SSgA Critical of GHG Short-Term Disclosures

SSgA critical of GHG short-term perspective offered up by oil and gas, mining and utility disclosures on addressing greenhouse gas emissions. If we are to maintain a salubrious environment, much of the coal and oil will turn out to be stranded assets. Given that reality, I reallocated most positions I had in this sector to others more likely to continue to grow in coming decades.

Index funds, such as those held by SSgA, BlackRock and Vanguard do not have that option, as long as heavy GHG emitters remain in the indexes. I am glad they remain invested because shareholders are often in a better position to press for change than consumers and governments. It is good to see SSgA taking something of a leadership role among the largest funds. See prior post, Morningstar Direct Uncovers ESG Hypocrites.

SSgA Critical of GHG Short-Term Focus

SSgA notes that oil and gas, mining and utilities collectively account for more than one quarter of annual greenhouse gas (GHG) emissions. As such, they should be taking a leadership role in addressing the long-term impacts of GHG emissions. Instead, their research by Rakhi Kumar and Michael Younis finds:

• A majority of companies (55%) are using one- to three-year time horizons for their GHG emissions-reduction goals, rather than longer time horizons needed to drive strategic change.
• Only two of surveyed companies identify review of strategic opportunities related to sustainability in committee charters. None of the others set clear expectations regarding the eventual shift to a low-carbon economy as an opportunity to shape long-term strategy.
• 43% of companies established absolute GHG reduction goals, 28% focused on intensity or efficiency targets and 10% set both absolute and intensity targets.
• US-based companies lag peers in Europe, Australia and Canada in disclosing carbon pricing and GHG emissions-reduction goals.
• Only half of the companies disclose either an average carbon-price assumption or a range of carbon prices; no company discloses both.

See Climate-Related Disclosures in Oil and Gas, Mining, and Utilities. According to Rakhi Kumar: “We are sending the paper to companies via emails and will bring it up during engagement.”

CalPERS and CalSTRS to Evaluate Portfolio Impacts

Senate Bill 964 defines “climate-related financial risk” at the risk that the changing climate and the transition to a low-carbon economy pose to investments. CalPERS and CalSTRS will generate their first comprehensive reports on climate risk by January 1, 2020. See IEEFA and environmental groups warn CalPERS/CalSTRS about climate risk.