What we're reading about, 4/26/24

Climate, energy, and sustainability coverage we've been following around the web

Note: Earlier this week, CAS published a new report, “State of Play: Proxy Season 2024,” breaking down emissions and energy use across the Russell 1000 and highlighting 21 upcoming annual meetings where we think climate-related shareholder proposals could be worth a closer look by investors.

(1) On Wednesday, the New York City Comptroller’s Office put out a press release after shareholders voted on a pair of dissident proposals that it put forward at Goldman Sachs (GS) and Bank of America’s (BAC) annual meetings. The proposals called for the banks to disclose a “clean energy financing ratio,” (CEFR) which would compare the volume of their lending and underwriting for “low-carbon” and fossil-fuel projects. While neither resolution passed, the GS and BAC proposals won support from 29 percent and 26 percent of voted shares, respectively, a relatively strong result in the context of falling support for dissident climate proposals.

Here’s what Comptroller Brad Lander had to say in the release:

“The climate crisis will not wait for us to get our act together. Strong results today send a wakeup call to the boards of Bank of America and Goldman Sachs that shareholders are paying close attention to ways they can measure their portfolio companies’ progress on the bold climate action to which they’ve committed.”

The Comptroller’s Office argued that disclosing a CEFR “[would] allow long-term investors to better assess the role banks play in the climate transition, and whether they are on track to meet their emissions reduction commitments.” Notably, they withdrew similar proposals at Citibank, JPMorgan, and RBC, all of which agreed to disclose the ratio. Here’s what a JPMorgan spokesperson had to say about that decision to Responsible Investor:

“We found common ground with NYC Comptroller on disclosing a clean energy financing ratio with an understanding that it is going to take us some time and resources to develop a decision-useful approach… We will engage with NYC and our shareholders to provide the market with more transparency about our activities and what financing the transition truly looks like.” 

Though the Comptroller’s Office proposals didn’t pass at GS or BAC, it’ll be interesting to see whether those banks follow Citi and JPM’s lead and start disclosing a similar metric. One last resolution - aimed at Morgan Stanley - is headed to a vote at that firm’s annual meeting in late May.

(2) Investigative reporting outfit Floodlight News wrote about a suggestive pattern of “dark money” donations by the Ohio-based utility FirstEnergy in the state’s hard-fought 2018 gubernatorial race. In 2020, FirstEnergy was implicated in a huge bribery scandal after donating $60 million (!) to a non-profit controlled by the speaker of the Ohio House of Representatives, Larry Householder. The scandal - which led to racketeering charges for Householder and a $230 million fine for FirstEnergy - was linked to the Ohio state legislature’s passage of HB6, which has been described as a “bailout” of FirstEnergy’s aging Perry and Davis-Besse nuclear plants, as well as two coal plants partly owned by the company, via a special surcharge on customers’ utility bills. Floodlight’s reporting turned up new links in the scandal between FirstEnergy and the effort to elect Ohio governor Mike DeWine.

(3) According to data compiled by Bloomberg, a group of US regional banks is ramping up their lending to oil, gas and coal clients as European rivals are backing away. Since the start of 2022, the combined number of fossil-fuel loan deals provided by Citizens Financial, BOK Financial, Truist Securities, Fifth Third and US Bancorp rose 70%+ on an average annualized basis compared with the preceding six years.

Marisol Salazar, SVP for energy banking at BOK Financial, told Bloomberg that the bank is now seeing significantly more opportunities in the fossil-fuel industry. The change means that fossil-fuel developers can continue to gain access to credit at competitive rates despite the pullback from European banks. According to Salazar: “For the smaller credits, there might be a little bit more aggressiveness in terms of pricing… but overall you’re going to see pretty common terms.”

(Bloomberg)

(4) Carbon-intensive industries - like airlines - have to pick up the tab for their emissions under emissions trading systems (ETS) in the EU, UK and Switzerland, which require companies to buy allowances to cover the CO₂ they emit.

However, there’s a hole in the European ETS scheme when it comes to aviation - it only covers intra-European flights, and not the long-haul routes that drive the vast majority of airline emissions. According to a report by climate campaign group Transport & Environment that was covered by the FT, only 22 percent of emissions from flights departing from Europe in 2023 were covered by regional carbon trading schemes. 

(5) The “High-Ambition Coalition to End Plastic Pollution” is a group of 66 countries, with members that run the gamut from large OECD members like France, Germany, Japan, to small island nations, is resuming negotiations in Ottawa with what Bloomberg calls a “smaller group of countries … [that] produces a disproportionate share of plastics as well as fossil fuels,” including the US. The goal of the High-Ambition Coalition is a binding global treaty to limit plastic pollution. The exact mechanisms such a treaty would use are, obviously, TBD, but here’s the high-level framework the Coalition is focused on:

(High Ambition Coalition to End Plastic Pollution)