From Climate Home is this post today by Megan Darby 8 takeaways from the Green Climate Fund meltdown  Excerpts in italics below with my bolds and images.

The UN’s flagship climate finance initiative had a public setback this week. What went wrong, what are the political implications and what happens next?

The UN’s flagship climate finance initiative had a major setback this week, with the board failing to agree on any big ticket decisions.

Longstanding tensions at the Green Climate Fund came to a head in Songdo, South Korea, as it opened talks on raising a new round of contributions.

On top of that, the head of the secretariat abruptly resigned, adding top level recruitment to the fund’s woes.

As the dust settled, Climate Home News spoke to several participants and observers about what went wrong, the fallout and next steps. Here are eight takeaways.

1. Absent Oquist

The meeting got off to a bad start when the Nicaraguan co-chair failed to show up. Ok, so things were pretty bad back home, with anti-government protests turning violent.

But it was ironic, given Paul Oquist had done a major U-turn to get the job. He notoriously refused to endorse the Paris Agreement in 2015, saying it was too weak. Nicaragua only joined last year when it became apparent Oquist otherwise had no chance at leading the GCF board.

In his absence, developing country board members complained they had not been properly consulted on the agenda, kicking off a protracted procedural dispute.

2. Trump towers

After president Donald Trump made clear he had no plans to put any more money into the GCF, you may wonder why the US still has a seat on the board.

Trump sizes up the benefits were Paris Accord to actually succeed.

Well, the country has already handed over $1 billion and Geoffrey Okamoto is the Trump appointee charged with seeing it is spent wisely. But he can afford to be provocative, having no stake in the fund’s sustainability.

His insistence that the replenishment process should be “donor-driven” did not go down well, on a board deliberately structured to give the developing world an equal say. Nor did his lobbying to end talks on time, while others were trying to salvage some agreement.

3. Fundraising

If there was any doubt on where the talks got stuck, a glance at the video page should dispel it. There are no fewer than six sessions recorded on “matters related to replenishment”, spanning more than 24 hours.

At heart, it is a rich-poor fight of the kind familiar to anyone who follows UN climate negotiations. Donor countries try to attach conditions to funding, while beneficiaries demand they quit stalling and deliver.

In previous meetings, the board has tended to push through some headline outcomes – usually project approvals – at the last minute, while deferring contentious policy decisions. This time round, representatives from Canada and Finland as well as the US were not prepared to just muddle through.

4. Performance review

Before it can raise new money, the fund will need to show donors what it has done with the initial round of contributions. This and other preparatory work is expected to take six months or so.

“If there is one thing we need to decide this time, it is to start a review, because that is a precondition to replenishment processes,” said Germany’s Karsten Sach in the meeting.

The problem was in deciding who should carry out the review. Most saw it as the natural remit of the fund’s independent evaluator Jyotsna Puri, but a handful of developing countries wanted to outsource it. So here too, there was no agreement.

5. Bamsey bails

After a weary-looking chair admitted defeat on replenishment, he dropped a bombshell: the fund’s top executive Howard Bamsey resigned with immediate effect.

Nobody blamed Bamsey for the chaos, which was essentially political, or cast doubt on his explanation the move was for “pressing personal reasons”. The Songdo-based role had kept him away from his family in Australia. (He could not be reached for further comment.)

But the timing took some – including the secretariat’s communications team – by surprise. He had been expected to oversee the replenishment process before leaving. His replacement must take on the heavy lift of fundraising and resolving a backlog of governance issues, while navigating the heated boardroom politics.

6. Projects in limbo

The collapse means a three-month delay for 11 projects bidding for nearly $1 billion of GCF money. Solar panels in Tonga, water management in the Guatemalan highlands and climate finance upscaling across 17 countries are some of the interventions that will just have to wait.

“The people and communities the GCF is meant to support – those who are most vulnerable – are the ones who suffer the most when progress is delayed,” said Action Aid’s Brandon Wu.

It does nothing to help the fund’s reputation for being slow to get money moving. Then again, with a cash crunch looming, the fund cannot afford to make cavalier spending decisions.

7. Political fallout

It comes in a critical year for the UN climate process. Ministers are due to take stock of global action at the Cop24 negotiations in Katowice, Poland this December.

Climate finance is a key part of that. The industrialised world has promised to mobilise $100 billion a year by 2020. Many countries’ climate plans hinge on that support.

The GCF is not expected to deliver all that investment, but is a totem of international cooperation. If it breaks down, it bodes poorly for the Paris Agreement.

8. Optimism

Despite the public meltdown, everyone CHN contacted was hopeful of getting things back on track. There is time for the fund to redeem itself before Cop24, at the next board meeting in October. Behind the scenes, its advocates will knock some heads together in the coming months.

While finance people may be horrified at the inefficiency and game-playing, those coming from a climate negotiations background see the occasional political upset as par for the course.

“Anything about new money is always very thorny,” said Meena Raman of the Third World Network. “I don’t think we have given up on [the GCF] and I don’t think anyone should.”

Footnote:  The last takeaway is wishful thinking from Climate Home, who are desperately hopeful that Paris Accord and the Green Fund succeed, despite the obvious signs of collapse.  Staying hopeful is also a signal of virtue.

Politicians and media pundits like to say that Climate Change is the biggest threat to modern society. I am coming around to agree, but not in the way they are thinking. I mean there is fresh evidence that we can defeat radical Islam, but we are already losing to radical climatism.  I refer to climate alarm and activism, which has come to dominate the environmental movement and impose an agenda for social re-engineering.  And now we have fresh evidence that even capitalists are working to undermine the infrastructure supporting modern civilization.

As we approach the year 2020, we confront the spectacle of financiers raiding shareholder wealth in order to cripple the Energy Industry, seen as threatening the climate.  2020 used to indicate perfect eyesight, so that perceptions could be trusted.  This is the opposite:  People who should know better have drunk climatist koolaid and are now running the asylum.

Dan Eberhart exposes this latest twist in his Forbes article Corporate Resolutions On Social Issues Serve Activists, Not Shareholders  Excerpts in italics with my bolds.

