Why Investor Demand for Corporate Sustainability Data is Only Intensifying
The day before President Trump formally announced his intention to withdraw the US from its commitment to the Paris Agreement last week—and a day after reports began surfacing suggesting that the withdrawal was imminent—an email from the nonprofit sustainability group Ceres appeared in my inbox with a subject line that was surprising at the moment: “A Stunning Victory”.
While Ceres would go on to condemn the decision to withdraw from the Paris Accord, the development that the group had been trying to highlight reflected a growing trend that shows the business case for corporate energy management and sustainability reporting is picking up steam.
Last Wednesday, 62% of ExxonMobil shareholders voted in favor of a proposal pushing for an annual report detailing how the company could be impacted by the effects of climate change, particularly the climate-focused policies and regulations emerging worldwide. This is at least partially a reflection of ExxonMobil’s global footprint—although the US appears set to withdraw from the Paris Agreement, several other major nations have since declared they will continue to honor their commitment.
However, similar developments have emerged throughout the financial community this year. Fidelity Investments recently updated its proxy voting guidelines to declare that the company “may support shareholder proposals calling for reports on sustainability, renewable energy and environmental impact issues,” according to a Fox Business report. Earlier this month, BlackRock, the world’s largest asset management firm, approved a shareholder proposal that called for oil and gas company Occidental Petroleum to provide more transparency into how it is preparing for the effects of climate change.
In an article about BlackRock’s push for increased sustainability reporting at Occidental, Wired.com reporter Nick Stockton described the significance of these kinds of developments:
“Shareholders of other petroleum companies have petitioned for climate risk disclosure before, but no one’s ever pushed through a vote. These aren’t save-the-planet activist shareholders, either. They’re investment companies whose business is ensuring they have enough money to pay out future financial obligations.”
In other words, this surge in investor interest in sustainability is not a standalone trend—it’s a reaction to the convergence of other trends that are making emissions and energy management a material concern for today's businesses. The recent shift in federal climate policy in the US seems to have galvanized state- and local-level fervor for energy efficiency and climate policy. Since President Trump announced the decision to back out of the Paris Agreement, the mayors of several major US cities and the governors of three states have declared their intent to honor the Paris Agreement in lieu of the commitment from the federal level. This kind of grassroots support for the agreement has become substantial enough that the executive secretary of the United Nations Framework on Climate Change is considering adapting its future reports to accommodate non-nation entities that have committed to the agreement, according to the New York Times. Federal policy may not be immediately forthcoming, but state and local regulations could still have a real impact on businesses going forward.
This kind of regulatory pressure has also started to impact the financial community directly. Last year, the Wall Street Journal reported that the Securities and Exchange Commission (SEC) is under pressure from lawmakers to develop industry-specific standards for sustainability disclosure in company filings. Coincidentally, that report followed an SEC investigation into climate change risk disclosure practices at ExxonMobil.
Investors have been increasingly pushing businesses for transparency into their sustainability and energy management practices over the past few years. What we’re seeing now is that, even as the pendulum of federal policy swings away from the climate-focused priorities established under the Obama administration, investors recognize that market forces have made it critical for businesses to be able to show progress in this area.