“We are not going to allow one election to reverse generations of progress at the height of our historic diversity, scientific advancement, economic output, and sense of global responsibility.”
– California Senate President pro tem Kevin De León & Assembly Speaker Anthony Rendon
Unpleasant a task as it is, we’ve no choice but to take stock of the potential damage the incoming Trump administration plans to inflict upon the things social investors fight hard for and the means we use to fight for them. In the Obama administration, socially responsible investing (SRI) had a sympathetic if not particularly muscular ally. Going forward, we can expect hostile pushback to our efforts to secure better regulation of the corporate impacts upon the environment, workers, supply chains, diversity, and politics. How much this will encourage companies to waver on their voluntary corporate responsibility commitments is an open question and will depend in part upon our community’s continued vigilance.
How can we move forward? This is the first in a series of blog posts that will look at how the Trump administration’s policies impact SRI priorities. We begin with climate change, where the new regime’s inclinations seem clearer than in other areas.
If This Is an Open Mind, What Would a Closed One Look Like?
An inveterate flip-flopper, the man who is on record calling climate change a Chinese hoax and who pledged to cancel all wasteful climate change spending from Obama-Clinton” told The New York Times on November 22 that he has an “open mind” about climate change and would “look at” whether to withdraw from the Paris climate agreement. But if you read his remarks carefully and balance them with the appointment of climate denier Myron Ebell to lead the EPA’s transition, there is little reason to take this head-fake at face value. Days after the Times interview, Republican National Committee Chairman Reince Priebus told Fox News that the president-elect has a “default position [on climate] which, most of it is a bunch of bunk.”
Destroying the Obama administration’s legacy will mean the dismantling of the Clean Power Plan, the linchpin to U.S. adherence to the Paris agreement, which is the rollback of executive orders and federal regulations; expedited permitting of fossil fuel extraction on federal lands; and reduced federal spending on clean energy. Even if Trump privately embraces a more nuanced view of climate science, this is the well-known game plan of the Republican Party.
Still, environmentalists and social investors have a number of arrows left in their quiver.
Paris Will Be Harder to Divorce Than the First Mrs. Trumps
First, withdrawing from the Paris climate agreement would be at least a three-year process fraught with legal challenges and massive opposition, even from the business community.
In the mainstream corporate community, the decarbonization train left the station some time ago. Harvard Business School professor Rebecca M. Henderson wrote shortly after the election:
[B]y my rough estimate, nearly every firm in the Fortune 500 has acknowledged the reality of climate change, as have thousands of other companies. Many have developed programs designed to address it, while simultaneously generating significant returns for shareholders. Most of the business world recognizes the tremendous threat that climate change represents – over the course of the Trump presidency, they need to make that perspective heard.
And that is already happening. One week after the election, more than 365 businesses and investors organized by Ceres reaffirmed their support for the treaty and the need to accelerate the transition to a low-carbon economy “in order to give financial decision-makers clarity and boost the confidence of investors worldwide.” Signatories included not just the mighty Clean Yield Asset Management, but DuPont, Gap, General Mills, Hewlett Packard Enterprise, Hilton, HP, Kellogg, Levi Strauss & Co., L’Oreal USA, NIKE, Mars, Starbucks, VF, and Unilever. Taking aim regionally, eighteen major companies – including Microsoft and Walmart – called for greater opportunities to source renewable energy in Virginia days after the election.
“There is no ignoring that the election of Donald Trump sent reverberations through the negotiation halls [at the Marrakesh climate talks], but delegates carried on with a strong spirit of determination. No country stepped back from its commitment to climate action. On the contrary, in the few days since the election, Australia, Botswana, Japan, Pakistan, Italy and others have joined the Paris Agreement.” – World Resources Institute
Other projects that will continue to advance the transition to a low-carbon economy include the RE 100, a global network of companies committed to sourcing 100% of their energy needs from renewable sources, and the We Mean Business coalition.