America’s growing energy dominance is helping transform our economy and revitalize the forgotten parts of our nation.

Through innovation and free-market principles, America’s oil and natural gas sector have moved us from an age of scarcity to a future of abundance. As a nation, we are once again the world’s biggest producer, with all of the economic, trade and national security benefits that portends.

But there is a move afoot by wealthy investment firms and environmental activists to undermine that success and turn back to a time of scarcity by making climate change an issue in the boardrooms of energy producers big and small. Under the guise of socially responsible investing or ESG – environmental, social and governance – they are attempting to “decarbonize” our economy one corporation at a time.

America’s success in the energy sector is directly attributable to the strength of our economic freedom and competitive markets – just look at Venezuela, Angola, Mexico, Iran, Libya or Russia for the grim alternative.

The numbers are astounding. Domestic oil production reached 10.9 million barrels a day this month and is expected to continue its ascent to record-setting levels well into next year, according to the U.S. Energy Information Administration (EIA). By 2019, surging domestic production is expected to drive down our use of imported oil to the lowest level since 1959.

The use of hydraulic fracturing to squeeze ever more oil and gas from tight shale rock is a key driver of the energy boom. Production from America’s seven major shale formations is forecast to hit 7.2 million barrels a day by the end of this month, according to EIA.

It’s the communities in and around these formations – located almost exclusively in what are often derided as “fly-over states”– that are seeing the everyday benefits of jobs, rising wages and increasing confidence in the economy. The resurrection of the energy sector is turning small towns once on the verge of becoming ghost towns into bustling centers of activity.

There’s no guarantee the good times will continue, though, especially if companies stop searching for new supplies of oil and gas. For those who subscribe to the ideas of socially responsible investing, the end of energy dominance can’t come soon enough.

Proxy advisory firms Glass Lewis, ISS and others are increasingly advising their large shareholder clients to turn America’s boardrooms into a battleground over climate change. In the process, they are undermining the financial stability of traditional energy companies by attempting to force directors to invest in renewable energy instead of fossil fuels.

Shareholders are, of course, within their rights to propose resolutions and pursue changes to the way corporations are governed. But, increasingly, the aim of these resolutions has shifted from securing better returns to achieving political change when our political leaders have disagreed with the direction these activists wish to go.

From the perspective of corporate leaders, this new frontier of so-called social responsibility looks more like the age of proxy pirates, who unfurl the Jolly Roger and swing aboard the boardroom deck intent on striking fear in the hearts of the captains of industry.

These attacks on corporate governance and fiduciary responsibility were once rare but are growing in frequency. In the early 2000s during the era of “peak oil” – when many believed our oil supplies were running out on their own – less than 200 shareholder proposals each year focused on environmental or social factors, according to Proxy Preview.

Over the past decade, the number of shareholder proposals motivated purely by political aims has increased in lockstep with our growing energy security. And the trend is growing. According to the Institutional Shareholder Services, more than two-thirds of the proposals filed this year were related to social or environmental pet causes.

The rising prevalence of climate-risk resolutions threatens to destabilize America’s energy sector, reversing the benefits of energy dominance and forcing change regardless of the economic and security costs to society.

Oil and gas projects take years, sometimes decades, to develop. If companies don’t invest today, consumers may find themselves paying more for imported energy.

The efforts of investment firms like BlackRock, Vanguard and State Street are distorting the market and scaring off investment that will, if allowed to continue unanswered, result in future supply shortages and higher prices for consumers.

Dan Eberhart Bio
I am CEO of Canary, one of the largest privately-owned oilfield services companies in the United States. I’ve served as a consultant to the energy industry in North America, Asia and Africa. My commentaries have been published in The Hill, Real Clear Energy, and the Economist. I have appeared on Fox News, CNN and CNBC. I am the author of The Switch. I was honored to be named to Hart Energy’s “30 Under 40” list and to be included on several U.S. trade missions to sub-Saharan Africa. I have undergraduate degrees in economics and political science from Vanderbilt University and a law degree from Tulane Law School. A Georgia-native, I currently live in Phoenix, Arizona, with my wife and daughter.

Comment:  I am all for Corporate Responsibility, which used to mean doing due diligence to get the facts and act accordingly as a reasonable good citizen.  Instead, people are falling prey to ideologues and investors are being steered toward con artists.  Behind all of this are the Climatists, true believers in the unproven notion that humans control the climate and not in a good way.

The Climatist Game Plan (From Previous post Climatist Manifesto)

Mission: Deindustrialize Civilization

Goal: Drive industrial corporations into Bankruptcy

Strategy: Cut off the Supply of Cheap, Reliable Energy

Tactics:

• Raise the price of fossil fuels
• Force the power grid to use expensive, unreliable renewables
• Demonize Nuclear energy
• Spread fear of extraction technologies such as fracking
• Increase regulatory costs on energy production
• Scare investors away from carbon energy companies
• Stop pipelines because they are too safe and efficient
• Force all companies to account for carbon usage and risk

Progress:

• UK steel plants closing their doors.
• UK coal production scheduled to cease this year.
• US coal giant Peabody close to shutting down.
• Smaller US oil companies going bankrupt in record numbers.
• Etc.

Collateral Damage:

• 27,000 extra deaths in UK from energy poverty.
• Resource companies in Canada cut 17,000 jobs in a single month.
• Etc.

For more info on progress see: http://business.financialpost.com/fp-comment/terence-corcoran-clean-green-and-catastrophic

Summary:

Radical climatism is playing the endgame while others are sleeping, or discussing the holes in the science. Truly, the debate is over (not ever having happened) now that all nations have signed up to the Paris COP doctrine. Political leaders are willing, even enthusiastic dupes, while climatist tactics erode the foundations of industrial society.  Deaths and unemployment are unavoidable, but then activists think the planet already has too many people anyway.

ISIS was an immediate threat, but there is a deeper and present danger already doing damage to the underpinnings of Life As We Know It. It is the belief in Climate Change and the activists executing their game plan.  Make no mistake: they are well-funded, well-organized and mean business.  And the recent behavior of valve-turners, acting illegally to shut off supplies of fossil fuel energy, shows they are willing to go very far to impose their will upon the rest of us.

