10 Scientific American, May 2019SCIENCE AGENDA
OPINION AND ANALYSIS FROM
SCIENTIFIC AMERICAN’S BOARD OF EDITORSIllustration by Rafa AlvarezClimate-Friendly
Capitalism
Investors are making companies act
on global warming—and they can do
even more
By the EditorsIt’s May, which means “proxy season” in the corporate world.
This is the time of year when publicly traded companies hold
their shareholder meetings, and investors can vote on resolu-
tions to change corporate policies. The votes can have plenty of
clout because huge private investment firms such as BlackRock
and Vanguard weigh in, as do major public shareholders such
as California’s and New York’s employee retirement funds with
billions of dollars in stock under their control. When they want
something, CEOs listen.
Recently more and more of these resolutions have pushed com-
panies to act on climate change and reduce greenhouse gas emis-
sions. Two years ago, for instance, investor proposals forced Shell
to sell off carbon-rich oil sands assets. Investors also made the
company tie 10 percent of executive bonus pay to success in cut-
ting emissions. And earlier this year BP, bowing to investor pres-
sure, agreed to align future capital spending with the targets of the
2015 Paris climate accord, reducing emissions enough to keep
global temperature rise below two degrees Celsius. That could
mean cuts as high as 50 percent, depending on the country.
This year and going forward, investors should exert more of
this leverage on these and other companies. That is because pol-
iticians, especially in the U.S., have abjectly failed to address the
threats that climate change poses to health, national security and
the environment. President Donald Trump has repeatedly said he
does not see climate change as a problem, despite strong and
steadily growing scientific evidence from the world’s research-
ers—and his own government agencies. This year the White
House took steps to create a panel, chaired by someone who be-
lieves mounting carbon dioxide is good for the planet, to attack
this overwhelming scientific consensus. On a local level, the state
of Washington recently voted down a tax on carbon emissions.
The businesses that generate large amounts of greenhouse
gases, in contrast, have proved willing to change their ways
when investors insist on it. Of the more than 600 largest public-
ly traded companies in the U.S., 64 percent have now made com-
mitments to reduce emissions, according to Ceres, a nonprofit
group that tracks corporate sustainability. Many of those moves
have come in response to proposals made at these annual share-
holder gatherings. In addition to the actions taken by BP and
Shell, Chevron has agreed to set an emissions-reduction target
for methane, another powerful heat-trapping gas.
Companies’ desire to avoid embarrassing proxy-season show-
downs has given rise to another investor force—a shareholder
network called Climate Action 100+, whose members have $32 bil-
lion in assets under management and try to push corporate chang-
es outside of these yearly meetings. One success earlier this year:
international mining giant Glen core said it will not grow its coal-
mining business any larger and will develop targets for emissions
reductions. Climate Action 100+ is also pressing nonenergy busi-
nesses that generate a lot of emissions, such as steel manufactur-
ers, to line up behind science-based reduction goals.
The motive of these investment funds is not unfettered altru-
ism. While they hold oil company stock, they also invest in real es-
tate along coastlines threatened by rising seas, in health care firms
whose costs will increase, and in dozens of other sectors that stand
to take a substantial hit if climate change is not brought under
control. So they have to take a long-term and global view.
It’s time to push this wave of capital pressure even further.
The Ceres report notes that most of the climate commitments it
tracks are vaguely worded: only 36 percent of the agreements
specify deadline-driven, quantitative targets for reduction. Com-
panies also need to adopt sustainability targets for things like wa-
ter use. More shareholders need to push for more of these specif-
ic goals and tie them to executive pay to ensure accountability.
Such demands can be tricky. The U.S. Securities and Ex -
change Commission has rules that prevent investors from mi-
cromanaging businesses. Ex xon, in fact, has asked the sec
for permission to block a proposal calling for it to align emis-
sions with the Paris accord. But the commission needs to give
shareholders the right to protect their investments. And inves-
tor activists need to keep working to bring science and business
together. Because money talks—or it walks—it can accomplish
things that politicians won’t.JOIN THE CONVERSATION ONLINE
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