The Other Vote Was 110 to One
Second, the Paris agreement’s 110 other signatories recently met in Marrakesh, Morocco, to continue implementing the accord with or without the United States. The COP22 gathering produced an outline to finalize the technical rules governing the Paris agreement by 2018, which will allow countries to put forward their enhanced national climate plans in 2020. China’s chief climate negotiator pledged that his country remained committed to action. An attendee from the World Resources Institute observed:
There is no ignoring that the election of Donald Trump sent reverberations through the negotiation halls, but delegates carried on with a strong spirit of determination. No country stepped back from its commitment to climate action. On the contrary, in the few days since the election, Australia, Botswana, Japan, Pakistan, Italy and others have joined the Paris Agreement.
In addition, the assembled countries called for much greater ambition in meeting Paris’s temperature limitation goals, and 47 members of the Climate Vulnerable Forum pledged to achieve 100% renewable energy between 2030 and 2050.
There Is Life Outside the Beltway
Third, subnational governments will continue with their work to curb emissions. More than half of U.S. states have already adopted standards that require utilities to incorporate renewables into their generation mix. According to the C40 Cities Climate Leadership Group, over 10,000 climate initiatives are underway in cities worldwide.
In remarks to the China General Chamber of Commerce, former New York City mayor Michael Bloomberg noted that, in the past decade, despite a complete lack of congressional legislation on climate change, the U.S. led the world in emissions reductions because cities, businesses, and ordinary citizens led the way, and “all are looking for ways to expand their efforts.” Bloomberg went further:
In fact, if the Trump administration does withdraw from the Paris accord, I will recommend that the 128 U.S. mayors who are part of the Global Covenant of Mayors seek to join in its place. Washington will not have the last word on the fate of the Paris agreement in the U.S. – mayors will, together with business leaders and citizens.
Renewables Are Doin’ It For Themselves
Fourth, the market forces that are driving the increased uptake of solar and wind energy will continue. Solar and wind’s manufacturing costs have dropped dramatically; solar is now at grid parity with fossil fuels in many states. “Environmental rules and government subsidies are no longer the key drivers for clean power. Economics are,” wrote Joe Ryan on Bloomberg.com in November. In addition to costs, he noted, part of solar farms’ appeal is that they take months to construct, in comparison to years needed for a new fossil fuel plant.
Trump hasn’t said whether he’ll repeal wind and solar tax credits. These were extended through 2021 by a Republican-controlled Congress last year, which is reason for optimism. But Ryan also warns:
There are indirect ways Trump may impede clean energy. His proposal to cut corporate tax rates could blunt the effectiveness of the tax credits for wind and solar. He could cut research-and-development funding. Rolling back environmental regulations may make coal more competitive. And Trump will have the opportunity to appoint at least two members to the Federal Energy Regulatory Commission.
Countering these threats are statements by power producers such as AEP, Xcel, NextEra, and Duke that they will move forward with lower-carbon fleets nonetheless.
Notwithstanding these positives, the stakes are incredibly high. Lux Research projects that carbon emissions under Trump will be 16% greater than they would have been under Clinton. And the Paris agreement’s goals must not only be met, they must be dramatically exceeded over time. As New York Times columnist Eduardo Porter wrote on November 30,
According to the International Energy Agency, the commitments made in Paris will cap the growth of greenhouse gas emissions between now and 2040 to 13 percent. The 450 p.p.m. target requires them to fall by 43 percent. Getting there will require rich countries like the United States to help finance much of the transition for poor countries. The role of global diplomacy will rise.
Shareholder advocates are rising to the challenge by filing about 200 resolutions on climate-related matters for 2017 proxy ballots, according to Ceres. This is a 15% increase from last year (and a 35% increase over 2014). Clean Yield’s contribution to this effort is set to include climate-related co-filings at Kraft-Heinz, United Parcel Service, and Southern Company, as well as a number of filings that would indirectly affect corporate behavior on climate (such as tying executive pay to sustainability performance). We will avail ourselves of the countless opportunities forthcoming to lobby policymakers on climate matters in the new era, and we will continue to make the case for divestment of fossil fuel companies. There was no choice prior to November 8, and there is no choice but to do so now. In that sense, everything and yet nothing has changed.
“Economics to Keep Wind and Solar Energy Thriving With Trump,” by Joe Ryan, Bloomberg News, November 22, 2016.
“365 Businesses and Investors Call On U.S. Leaders to Support Paris Climate Agreement,” Ceres press release, November 16, 2016.