Shell Shareholders Vote 94% Against Climate Target-Setting Resolution

On May 22, 2018 one of the first skirmishes went badly for climatists, though journals like the Guardian gave no such impression:
Shell investors revolt over pay and maintain pressure over climate change; Oil firm grilled over carbon emissions, but defeats motion calling for tougher targets.

The resolution (“2DS”) represents a new front in attempts to constrain oil majors since it seeks authority to set operational goals in reference to the Paris accord, normally the discretion of management. BTW this type of resolution requires 75% approval, and only got 6%.

Proxy advisors exercise great influence in these fights and are coming under increasing scrutiny and criticism for promoting causes against the financial interests of shareholders. In this case some may be taking notice that virtue signaling is not free of consequences. Independent European proxy advisory group ECGS recommended investors back the climate resolution, but major advisers Glass Lewis and ISS opposed it. The results show no major institutional investor (including Norwegian wealth fund) gave support.

Climate Activists storm the bastion of Exxon Mobil, here seen without their shareholder disguises.

The background and context for shareholder climate activism comes from Harvard Law School forum on Corporate Governance 2018 Proxy Season Preview  Excerpts with my bolds.

2017 was breakout year for climate change campaigns with three landmark majority votes asking Exxon Mobil, Occidental Petroleum, and PPL to report on how they plan to adjust their business models in line with the Paris Accord’s goal of limiting global warming to 2° Celsius (“2° scenario” or “2DS”).

The results reflect a sea change in the attitude and voting practices of several major asset managers—BlackRock, Vanguard Group and Fidelity Management & Research—which for the first time supported some of the climate change resolutions last year. Of the three, Fidelity made the greatest shift in its voting, backing every one of the 2DS resolutions it voted on, while BlackRock and Vanguard only endorsed the two at Exxon and Occidental.

Other institutional investors could follow suit, particularly as a result of pressure from their own shareholders and clients. Last year, Walden Asset Management withdrew proposals at BlackRock, Vanguard, and JPMorgan Chase after the firms agreed to review inconsistencies between their proxy voting records and their public stance on climate change. Walden and other filers have similar resolutions pending this year at Bank of New York Mellon and Cohen & Steers and withdrew a third at T. Rowe Price Group. Franklin Resources, which has received proxy voting review resolutions every year since 2014, wasn’t retargeted in 2018 because it improved its approach by voting for 24% of climate risk proposals in 2017, compared to 10% in 2016.

The proxy advisors have also amended their voting policies for 2018 to reflect their general support of resolutions to disclose climate-related risks. ISS’s policy now extends to proposals on how the company identifies, measures and manages such risks, in keeping with the recommendations of the TFCD, while Glass Lewis will largely back requests for climate change scenario analyses at companies in extractive or energy-intensive industries.

All of this has galvanized shareholder activists, who have filed a new round of 2DS proposals for 2018 with the expectation of generating a higher number of favorable votes or encouraging pro-action by companies. In addition to last year’s three majority vote companies, Duke Energy and Marathon Petroleum have produced or committed to producing climate impact reports, even though 2017 proposals received less than majority support. Several utilities targeted in 2018—CMS Energy, DTE Energy and WEC Energy Group—have also agreed to publish climate assessments.

Even so, not all company responses have satisfied investors. Exxon’s newly released report has already drawn criticism from proponents for concluding that aggressive climate policies pose little risk to its reserves because the demand for fossil fuels will remain strong for decades. Individual investor Steven Milloy went a step further by characterizing these reporting exercises as mere “greenwashing”  to improve companies’ public image. In a proposal at Exxon that was later withdrawn, he asserted that many voluntary activities and expenditures touted as protecting the climate are a waste of corporate assets that fail to yield any meaningful benefits to shareholders, public health, or the environment. As a case in point, two years after BP and Royal Dutch Shell shareholders overwhelmingly passed 2DS resolutions, the companies still disclose only minimal information on how they are mitigating climate risks, and they have yet to set greenhouse gas (GHG) reduction targets or markedly improved their investments in low-carbon technology.

Although 2DS will be the most-watched environmental category this year, other climate-related resolutions could generate significant support. As You Sow and Miller/Howard Investments have filed resolutions at nine oil and gas producers to report on their efforts to monitor and minimize methane leakage. Prior support on these proposals has been strong, averaging 31.7% in 2017, including two resolutions that received votes in the 40% range.

Aside from energy firms, proponents are targeting a broad range of industries with resolutions to set goals to reduce GHG emissions or increase renewable energy sourcing. In the past, these measures have averaged support in the 20% range, though several this year have already yielded commitments from AES, American Electric Power, and Western Union. A proposal variation favored by Jantz Management and Amalgamated Bank—to assess the feasibility of achieving net-zero GHG emissions by a specific date—continues to be excludable as ordinary business.

Resources:

Fund Managers Should Focus on Returns, Not Political Ideals RealClearMarkets

This trend, while relatively new, is alarming and it differs significantly from traditional activism. While traditional activist shareholders used the proxy proposal process to advance views that differed from management on what was best for the company, they never did anything that would undermine the reason for their investment, which was to maximize shareholder value. In contrast, the new wave of shareholder activists, have a fundamentally different goal; to exploit the proxy proposal process to drive wider societal change.

Pensioners Pay for Climate Activism

We all care about the environment and our own social causes, but an increased focus on issues that have no concrete connection to value has proven costly for the retirees who rely on their pension fund for their livelihood and the taxpayers that backfill their underperformance.

Now the nation’s largest passive-investment fund is moving toward implementing the same types of policies as the pension funds that happen to provide it billions of dollars in business each year, and millions of everyday investors could be affected. Anyone with an investment account should take note.

Climate Shell Game

Shell Resolution:  Shareholders support Shell to take leadership in the energy transition to a net-zero-emission energy system. Therefore, shareholders request Shell to set and publish targets for reducing greenhouse gas (GHG) emissions that are aligned with the goal of the Paris Climate Agreement to limit global warming to well below 2°C.

