Ceres: the US investor coalition advising the UN, lobbying the SEC and investing $10bn in renewables

Ceres President, Mindy Lubber, explains how US policy is coming around to its way of thinking on the environment.

Few environmental groups have both the influence to address the General Assembly of the United Nations on climate change issues and the investor clout to lobby the US Securities and Exchange Commission to push companies to disclose environmental financial risks and opportunities. Ceres, the North American environmental investor coalition, has done both in the last month. At the same time, it is pushing ahead with one of the most ambitious investor commitments to date for renewable energy: the announcement in February this year by more than forty leading US and European institutional investors, responsible for over $1.75 trillion (€1.2 trillion) in assets and co-ordinated by Ceres, to collectively deploy $10bn in assets over the next two years, alongside a raft of other green measures.
A McKinsey Global Institute report, released at the Investor Summit on Climate Risk, hosted by the United Nations Foundation and Ceres, where the announcement was made, said major investments over the next decade in energy productivity could earn double-digit rates of return for investors, cut global energy demand growth by 50% and achieve up to half of the reductions of greenhouse gas emissions, the Intergovernmental Panel on Climate Change says is required to prevent the world’s mean temperature from increasing by more than 2 degrees centigrade.Ceres was born out of the Valdez Principles, a list of ten broad conservation standards issued to companies in response to 1989’s disastrous Exxon Valdez oil spill off the Alaskan coast, where Exxon came in for severe criticism over its clean-up response. The organisation now includes the biggest US institutional investors, including pension giants CalPERS and CalSTRS. In 2003, it launched the Investor Network on Climate Risk, which has 65 investors with assets totalling $5 trillion, including fund managers such as American International Group Investments, Deutsche Asset Management, and State Street Global Advisors.
Mindy Lubber, president of Ceres, says the action ethic underpins its work: “We produced environmental plans in 2003 and 2005 and the follow up to see how they were executed were presented at our subsequent investor summits. We’re conscious we have to ‘do’ rather than just talk and we have monthly investor calls for updates on progress. If you look, for example at shareholder votes on climate change, this year we had 56 resolutions, more than ever before.” She says the weight of assets behind Ceres is key to it being able to influence the investment management industry as a whole: “The fact that large institutions are increasingly demanding that money managers respond to environmental questions in hiring request for proposals (RFPs) is a sure-fire way of making this work.”
Notably, Ceres has said its members will commit investment managers to report on how they are assessing climate risks in their portfolios, whether from new carbon-reducing regulations, physical impacts or competitive risks. However, sceptics claim Ceres has been long on rhetoric but short on ensuring its commitments are followed through. One US SRI fund manager, speaking anonymously, said: “They’ve produced some great initiatives, but I think you’ll find that many managers running environmental portfolios wonder when the mooted assets will come to the market.” Lubber says Ceres is going to “count up” the $10bn the coalition has vouched: “We keep tallies on what is and what isn’t being done.” More concretely, Ceres members have taken action since the declaration. The $52.7bn (€34.3bn) Massachusetts Pension Reserves Investment Management Board (PRIM) tendered for one or more asset managers to run $900m in natural resources assets, including renewable energy and farmland. CalPERS, the giant $247bn (€181bn) US pension fund for Californian public employees, has also begun making investments in timber that could top $2.4bn (€1.6bn) in the coming years. The same oversight will apply to the other goals laid out in the action plan, Lubber says. They include a 20% reduction in energy used in property investment holdings over the coming three years and the promotion of investments in energy efficiency and clean energy technologies along with tougher scrutiny of carbon-intensive investments.
Lubber says Ceres doesn’t advise members on specific products: “We do hold regular discussions about what investors are doing and how that knowledge can be transferred to smaller funds that might not have the research capabilities. We also provide information on the big debates that are out there, such as the bio-fuels question.”It is in the policy arena, however, that Lubber believes Ceres is most potent, particularly because of its investor credentials: “We are not just an environmental coalition in the pure sense, otherwise we would not be working with investors, we would be doing what we should, which is lobbying government. We believe in the financial case for good climate change management though and its impact on company profits and that is what we strive for with our signatories.” In her appearance last month at the UN, Lubber told delegates: “A strong, equitable international framework to reduce greenhouse gas emissions is essential. Such a framework would correct a significant market failure – namely that there is no cost on climate pollution. Investors want to correct this failure and put a price on global warming pollution.” She added: “Savvy investors already know that smart companies with a strategic vision are reducing their exposure to climate change risks and are seizing the opportunities it is creating, especially in clean energy and clean technology.”
With regards to Ceres’ lobbying of the SEC on mandatory corporate reporting on CO2, Lubber says there is no sign yet of a change in policy: “The SEC hasn’t said either way what it will do. But they are a lot further along than they were three years ago. They are studying the proposals, which shows the change in the way they and financial markets see this issue.”
November’s US presidential elections, however, promise a validation of Ceres’ political lobbying: “We expect to see a cap on carbon emissions and a trading system on this sometime in the first third of 2009. Both presidential candidates support it. There is a lot already happening in anticipation of this.”