energy investment portfolio will evolve?
Heintz: The window of opportunity to avoid catastrophic climate change narrows with each day.
Clean energy technologies and other business strategies that advance energy efficiency, decrease dependence on fossil fuels, and mitigate the effects of climate change are the way forward. Our investments in these sectors will continue to grow as more and more economically attractive opportunities open up.
This article first appeared at SUSTAIN, a magazine produced by the International Finance Corporation, a member of the World Bank Group.
Repost from The Guardian [Editor: significant quote: “Note: The first line originally said 40 coal mining companies had been dropped, instead of the correct number of 32. A further eight companies were dropped due to their greenhouse gas emissions: five tar sand producers, two cement companies and one coal-based electricity generator.” My emphasis. – RS]
World’s biggest sovereign wealth fund dumps dozens of coal companies
Norway’s giant fund removes investments made risky by climate change and other environmental concerns, including coal, oil sands, cement and gold mining
By Damian Carrington, 5 February 2015
The world’s richest sovereign wealth fund removed 32 coal mining companies from its portfolio in 2014, citing the risk they face from regulatory action on climate change.
Norway’s Government Pension Fund Global (GPFG), worth $850bn (£556bn) and founded on the nation’s oil and gas wealth, revealed a total of 114 companies had been dumped on environmental and climate grounds in its first report on responsible investing, released on Thursday. The companies divested also include tar sands producers, cement makers and gold miners.
As part of a fast-growing campaign, over $50bn in fossil fuel company stocks have been divested by 180 organisations on the basis that their business models are incompatible with the pledge by the world’s governments to tackle global warming. But the GPFG is the highest profile institution to divest to date.
A series of analyses have shown that only a quarter of known and exploitable fossil fuels can be burned if temperatures are to be kept below 2C, the internationally agreed danger limit. Bank of England governor Mark Carney, World Bank president Jim Yong Kim and others have warned investors that action on climate change would leave many current fossil fuel assets worthless.
“Our risk-based approach means that we exit sectors and areas where we see elevated levels of risk to our investments in the long term,” said Marthe Skaar, spokeswoman for GPFG, which has $40bn invested in fossil fuel companies. “Companies with particularly high greenhouse gas emissions may be exposed to risk from regulatory or other changes leading to a fall in demand.”
She said GPFG had divested from 22 companies because of their high carbon emissions: 14 coal miners, five tar sand producers, two cement companies and one coal-based electricity generator. In addition, 16 coal miners linked to deforestation in Indonesia and India were dumped, as were two US coal companies involved in mountain-top removal. The GPFG did not reveal the names of the companies or the value of the divestments.
“One of the largest global investment institutions is winding down its coal interests, as it is clear the business model for coal no longer works with western markets already in a death spiral, and signs of Chinese demand peaking,” said James Leaton, research director at the Carbon Tracker Initiative, which analyses the risk of fossil fuel assets being stranded.
A report by Goldman Sachs in January also called time on the use of coal for electricity generation: “Just as a worker celebrating their 65th birthday can settle into a more sedate lifestyle while they look back on past achievements, we argue that thermal coal has reached its retirement age.” Goldman Sachs downgraded its long term price forecast for coal by 18%.
On Wednesday, a group of medical organisations called for the health sector to divest from fossil fuels as it had from tobacco. The £18bn Wellcome Trust, one of the world’s biggest funders of medical research , said “climate change is one of the greatest challenges to global health” but rejected the call to divest or reveal its total fossil fuel holdings.
In January, Axa Investment Managers warned the reputation of fossil fuel companies were at immediate risk from the divestment campaign and Shell unexpectedly backed a shareholder demand to assess whether the company’s business model is compatible with global goals to tackle climate change.
Note: The first line originally said 40 coal mining companies had been dropped, instead of the correct number of 32. A further eight companies were dropped due to their greenhouse gas emissions: five tar sand producers, two cement companies and one coal-based electricity generator.