This shareholder resolution is intended to express shareholder support for a course towards a net-zero-emission energy system. The why of a course towards a net-zero-emission energy system is clear: increasing costs of the extraction of fossil fuels, decreasing costs of generating renewable energy, and the global political pledge to stop global warming. The how and the what are up to the management of Shell. It is up to them to set GHG emission reduction targets and to develop activities to attain these targets.

We the shareholders request that the company publish company-wide greenhouse gas (GHG) emission reduction targets according to the following 3 scopes:

Scope 1: direct emissions from the facilities under Shell’s operational control or the equity boundary,
Scope 2: indirect emissions from the facilities of others that provide electricity or heat and steam to Shell’s operations,
Scope 3: emissions that Shell estimates come from the use of Shell’s refinery products and natural gas products.

How Climate Law Relies on Paris

On the same day POTUS announced US withdrawal from Paris accord, a majority of Exxon Mobil shareholders approved a resolution asking management to assess the value of corporate assets considering a global move toward a low-carbon future. Here is the resolution, filed by the New York State Comptroller:

RESOLVED: Shareholders request that, beginning in 2018, ExxonMobil publish an annual assessment of the long-term portfolio impacts of technological advances and global climate change policies, at reasonable cost and omitting proprietary information. The assessment can be incorporated into existing reporting and should analyze the impacts on ExxonMobil’s oil and gas reserves and resources under a scenario in which reduction in demand results from carbon restrictions and related rules or commitments adopted by governments consistent with the globally agreed upon 2 degree target. This reporting should assess the resilience of the company’s full portfolio of reserves and resources through 2040 and beyond, and address the financial risks associated with such a scenario.

The Perpetrators: Huge Fund Managers like BlackRock and Vanguard apply Proxy Power against companies in their portfolios.

Reports such as these have been appearing in the media:

BlackRock Wields Its $6 Trillion Club to Combat Climate Risks

Big investors press major companies to step up climate action

‘Money talks’: A $1.2 trillion fund manager is about to pull investment from companies that won’t act on climate change

BlackRock’s Message: Contribute to Society, or Risk Losing Our Support

The irresponsible behavior by these perps is explained by Tim Doyle at Crain’s newsletter: BlackRock mustn’t mimic underperforming NYC pension funds. Excerpts below with my bolds

Financial firms and fund managers must focus on returns, not political and social causes

Earlier this year, BlackRock CEO Larry Fink released his annual letter to CEOs, in which he called for a greater focus on “societal impacts” by the companies in which BlackRock invests. The lengthy letter went into considerable detail to explain the firm’s position, but failed to specify how this initiative will be carried out and what it means for the millions of hardworking Americans investing in BlackRock’s passive index funds.

But what is really behind this call to action? And why are passive-fund managers becoming active?

BlackRock’s newfound focus comes at a time when pension funds—such as the New York City Employment Retirement Systems and California Public Employees Retirement System (CalPERS)—are taking an increasingly aggressive position toward investments that align with social and political agendas, with returns often taking a backseat.

In New York today, the city’s contribution to its pension funds were $9.3 billion in fiscal 2017, up from $1.4 billion in 2002. The city’s budget will soon allocate more spending on pension costs than on social services (excluding education), while the funds are estimated to be at least $65 billion in the red, with a weighted average funded ratio of only 62%, or 10% below the national average. These are alarming figures.

Ironically, as the pension system struggles to meet its obligations, city Comptroller Scott Stringer is ramping up the funds’ focus on matters that on their face have little to do with performance and much more to do with public relations, submitting 92 separate shareholder proposals to 88 different companies in fiscal year 2017, the majority focused on giving large passive funds and pensions special status to elect directors and on social and environmental issues.

Stringer even stated in his inaugural address that he wants to “remake the office of comptroller into a think tank for innovation and ideas” and recently came out in support of fossil-fuel divestment at the city’s pension funds—another politically motivated move that could cost taxpayers billions.

The same can be seen at the nation’s largest public pension fund. CalPERS has increased its environmental and social investing and activism while converting a $3 billion pension surplus in 2007 to a $138 billion deficit today. CalPERS leaders have also taken an increasingly active public role, using the fund’s environmental and social platform to push a larger agenda on the world stage, all while struggling to meet its obligations.

Despite poor returns, these funds carry a large influence on companies, like BlackRock, that manage trillions in pension fund money, pressuring them to also take an aggressive stance on these issues. CalPERS, for instance, has paid BlackRock millions of dollars in fees and is negotiating with the company over management of the fund’s $26 billion private-equity program. BlackRock also voted in support of a CalPERS-sponsored climate-related proposal for the first time in 2017.

These are no small matters for a company that manages roughly $6 trillion in assets, the large majority of which are passive investments meant to track an index for steady value creation, not to act as active managers to push political and societal agendas unrelated to returns.

Since BlackRock’s announcement, its CEO has made a number of public appearances but has yet to reassure those who have placed trust in his firm’s passive-investment vehicles. After all, passive investors are looking to make gains based on the market, not pick winners and losers based on the social and political influences of mismanaged pension funds. Instead, the firm’s inability to share concrete details about the path forward creates more confusion for investors, who are worried what this new focus on “social impact” will mean for their retirement funds.

We all care about the environment and our own social causes, but an increased focus on issues that have no concrete connection to value has proven costly for the retirees who rely on their pension fund for their livelihood and the taxpayers that backfill their underperformance.

Now the nation’s largest passive-investment fund is moving toward implementing the same types of policies as the pension funds that happen to provide it billions of dollars in business each year, and millions of everyday investors could be affected. Anyone with an investment account should take note.

Tim Doyle is vice president of policy and general counsel at the American Council for Capital Formation.

New York city signed up for “Me Too” commitment to Paris Accord, and the city’s pensioners are paying the price as their retirement funds suffer from virtue signaling divestment from oil companies.  Jeff Patch writes in Real Clear Policy End the Political Games With Public Pensions  Excerpts below with my bolds.

