Recession in the Air, and Big Money Fleeing Climate Risks

August 14, 2019

Today’s news includes reports of big losses in the stock market, and indications for recession risk.

Will the next recession turn the current flight from climate risk into a stampede?


Earlier this year, one of Meryam Omi’s deputies at Legal & General Investment Management sat down with board members and managers from Exxon Mobil Corp. to discuss how the oil giant could address climate change. LGIM, which manages about $1.3 trillion, is one of Exxon’s top 20 shareholders.

The Exxon delegation listened, but it didn’t accept the suggestions, says Omi, LGIM’s head of sustainability and responsible investment strategy. Around the same time, Exxon persuaded the U.S. Securities and Exchange Commission to block a shareholder resolution that pushed the oil giant to do more to address climate risks.

So, in June, London-based LGIM announced that it had dumped about $300 million worth of its Exxon shares and would use its remaining stake to vote against the reappointment of Exxon Chairman and Chief Executive Officer Darren Woods. “There’s got to be an escalation,” Omi says.

As the risks of climate change have become more pronounced, so have efforts by major investment firms to push companies in greener directions. They tried talking. Then they started backing shareholder resolutions. Now, LGIM is at the forefront of a more aggressive, and controversial, tactic: divesting. “You cannot have the same conversation for 15 years with no results,” Omi explains. (Exxon responded to LGIM’s announcement by saying that it publishes an annual tally of emissions from its operations and is on track to meet targets for reducing methane emissions.)

Momentum is gathering, says Mark Lewis, who leads climate change investment research for Paris-based BNP Paribas Asset Management. He likens it to the divestment campaign that forced companies participating in apartheid-era South Africa to change course, and he invokes the spirit of Gandhi: “They’ve ignored us and laughed at us. I think now they’re fighting us. So next we win.”
But he knows it won’t be easy. In March, as he helped the BNP Paribas press team put the finishing touches on an announcement that its actively managed funds would exit almost €1 billion ($1.1 billion) of coal stocks as early as next year, he thought the news might cause a few “ripples” and not much more. In fact, Lewis was bombarded with emails and calls, not all of them polite. “It surprised me how big the reaction was,” he says.

Lewis, who earlier in his career was a utilities analyst at Deutsche Bank AG and deputy head of investor relations for German power company EON SE, had formed close business relationships, even friendships, with coal executives. He says the decision to cut coal was painful, but ultimately he had to face the economics.

Columbus Dispatch:

CDP, A London-based nonprofit group formerly known as the Carbon Disclosure Project, surveys thousands of companies each year, asking what they’re doing to lower emissions and whether they anticipate financial losses and risks because of changing weather and regulations. This was the first year the group asked companies to calculate potential losses.
“What we saw last year, for the first time, was companies trying to put some numbers next to what they believe their risks and opportunities are. And I think for us, it’s too early to understand because we don’t have all of the specific sector expertise to know if that number is big enough or small enough. That’s part of the process,” said Bruno Sarda, the North America CDP president based in New York.
In results from its 2018 survey, CDP found that 215 of the world’s largest 500 companies face $1 trillion in losses unless they take steps to prepare, Sarda said.
More than 7,000 companies around the world participated, representing half of the global market in 2018, he said. Two Columbus-based companies, L Brands and Huntington Bancshares, participated in the survey.
Investors often request that companies participate.
“A lot of our work is on behalf of investors; some of it is also on behalf of other businesses looking into their supply chains,” he said.
Huntington, which has $104 billion in assets, anticipated it could lose $23.6 million if no action is taken on the climate, according to the survey responses. The company cited extreme weather events, energy costs and regulations as factors. The bank holding company received a B grade for its responses. A spokesperson declined an interview request from The Dispatch.

10 Responses to “Recession in the Air, and Big Money Fleeing Climate Risks”

  1. renewableguy Says:

    And humanity will totally ok. No need to worry. /sarc off

  2. Sir Charles Says:

    Re methane emissions:

    Ideas and perspectives: is shale gas a major driver of recent increase in global atmospheric methane?

    Methane has been rising rapidly in the atmosphere over the past decade, contributing to global climate change. Unlike the late 20th century when the rise in atmospheric methane was accompanied by an enrichment in the heavier carbon stable isotope (13C) of methane, methane in recent years has become more depleted in 13C. This depletion has been widely interpreted as indicating a primarily biogenic source for the increased methane. Here we show that part of the change may instead be associated with emissions from shale-gas and shale-oil development. Previous studies have not explicitly considered shale gas, even though most of the increase in natural gas production globally over the past decade is from shale gas. The methane in shale gas is somewhat depleted in 13C relative to conventional natural gas. Correcting earlier analyses for this difference, we conclude that shale-gas production in North America over the past decade may have contributed more than half of all of the increased emissions from fossil fuels globally and approximately one-third of the total increased emissions from all sources globally over the past decade.

  3. dumboldguy Says:

    Recession? Bring it on! For many reasons, not the least of which will be to show that DJT knows nothing about managing the economy and hurt his reelection chances. Perhaps it will also help the greedy bastards in the world of finance and insurance to move away from fossil fuels—-one can hope.

  4. rsmurf Says:

    Like I’ve said before, no one is going to do anything, as long as big money is involved. And the oil companies are doing the biggest damage to the planet so they can pile more cash in their vaults.

  5. J4Zonian Says:

    The idea of making fossil fuel corporations green or sustainable or anything like it is so absurd it could only come out of rich people and the people who lie for them for a living. They’ll be sustainable when they’re shut down.

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