World’s Top Carbon Offenders Need to Step Up, Says Investor Group

A group of the world’s largest corporate carbon offenders, including many that have recently made explicit commitments to reach net-zero emissions, need to step up their pace to make meaningful progress toward climate sustainability.

That’s the latest from the investor sustainability initiative Climate Action 100+, which on Monday released its first-ever benchmark to help investors assess 159 focus companies on their environmental practices. The standard has been in the making for the past 12 months.

Called the Climate Action 100+ Net-Zero Company Benchmark, the standard evaluates how well large companies are doing reducing greenhouse gas emissions, improving governance, and stepping up on releasing climate-related disclosures.

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The benchmark is meant to be useful for allocators who want to track corporate progress on climate change and use that to inform how they engage in shareholder activities, according to leaders at Climate Action 100+. These include signatories such as the California Public Employees’ Retirement System (CalPERS).

“For CalPERS, this is a vitally important piece of work. We will be using it not only to inform our engagement, but also our proxy voting,” Anne Simpson, managing investment director of board governance and sustainability at CalPERS, told reporters during a media briefing Friday.

“For us, ultimately, we have to be able to hold boards accountable for delivering the strategy, that CapEx [capital expenditure], the compensation plans, the approach to political lobbying, and the regular reporting, so that we’ve got confidence that they’re on track,” she continued.

The investor group has some teeth: Started in 2017, Climate Action 100+ has more than 575 investors with $54 trillion in assets. It also has a steering committee staffed with five representatives from AustralianSuper, CalPERS, Gam Investments, Ircantec, and Sumitomo Mitsui Trust Asset Management.

Together, the group is putting pressure on 167 total focus firms that drive 80% of global industrial emissions. (While the current benchmark reviews just 159 focus companies, the remaining eight firms, which are mainly energy companies like the Saudi Aramco, will be included in future iterations. The next benchmark will be released next year.)

The benchmark does not use overall numeric or alphabetical ratings to grade companies, instead relying on yes/no bars across nine indicators. But, thus far, no firm evaluated by the benchmark has performed at a high level across all nine indicators, Climate Action 100+ said.

While a spate of high-profile firms have recently announced ambitious commitments to curb emissions in line with the Paris Agreement, many have yet to outline clear long-term strategies on how they will do so, the investor group said.

“Declaring is not enough,” said Ceres CEO and President and Climate Action 100+ Steering Committee member Mindy Lubber.

What’s needed, she continued, are clear short- and medium-term targets, decarbonization strategies, and related capital expenditures, “to build that net-zero company in the future.”

Notably, just six out of 159 companies have made commitments to align their capital expenditures, or future investments, with their carbon reduction goal, and none of those businesses have made commitments to align investments with the Paris Agreement.

Corporate governance on climate change should also be tied to executive compensation, the group said. Nearly 140 firms plan to consider carbon emissions at the board level, but just one-third of the 159 total firms have said they will tie executive compensation to emission reduction targets.

The impact of holding this group of companies accountable could be huge, leaders said. The group of corporate firms represent the third largest source of emissions on the planet, behind China and the US, according to CalPERS’ Simpson.

“So we should not underestimate the scale,” Simpson said.

Other asset managers like BlackRock plan to push firms on their records on human rights, it said this month.

Climate Action 100+ is coordinated by five investor networks, which are Asia Investor Group on Climate Change (AIGCC), Ceres, Investor Group on Climate Change (IGCC), Institutional Investors Group on Climate Change (IIGCC), and Principles for Responsible Investment (PRI).

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Tags: California Public Employees’ Retirement System, CalPERS, Ceres, Climate Action 100+, Climate Change, environmental social and governance investing, ESG, Institutional Investors Group on Climate Change, Investor Group on Climate Change, Principles for Responsible Investing

Black Americans continue to lag behind white Americans in terms of building wealth as only 55% of Black Americans reported having stock market investments compared with 71% of white Americans, according to a recent survey released by Charles Schwab and Ariel Investments.

“Black Americans are already behind the eight ball, and it is disheartening to see that at current savings and investing rates, the wealth gap will continue to expand, endangering our futures and leaving our families exposed,” Mellody Hobson, co-CEO and president of Ariel Investments, said in a release.

According to the 2020 Ariel-Schwab “Black Investor Survey,” Black Americans are less likely than white Americans to own almost every type of financial vehicle, except for whole life insurance. The survey also found they are less likely than white Americans to have written wills, financial plans, or retirement plans.

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And the disparities are growing monthly as Black Americans save $393 overall per month, compared with whites, who save an average of $693 per month. Even Black Americans who earn more than $100,000 a year consistently save or invest considerably less than their white counterparts at the same income level, according to the survey. And only 23% of Black Americans have inherited wealth, compared with 51% of white Americans.

“These differences are not new,” Hobson said. “Black Americans are disadvantaged from the outset when it comes to building wealth.”

However, there were also some positive trends that indicate younger generations are starting to close the racial wealth gap, at least in terms of stock market participation. The survey found that 63% of Black Americans under the age of 40 are now participating in the stock market, which is equal to white Americans of the same age. It also found that three times as many Black investors (15%) as white investors (5%) invested in the stock market for the first time in 2020, and that 29% of Black investors under the age of 40 were new to investing in 2020 compared with 16% of white investors under 40.

The survey also found that 401(k) plans have become an important vehicle for introducing many Black Americans to investing, with 63% of Black investors having first invested in the stock market through one. And 401(k) ownership rates are now similar between Black and white Americans (53% vs. 55%); however, there is a gap between savings rates as white 401(k) plan participants contribute 26% more per month toward their retirement accounts than Black 401(k) plan participants.

“These findings are encouraging for younger Black investors, but there is much work to be done to ensure that Black Americans have access to the resources they need to stay engaged and successfully investing for the long term,” Rick Wurster, executive vice president, Schwab Asset Management Solutions, said in a release.

The survey also found that the COVID-19 pandemic affected more Black Americans financially than white Americans. While both groups reported a sharp increase in saving for emergencies compared to prior years, the pandemic’s economic impact caused Black Americans to take action in greater numbers than white Americans. More than twice as many Black Americans (12%) as white Americans (5%) borrowed from their 401(k) plans, and 18% of Black Americans dipped into an emergency fund, compared with just 10% of white Americans. And 9% of Black Americans said they asked their family or friends for financial support last year, compared with 4% of white Americans.

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Tags: African American, Ariel-Schwab, Black, Black Investor Survey, disparity, Mellody Hobson, racial gap, wealth gap