There’s a link on New York City Comptroller Scott Stringer’s website to an outline of his office’s Powers and Duties Under New York State Law. The 159-page overview covers an extensive spectrum of legal responsibilities, ranging from arts and cultural affairs to worker compensation. Nowhere does the list reference shareholder activism, directing city environmental policies, or — for that matter — leveraging the $190 billion in pension fund assets his office stewards to pursue a political agenda.

And yet that’s exactly what Mr. Stringer is doing. The professional investment managers of the city’s five public-sector pension funds, their board members, and Stringer himself are all exploiting their positions as custodians of the retirement savings of the city’s workers to promote their own political objectives. Politics seems to pervade every action of the city comptroller’s office, which just last month announced a plan to divest pension holdings from fossil-fuel interests, regardless of the impact on financial performance.

A new report from the American Council for Capital Formation sheds light on how such political machinations have impacted New York’s public pension funds, highlighting the price residents pay for their leaders’ political predilections. Specifically, the report finds that nearly $1 of every $5 of personal income taxes the city collects go to paying down the pension system’s liabilities. Meanwhile, the liabilities continue to grow, with nearly $10 billion from the City’s proposed 2018 budget needed to cover a pension funding shortfall that ranges between $65 billion and $142 billion.

As the person responsible for the management of those funds, one might expect Mr. Stringer to focus on making prudent investments. Fiscal diligence should be the top priority of any comptroller’s office. Instead, Stringer and his staff have continued using public monies as a political tool to pressure social change in corporate boardrooms.

For instance, last year, his office launched the second phase of a project aimed at pressuring public companies on various social issues, including his Boardroom Accountability Project 2.0, which pushes companies to disclose demographics on members, including their sexual orientation. Over the course of 2017, New York City Comptroller’s Office has become one of the nation’s most aggressive sponsors of activist shareholder proposals, submitting close to 100 measures, including a new initiative to divest public funds entirely from fossil fuels by 2020.

The ACCF report uncovers numerous instances of fiduciary irresponsibility. It reveals how fund managers have chosen to systematically increase investments in the Developed Environmental Activist stocks, despite the classes continued underperformance against the rest of the fund. (Those assets now make up 12 percent of the total fund.) And it details how Stringer prioritizes headline-grabbing political appearances ahead of resolving the under-performance of his funds.

Perhaps most concerning point is that a majority of Stringer’s constituents — the teachers, nurses, policemen, and firefighters who dutifully pay into public pension funds every month — remain oblivious to this emerging crisis. Last week, a separate study released by the Spectrum Group revealed that 80 percent of the city’s current and former employees were unaware that their pensions were not fully funded. Two-thirds of all respondents said they wanted their funds’ managers to concentrate on maximizing their returns.

Taken together, these reports make two points abundantly clear. First, there is a very real disconnect between the objectives of the people who own the funds and their professional managers. Second, this disconnect has consequences not just pension fund members, but also for taxpayers across the city. In short, everybody loses — except Stringer and his political supporters.

The city comptroller has a duty to put the financial interests of taxpayers and public employees above his narrow political ambitions. If Mr. Stringer wants to set social policy, he should run for city or state office instead. Until then, he should focus on safeguarding the future of his constituents’ pension funds.

This post updates the guerrilla warfare conducted by anti-fossil fuel activists against corporations by means of shareholder resolutions.

Update Dec. 6 below:  Investor Activism is also Bad for Pensioners

Background

Last year activists took a scalp from Exxon Mobil when a resolution passed requiring the Board to include business risk assessment from global warming/climate change. The cascade of suppositions underlying that proposal reveals the flimsy logic beneath these financial maneuvers. Details are in the post: How Climate Law Relies on Paris

A New Front is Opened

The Exxon success depended on proxy shares voted in large blocks by firms with huge assets, especially BlackRock and Vanguard. This year pressure was applied to wealth funds to pass “2°C Shareholder Resolutions.” This is basically a proposal that corporations subscribe to the Paris accord, and submit themselves to emission reduction targets, not only regarding their own operations, but also emissions arising from the use of their products (Hello petroleum companies!).

Storming Shell Castle

In May this Paris Subscription ploy was soundly defeated at the Shell annual meeting, and activists are disappointed both by the result and the voting by wealth managers.  Reuters reported Shell shareholders reject emissions target proposal.

The flavor of this campaign is in the text of the resolution and management’s recommendation from the Royal Dutch Shell Annual Meeting Shareholder Information:

 2°C Resolution Highlights:

Shareholders support Shell to take leadership in the energy transition to a net-zero-emission energy system. Therefore, shareholders request Shell to set and publish targets for reducing greenhouse gas (GHG) emissions that are aligned with the goal of the Paris Climate Agreement to limit global warming to well below 2°C.

This shareholder resolution is intended to express shareholder support for a course towards a net-zero-emission energy system. The why of a course towards a net-zero-emission energy system is clear: increasing costs of the extraction of fossil fuels, decreasing costs of generating renewable energy, and the global political pledge to stop global warming. The how and the what are up to the management of Shell. It is up to them to set GHG emission reduction targets and to develop activities to attain these targets.

We the shareholders request that the company publish company-wide greenhouse gas (GHG) emission reduction targets according to the following 3 scopes:

Scope 1: direct emissions from the facilities under Shell’s operational control or the equity boundary,
Scope 2: indirect emissions from the facilities of others that provide electricity or heat and steam to Shell’s operations,
Scope 3: emissions that Shell estimates come from the use of Shell’s refinery products and natural gas products.

Shell Management Comments (Excerpts)

Your Directors consider that Resolution 21 is not in the best interests of the Company and its shareholders as a whole and unanimously recommend that you vote against it.

Shell welcomes and strongly supports the Paris Agreement, and supports the aspiration of transitioning towards a net-zero emissions world by 2050. We will work together with governments and stakeholders towards meeting this aspiration and we commit to report on steps taken.

However, this resolution demonstrates fundamental misunderstanding of the necessary solutions to achieving the Paris goals. The resolution is unreasonable with regard to what the Company can be held accountable for and would be ineffective or even counterproductive for the following reasons:

We are convinced we have all the required flexibility to adapt and remain relevant and successful, no matter how the energy transition will play out. We believe that by tying our hands in the early stages of this evolution, this resolution would weaken the Company and limit our flexibility to adapt.

