Actions on climate a must for companies
For the past several years, Blackrock, the giant investment firm, has cast itself as a champion of the transition to clean energy.
Last month, Laurence Fink, Blackrock’s CEO, wrote that the coronavirus pandemic had “driven us to confront the global threat of climate change more forcefully,” and the company said it wants businesses it invests in to remove as much carbon dioxide from the environment as they emit by 2050 at the latest.
But crucial details were missing from that widely read pledge, including what proportion of the companies Blackrock invests in will be zero-emission businesses in 2050. Setting such a goal and earlier targets would demonstrate the seriousness of the company’s commitment and could force all sorts of industries to step up their efforts. A Blackrock spokesperson said for the first time last week that the company’s “ambition” was to have “net zero emissions across our entire assets under management by 2050.”
As the biggest companies strive to trumpet their environmental activism, the need to match words with deeds is becoming increasingly important.
Household names like Costco and Netflix have not provided emissions reduction targets despite saying they want to reduce their effect on climate change. Others, like agricultural giant Cargill and clothing company Levi Strauss, have made commitments but have struggled to cut emissions. Technology companies like Google and Microsoft, which run power-hungry data centers, have slashed emissions, but even they are finding that the technology often doesn’t yet exist to carry out their “moonshot” objectives.
“You can look at a company’s website and see their sustainability report and it will look great,” said Alberto Carrillo Pineda, a founder of Science Based Targets, a global initiative to assess corporate plans to reduce emissions. “But then when you look at what is behind it, you’ll see there is not a lot of substance behind those commitments or the commitments are not comprehensive enough.”
President Joe Biden also is placing a big emphasis on climate change and has rejoined the Paris agreement. But determining how hard companies are really trying can be very difficult when there are no regulatory standards that require uniform disclosures of important information like emissions.
Institutional Shareholder Services, a firm that advises investors on how to vote on board elections and other corporate matters, uses company data and its own analysis to assess what corporations are doing to reduce emissions. Just over one-third of the 500 companies in the S&P 500 stock index have set ambitious targets, it found, while 215 had no target at all. The rest had weak targets.
There has been some progress by companies that have rigorous targets. In a report last month, Science Based Targets, which was started by the environmental groups and hundreds of businesses brought together by the United Nations, said the 338 large companies around the world for which it had sufficient emissions data collectively reduced their emissions by 25 percent between 2015 and 2019.
Blackrock, with $8.7 trillion of assets under management, including
stakes in many companies, clearly faces a daunting task. The company doesn’t directly own most of the shares or bonds it buys — it manages them for pension funds, other corporations and individual investors — limiting how much climate activism it can pursue. In addition, most of its investment products track indexes like the S&P 500, so it inevitably ends up managing stocks of fossil fuel companies.
Many Wall Street firms have made pledges to get to net zero emissions from their lending and other financial activities but have not made clear whether that goal applies to the stocks and bonds they manage for customers. Blackrock’s decision to include all the assets it manages could pressure other financial giants to make similar commitments, but it could rankle fossil fuel industries and their political supporters in Congress.
Later this year, Blackrock is going to announce an interim target for how many of its investments will have achieved, or be on their way to, zero emissions in 2030.
Still, Blackrock is careful about the language it uses when describing what it will do to push businesses in its portfolios to reduce emissions — for which it has been criticized by people who want the firm to take a more activist stand. In a recent letter, the company said it was intent on “increasing the role of votes on shareholder proposals in our stewardship efforts around sustainability.”
“This could mean a lot of things and — as always — the proof is in the pudding,” Lutz of ISS said.
Other companies that have pledged to cut emissions face different challenges, including coordinating with suppliers and partners.
Consider the apparel industry. Much of its contribution to climate change comes from its supply chain. The clothes that Levi Strauss and others put their labels on are often made in factories in places like China, Pakistan and India that remain reliant on coalfired power plants. The clothes are transported on ships and planes that burn diesel and jet fuel.
Even so, when Levi Strauss rolled out its 2025 climate action strategy three years ago, its CEO, Chip Bergh, said, “We believe it’s time for businesses to start playing a larger role in fighting the world’s most pressing problems, like climate change.”
The company set a Scope 3 emissions target. But Science Based Targets said in January that emissions from Levi’s supply chain were not falling and had grown by 13 percent between 2016 and 2019.
Cargill, one of the largest privately owned American companies and a major middleman that works with farmers and food companies around the world, has attempted to become a strong voice on climate change but has struggled to meet its goals.
The company is a big purchaser of Brazilian soy beans, which are often grown on land that was previously forested. In 2010, Cargill promised to meet a “net zero” deforestation goal by 2020, but the company did not succeed and has extended its target to 2030. “Our commitment on deforestation has not wavered,” said Jill Kolling, Cargill’s vice president for global sustainability.
The company’s plans show how emissions could go up overall even when a business has set a goal to cut them. Cargill wants to reduce its emissions in its global supply chains by 30 percent per ton of production by 2030, a target it made no progress on at the time of measurement in 2019, according to Science Based Targets. But overall emissions in its supply chains may not fall by that amount because of increases in production. “It depends on how our business grows, and that’s hard to predict,” Kolling said.