Friday marks the one-year anniversary of President Donald Trump’s announcement that he was pulling the U.S. out of the global Paris Agreement, and environmental groups are clamoring for others to step up and plug the gap.
A coalition formed shortly after Trump’s announcement to encourage as many participants as possible from the private and public sectors to commit to a “We Are Still In” pledge now has more than 2,750 signatories, according to the sustainability-focused nonprofit Ceres.
The pledge is to stick with the primary goal of limiting the global temperature rise to below 2 degrees annually by reducing greenhouse-gas emissions. That goal is crucial as insurers have warned that anything higher would make the world uninsurable. Signatories come from all 50 states of the U.S. and include business leaders, university presidents, faith and tribal leaders, and cultural institutions, representing 127 million Americans and $6.2 trillion of economic power.
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“The number of private-sector leaders who have stepped into the breach is impressive, substantial and promising, and what states and cities are doing will go a long way toward meeting the goals,” said Mindy Lubber, chief executive of Ceres. “That said, the U.S. not being part of a global treaty that is absolutely essential to get to a below-2-degree world is beyond unfortunate.
“As much as voluntary commitments are great and extremely compelling, the fact is we need not just thousands but many more moving all at once to get where we need to go.”
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The good news is the participation of major banks and investors, who have been leaders in committing to such actions as clean-energy investments and to divesting fossil-fuel-related securities. In the last few years, banks have committed $850 billion to clean-energy investments, said Lubber, while investors including public pension funds have placed billions more in low-carbon funds.
New York State Comptroller Thomas DiNapoli, for example, said in January he was doubling to $4 billion the allocation of the state’s Common Retirement Fund to its low-emissions-equities index. The fund, which provides benefits for the state’s police and firefighters, was the first public pension fund in the U.S. to create such an index, which excludes or reduces holdings in the worst carbon emitters and favors low emitters. The move raised the current value of the fund’s sustainable investments to more than $7 billion, said DiNapoli.
“Our investment decisions and our shareholder engagements are a caution to corporations: If they’re not helping build a decarbonized future, they may get left behind,” said DiNapoli.
That same month, the New York City Comptroller Scott Stringer, as trustee of the city’s public pension funds, announced the goal of divesting from fossil-fuel reserve owners within five years. The move would mark the first such effort by a major U.S. public pension plan. The city has five pension funds, which hold about $5 billion in securities linked to more than 190 fossil-fuel companies.
The financial future of the city’s public-sector retirees is linked to the sustainability of the planet, said Stringer: “Our announcement sends a message to the world that a brighter economy rests on being green.”
At the same time, New York City Mayor Bill de Blasio filed a lawsuit against the five biggest listed fossil-fuel companies predicated on their estimated contributions to global warming.
“The city will be seeking damages from BP BP, +0.22% , Chevron CVX, -0.36% , ConocoPhillips COP, +1.34% , Exxon Mobil XOM, +0.73% and Royal Dutch Shell RDSA, +0.36% for the billions of dollars the city will spend to protect New Yorkers from the effects of climate change,” he said.
California’s pensions funds have been active, too. The $348 billion California Public Employees’ Retirement System, known as Calpers, in April named its first investment managing director for its sustainable-investment program. Beth Richtman, who was an investment manager in the system’s real assets program, will manage the system’s environmental, social and governance integration.
Separately, Calstrs, the California State Teachers’ Retirement System, a $225 billion pension fund, named eight ESG-focused managers in April to receive investments when opportunities arise.
In the private sector, many companies have adopted climate goals, and some are now making climate-risk disclosures in their annual financial filings.
The industries that have lagged are in fossil fuels — not surprisingly — and the automobile sector, and the latter has been a big disappointment, said Lubber.
“The auto industry stood with us on Cafe [corporate average fuel economy] standards, they stood with us on emission limits. Now the Auto Alliance is standing with this administration rolling back those standards as we speak,” she said.
The Environmental Protection Agency under administrator Scott Pruitt on Thursday formally submitted a proposal to roll back the so-called Cafe rules, which were put in place under President Barack Obama as a way to limit tailpipe emissions, the New York Times reported. The rules required car makers to almost double the fuel economy of passenger vehicles to an average 54.5 miles a gallon by 2025 and were expected to make a significant contribution to greenhouse-gas reduction.
Automobile makers opposed the rules, which they said were too onerous. But they have been supportive of more stringent standards and are certainly worried about one possible unintended consequence of the rule change. California has vowed to maintain its own stricter rules on emissions using special status granted it under the 1970 Clean Air Act, a status the Trump administration said it would challenge.
But if California were to win a legal fight, it could create two sets of standards and effectively mean two separate car markets, one with the more stringent standards and one with the more lax ones.
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“The Trump administration is rolling back a wide variety of regulations that protect our water, air, land and public health in order to benefit high-pollution industries that donate heavily to political campaigns,” said the nonpartisan and nonprofit Environmental Integrity Project.
The administration has targeted more than 60 environmental rules, many of them introduced by Obama.
“The world has got more complicated under this administration,” said Ceres’s Lubber.
Meanwhile, the Securities and Exchange Commission is not expected to be much help to environmentalists under the current administration. There were hopes the SEC would introduce mandatory climate-risk disclosures in financial reporting, but those hopes have dimmed for now. Instead, some companies are making voluntary disclosures, typically in their annual regulatory filings.
“That’s great, but there are many more companies who are not making disclosures, and there’s no enforcement,” she said. “Yet the need to act is urgent — we need to move faster and at a far greater scale.”
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Among environmental exchange-traded funds, the PowerShares Global Clean Energy ETF PBD, -0.62% was down 1.2% Friday but has gained about 9% in the last 12 months. The PowerShares Water Resources Portfolio PHO, +0.56% was up 0.8% and has gained 13% in the last 12 months. The PowerShares S&P Global Water Index Portfolio CGW, +0.67% was up 0.6% and is up 4% in the last 12 months.
The S&P 500 SPX, +1.08% has gained 12% in the same time frame, while the Dow Jones Industrial Average DJIA, +0.90% has added 16%.
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