We are already willing and able players in the energy transition in ways that are uniquely suited to our skills, reach and ambition – all with the ultimate objective of maintaining a sustainable business model. We aim to reduce the greenhouse gas intensity of our own operations over time. From this year we are making part of our remuneration conditional on managing greenhouse gasses.

To achieve a net-zero emissions world requires the widespread transformation of the energy system. . .It demands collective action across the energy system. To impose targets on a single supplier in this complex system does not only fail to address the actual challenge (as it will not reduce system emissions overall because customers will simply turn to alternative suppliers); it would also undermine our ability to play an active role in the transition and would hinder long-term value creation for the Company and its shareholders.
The Battle Mounts Against Electricity Companies

The “Blame and Shame” campaign is exemplified in a report today from advocacy enterprise Preventable Surprises, Missing in Action: Missing 55% fail to step up on climate by Casey Aspin, 5 December 2017.  The taste of sour grapes comes through in the summary:

When the world’s two largest money managers, BlackRock and Vanguard, threw their weight behind a successful 2°C scenario resolution at Exxon last spring, the media hailed a shift in attitudes toward climate risk and, more specifically, the risk of assets being stranded by the need for rapid emissions reduction. Preventable Surprises has released a report scoring the ten largest investors in utilities on their proxy voting record in the sector.

It highlights the contradiction between the Exxon vote and those cast in the utility sector, the largest source of greenhouse gas emissions in the US. BlackRock and Vanguard voted against 2°C resolutions at all nine US utilities targeted by shareholders for increased climate risk disclosure. In response to our questions, both asset managers provided statements expressing a preference for private engagement over public proxy votes.

Private engagement lacks accountability, transparency, or metrics. That is why the Task Force on Climate-Related Financial Disclosure (TCFD) recommended this year that all publicly traded companies provide the level of transparency sought in the 2°C scenario resolutions, which ask companies to disclose how they are managing the risks and opportunities that arise from aligning with the Paris Agreement. The TCFD is seeking to reduce systemic risk in financial markets–a goal shared by Preventable Surprises.

It is alarming that the two largest utilities investors could not find a single US utility where climate risk management was weak enough to merit public support for a 2°C resolution. Many coal-dependent US utilities have not only resisted the transition to renewable generation (which is both cleaner and now cheaper in many markets), they also have fought government policy aimed at reducing emissions.

Private engagement does not work in a sector where coal plants are subsidised by ratepayers in highly regulated states, increasing the risk of stranded assets. Fiduciary responsibility dictates that both portfolio risk and planetary risk require more forceful stewardship than the largest investors have shown to date. We hope the owners of the assets managed by Vanguard and BlackRock use this report to discuss with their managers how they are assessing risk in the most fossil fuel-intensive sector in America.

Summary

It is no surprise that energy companies are unwilling to vote themselves out of business, even while espousing belief in global warming/climate change. And it appears that wealth fund managers are down with risk assessments, but not for setting emissions reduction targets. They must know that any such commitments will bring the heavy legal artillery lobbing massive lawsuits in the name of accountability.

Update Dec. 6 :  Investor Activism is also Bad for Pensioners

From article at RealClearMarkets: Pension Funds’ Rush to Go Green Costs Retirees Their Green

For index fund managers and pension fund leaders to push an environmental agenda on the companies they invest in potentially entails more risk and lower returns on the wealth of those whose money they hold. According to a report released this week by the American Council for Capital Formation (ACCF), the California Public Employees Retirement System (CalPERS) — the nation’s largest public pension fund – has ramped up its focus on such ventures. The result: environmentally-driven funds made up four of the nine worst performing funds in the CalPERS portfolio and represented none of the system’s 25 top-performing funds this past year. As this focus on ESG-efforts has increased, CalPERS has moved from a $3 billion pension surplus in 2007 to a reported $138 billion deficit today. Yet those who manage the fund remain unwilling to put their own money on the line; the personal investment portfolios of the fund’s Chief Investment Officer and at least two other senior executives report no ESG-related investments at all. What’s up with that?

The ACCF report also highlights the role that CalPERS plays in convincing (some might say pressuring) other large institutional investors to join alongside it in attacking companies it invests in via the submission of shareholder proposals. BlackRock, which generates many millions in management fees from CalPERS each year, and which is currently vying to run the pension fund’s $26 billion private equity arm, voted alongside CalPERS on putatively ESG-related proposals for the first time in its history this past proxy season. According to Bloomberg, the combined assets of BlackRock and Vanguard alone are set to top $20 trillion by 2025. These two own basically everything in the universe. If activist funds like CalPERS are able to force passive funds like those controlled by BlackRock and Vanguard to join its ESG-masked-as-corporate-governance crusade, we’re in for a heck of a ride. And not in a good way.

It may be tempting to urge public pension managers to take a more proactive role and bet against companies whose products some of us, for whatever reason, disapprove of — or for those managers to use their positions to influence the business decisions of firms in which they have a stake. However, it would be much better for government workers, retirees, and taxpayers today and in the future if the investors managing the money of public pensions prioritized sound financial policy above all else.

Climate Activists storm the bastion of Exxon Mobil, here seen without their shareholder disguises.

The Paris agreement involves estimates of future damages because of global warming assumed to be caused by burning of fossil fuels. Looking into the numbers raises a surprising predicament, as explained by Ronald Bailey of Reason Magazine. The title of his article points to the problem:

Climate Change Will Reduce Incomes in 2100 from $97,000 to $95,000

Global per capita income now is $10,000. How much should we spend to prevent climate change losses in 2100?

Set aside the flawed science claiming CO2 is the climate control knob, even the damage estimates pale in comparison with the march of prosperity. Bailey works with the numbers from alarmist economists Nordhaus and Moffatt. Excerpt below with my bolds.

The Yale economist William Nordhaus has spent decades using a combination of econometric and climate models to estimate global warming’s future effects. He isn’t the only researcher who’s been attempting to make such projections, and Nordhaus’ latest study considers a range of different estimates. (Get your salt shaker ready.)

In a new National Bureau of Economic Research working paper, Nordhaus and his colleague Andrew Moffatt survey 36 different estimates (derived from 27 studies) of climate change’s impact on gross world product by the year 2100. Nordhaus and Moffatt note that “there are many studies of theoretical temperature increases in the 2 to 4°C range, and that they cluster in the range of a loss of 0 to 4% of global output.” After crunching the numbers, they report:

The estimated impact from the preferred regression is 1.63% of income at 3°C warming and 6.53% of income at a 6°C warming. We make a judgmental adjustment of 25% to cover unquantified sectors….With this adjustment, the estimated impact is -2.04 (+ 2.21)% of income at 3°C warming and -8.16 (+ 2.43)% of income at a 6°C warming.

The authors note that the Intergovernmental Panel on Climate Change’s Fifth Assessment Report declined to make an estimate of future losses, but in the Fourth Report, the panel stated that “Global mean losses could be 1 to 5% of GDP for 4°C of warming.” This means that Nordhaus and Moffatt’s findings are broadly in line with the climate change consensus.

So what do these findings portend for people lucky enough to be alive in 2100? Let’s consider the best-case scenario first. Annual gross world product is currently somewhere around $75 trillion, which without adjustments means that global income stands at around $10,000 per capita. Assume 3 percent economic growth from now until 2100, and a global population that year of 9 billion. Without climate change, world GDP would rise to $872 trillion and income would be $97,000 per capita. Assuming a 3°C increase in average temperature, that would reduce global GDP from $872 trillion to $854 trillion, and income to $95,000 per capita. At 6°C, the figures would be $800 trillion and $89,000 per capita.

In the unlikely event that global economic growth dawdles along at only 2 percent per year for the rest of this century, gross world product would rise to only $388 trillion and income to $43,000 per capita without warming. A 3°C rise in average temperature would reduce global GDP to $380 trillion and income to $42,000 per person; a 6°C increase would cut global GDP to $360 trillion and income to $40,000 per person.

The Nordhaus and Moffatt survey of studies also found “no indication from the damage estimates of a sharp discontinuity or high convexity.” In other words, the studies do not identify threshold effects in which damages from climate change accelerate in the future.

These calculations bring up this question: How much should people living today making an average of $10,000 apiece spend in order to prevent the future incomes from falling from $97,000 to $95,000 per capita?

Now is the time to get out your salt shaker and liberally apply the sodium chloride to these calculations.

See also post Climate Policies Gouge the Masses

Excerpt: David R. Henderson, public policy economist at the Stanford Hoover Institution, puts the issue this way:

Claims that human-caused global warming will raise average temperatures by 2C to 5C over the next 100 years and cause serious harm to society are controversial. However, assuming that global warming will be a big problem, there are two important questions: (1) What should be done about it? and (2) When should it be done?

There is much debate about what discount rate to use when comparing environmental costs and benefits. Generally, the more one values today’s dollars over tomorrow’s, the higher is one’s discount rate. At one extreme, an infinitely high discount rate would imply that we place almost no value on future consumption. Conversely, using a discount rate of zero means that benefits today are no more valuable than benefits 100 years from now..

However, the choice of which discount rate to use is not about the weight given to the well-being of future generations but about opportunity costs. Investments people make today are likely to increase the wealth of their descendants, giving future generations greater resources to exercise their preferences regarding environmental protection.

The higher the rate of return that can be earned by investing a dollar today, the more wealth future generations are deprived of if the money is spent now. Thus, Kevin Murphy of the University of Chicago argues that we should use the market interest rate as the discount rate because that is the opportunity cost of climate mitigation. Interestingly, even Stern’s own model assumes that people 200 years from now will have real incomes that are more than 10 times incomes today. This means that if the government taxes people today explicitly or through regulations to reduce climate change 200 years from now, the government will be taxing the poor to help the rich.

Climate Activists storm the bastion of Exxon Mobil, here seen without their shareholder disguises.

It’s not only big oil companies under siege from anti-fossil fuel activists. All businesses, small and large, private and publically traded are in the crosshairs.

Robert Bradley has a recent post directed at leaders of businesses, both large and small with respect to global warming/climate change. The article is Climate Alarmism and Corporate Responsibility at Master Resource. It is important advice since the large majority of business people are ethical and want to do the right thing, but their good intentions can be used against them in the current feverish media and political environment.

Everyone including business leaders needs to distinguish between two related but different threats from global warming/climate change. The first is the direct impacts upon one’s business and livelihood from natural conditions. The second is the indirect threat to prosperity from misguided public policies to “fight climate change.”

Climate Science: Where’s the Alarm?

On the outlook for the climate, of course there are both risks and opportunities to anticipate. Corporate plans typically involve assumptions and projections considered to be believable to a “reasonable person.” And as Bradley points out, no reasonable person can be expected to go beyond IPCC science, which is premised on concerns about global warming/climate change. Bradley:

Climate alarmism is not supported by the scientific reports of the Intergovernmental Panel on Climate Change (IPCC) on close inspection. There is no direct linkage between the IPCC finding that “the balance of evidence suggests a discernible human influence on climate” and climate alarmism. In fact, there is ample evidence in the scientific literature that the enhanced greenhouse effect is benign. Top climate economists have gone further to conclude that a warmer and wetter world predicted by climate models would produce net benefits in future decades for the United States and other areas of the world with the free market means to adapt. (my bold)

Corporate policymakers can discount climate alarmism by understanding several key arguments and facts:

• Increasing atmospheric concentrations of carbon dioxide (CO2), the preeminent anthropogenic greenhouse gas, benefit plant life and agricultural productivity and are not a direct human health issue. It will be centuries before the plant optimum concentration is reached and exceeded, creating a long potential glide path for hydrocarbon energies to “green” planet earth. 
• The surface warming (“greenhouse signal”) of recent decades shows a relatively benign distribution. Minimum (night, winter) temperatures have been increasing twice as much as maximum (daytime, summer) temperatures.[9] Higher nighttime temperatures and longer growing seasons reinforce the aforementioned carbon fertilization effect to aid plant growth and agricultural productivity.

• Model-estimated warming from anthropogenic effects has fallen over time. . .The chart above shows IPCC (2007) projecting warming at 0.38C per decade and the last report (2013) dropped to 0.17 C per decade. With a more than 50 percent drop in the IPCC estimate in six years, there is clear evidence that model revision and more realistic forcing scenarios have weakened the alarmist scenario.

• Today’s lower model-predicted warming estimates may still be too high. At the half way point of the feared doubling of the warming potential greenhouse gases in the atmosphere, the model scenarios are over predicting warming by a factor of two or more.

• The two global temperature measurements from satellites and balloons in their two decades of existence have not picked up the “greenhouse signal” where it should be most pronounced or at least discernible—the lower troposphere. This suggests that surface thermometers may be overestimating warming and/or the surface warming is primarily the result of other factors than just the enhanced greenhouse effect (such as increased solar radiation). A natural warming trend neuters the case for climate alarmism.

• The reduced growth rate of greenhouse gas buildup in the atmosphere in the last decade, as much as half the rate of some alarmist scenarios, extends the warming timetable to facilitate adaptation under any scenario. The reduced buildup is primarily related to greater carbon dioxide intake—the “greening of planet earth” phenomenon of robust carbon sinks.

• Scientists who are confident about pinpointing the greenhouse signal from the surface temperature record have not substantiated a greenhouse signal with weather extremes. “Overall,” concluded the IPCC, “there is no evidence that extreme weather events, or climate variability, has increased, in a global sense, through the 20th century, although data and analyses are poor and not comprehensive.”

Business leaders have to balance the needs and interests of various stakeholders in the enterprise: principally the customers, the employees and the investors, as well as the larger society. Today’s social context presents the hazards of misguided public policies and regulations against fossil fuels, despite the unconvincing science case for them. The main risks are more expensive and unreliable power, more costly energy of all kinds, and a sluggish economy burdened with unnecessary expenses. To cope, Bradley makes some “no regrets” suggestions:

“No regret” policies—policies that are economical whether or not GHG emissions are worth addressing—should be pursued in their own right to help defuse the climate change issue. A prominent example is for businesses to profitably lower their energy usage wherever possible. Energy service companies in recent years have executed long-term contracts with guaranteed savings to completely manage the energy function of commercial and industrial users. Total energy outsourcing improves the allocation of core competencies and creates new incentives for optimal energy usage to benefit each party to the agreement.  (my bold)

Other pro-market “no regret” public policies that would have the effect of profitably reducing greenhouse gas emissions over time include:

• Reducing criteria air pollutants in urban areas not in compliance with the Clean Air Act. 
• Modernizing and simplifying the tax code to provide more incentives for capital-intensive businesses to modernize their physical capital, thus lowering energy usage and related GHG emissions. 
• Maintaining incentives (or removing disincentives) for hydroelectric and nuclear power generation facilities that produce carbon-free electricity.Increasing energy conversion efficiencies of new electric generation capacity and a growing market share of natural gas-fired power relative to coal are natural market processes that will complement the above public policy reforms. Together, they will ensure that GHG emissions are not greater than their free market levels and will continue to fall per unit of output (the decarbonization phenomenon).

Summary

Agenda-driven climate alarmism should be rejected by corporate America on pragmatic and social responsibility grounds. Not only does the balance of evidence point toward net social benefits from a carbon dioxide enriched and moderately warmer and wetter world. Energy reality concludes that any short-term regulatory approach is futile and wasteful compared to perfecting business-as-usual strategies and using the wealth of energy abundance and free global markets to adapt to any weather and climate conditions in the future.

Reuters published today 2017 tables listing sovereign investors in two categories: Leaders and Laggards. I noticed that the laggard table included the assets size of funds, while the leader table did not. So I went to the report itself by the Asset Owners Disclosure Project (AODP) which is leading the effort to blame and shame investors away from fossil fuel companies.

There you find in fact they apply five categories according to how enthusiastically a fund complies with climate change doctrine.  From the AODP Report:

The AODP Global Climate 500 Index rates the world’s 500 biggest asset owners – pension funds, insurers, sovereign wealth funds, foundations and endowments – on their success at managing climate risk within their portfolios, based on direct disclosures and publicly available information.

This year also sees the launch of the first AODP Global Climate Index for Asset Managers, rating the world’s 50 largest asset managers on their success at managing the financial risks of climate change for their clients.

It follows the same methodology. Asset owners and managers are scored on three key capabilities which align with the four key areas highlighted by the FSB Task Force on Climate-related Financial Disclosures: Governance & Strategy, Portfolio Carbon Risk Management and Metrics & Targets. They are graded from AAA to D while those with no evidence of action are rated X.

GOVERNANCE & STRATEGY – Organisation structure and approach it uses to oversee climate risk objectives. – Degree of integration of climate risk principles in the organisation’s policies and processes

PORTFOLIO RISK MANAGEMENT – Variety and effectiveness of tools and approaches used to evaluate and manage climate change related financial risks and opportunities. This includes engagement, voting practices, and portfolio management tools.

METRICS & TARGETS – Key metrics used to measure, monitor and compare portfolio climate risk management performance, including the value asset owners have invested in low carbon assets.

The AODP Report applies a lot of lipstick to the numbers in the interest of boosterism for their project and their cause. But a different story is evident from the numbers, according to their own analysis. For example, here are the 2017 results for the world’s top 500 Asset Owners (AUM=Assets Under Management)

Unreported anywhere is the fact 73% of the wealth in these funds is in the bottom two compliance categories.  In fact the laggard funds are six times as numerous and have 3 times the assets of the leaders.  Below is the table of 2017 results for the top 50 Asset Managers (Firms investing on behalf of clients).

The report on the top 50 Asset Managers shows them more responsive to social pressure. This was also evident in the recent Exxon shareholder climate resolution where two large asset managers made the difference. Even so, more than half of the firms and half of the assets got the bottom two ratings.

Conclusion

Despite some progress in converting capital managers to seek climate virtue rather than capital gains, most of the wealth is still focused on investment return.

Background on the climate financial strategy and Exxon is at How Climate Law Depends on Paris

ROI = Creating Value