Paul Hodgson: Climate denial? It’s all about the lobbying; and investors should be aware of the risks and whose money’s being spent

New analysis and tools for identifying pro and anti-climate moves by companies and trade associations show how lobbying is thwarting change in the US

This year’s RI Digital: USA 2020 conference, takes place on December 2-3. The conference is free to attend.

In August, Storebrand, Norway’s largest asset manager, divested from three US energy and power companies – Exxon Mobil, Chevron and the Southern Company. 

Because of their production and use of fossil fuels? 

No, for lobbying against the Paris agreement and climate regulations.

Analysis of lobbying activities and climate risk and incidents by RepRisk, the Swiss reputational risk analysis firm, and a new tool from the US climate activist the Environmental Defense Fund (EDF), shows investors to the danger of ignoring corporations’ lobbying records.

RepRisk found that “more than 2,200 public and private companies were implicated in more than 3,600 risk incidents tied to lobbying worldwide over the past 13 years”. The environmental issues that most frequently coincide with lobbying include “climate change, greenhouse gas emissions, global and local pollution, and impacts on landscapes, ecosystems, and biodiversity”.

While the report shows that lobbying activities are most frequently linked to corruption, bribery, extortion, and money laundering, rather than climate change and greenhouse gas emissions, the sectors most clearly linked to lobbying risk incidents are those most closely related to fossil fuels: utilities, and oil and gas companies. Even more importantly in this election year, the oil and gas sector had the most or second-most risk incidents related to lobbying of any sector during the presidential election years in the US – 2016 and 2020.   

As the report notes: “Oil and gas companies’ public messaging often positions them as working to reduce the adverse environmental impacts of their business operations – many ‘Big Oil’ supermajors feature language in support of the Paris Agreement and carbon reduction in their operations.” 

However, RepRisk’s data shows that such language is a cover for these corporations, which are actually undermining efforts to address the climate crisis through direct and indirect lobbying of governments – especially the US government – to prevent the application of regulations. In order to account for lobbying risk, investors must check a company’s messaging against its lobbying activities.

Of course, this is particularly difficult in the US, where lobbying activities and expenditures – although allegedly subject to all sorts of regulations and disclosure requirements – are among the most obscure in the world.

However, according to EDF’s new Climate Authenticity Meter, one of the meter’s recorded incidents deemed to ‘support progress on climate policy’ is the agreement between three US corporations and the New York State Common Retirement Fund (NY-CRF) to disclose their political spending. While political spending is not the same as lobbying expenditures, as EDF says, one of the most important ways companies “can influence climate policy is through their financial contributions to elected officials, think tanks and nonprofit organizations”. In other words, even though the money is not spent on lobbyists, it is still lobbying.

The three companies agreeing to disclose political spending are VF Corp, a clothing manufacturer , Simon Property Group, a shopping mall real estate firm, and Brown-Forman, which makes Jack Daniel’s whisky. Since 2010, the NY-CRF has filed more than 150 shareholder proposals on political spending and lobbying disclosures. Some 45 companies have adopted or agreed to adopt disclosure requirements, including Bank of America, Delta Airlines and PepsiCo. It’s progress, and other investors are making progress too, using the Center for Political Accountability’s template shareholder resolution.

But the bulwark of secrecy is still massive.

EDF’s Climate Authenticity Meter analyses how corporate climate lobbying activities compare against the AAA Framework for Climate Policy Leadership, which has as one of its three pillars to: “Allocate advocacy spending to advance climate policies, not obstruct them”.

Supporting climate policy leadership – and I did not think I would ever write these words – is the Business Roundtable, which released in September this year its climate policy statement, which says: “While the United States has made significant progress toward reducing greenhouse gas (GHG) emissions as a result of private sector innovation and supportive state and federal policies, the existing patchwork of federal and state regulations, tax incentives, subsidies and other policies is inefficient and has negatively impacted the long-term investment strategies of many US companies by creating regulatory uncertainty.”

More reassuringly familiar, and earning two ‘highly obstructs progress on climate policy’ mentions, are the moves by the US Chamber of Commerce. 

First, it supported the US Department of Labor’s new regulations that seek to limit environmental, social and governance (ESG) investments. 

Second, it filed an amicus brief with the D.C. Circuit, joining the Trump administration in challenging the ability of the state of California to set its own fuel efficiency targets.

To balance these actions, the Authenticity Meter also records as ‘highly supportive’ Ford, Honda, BMW, Volkswagen and Volvo, in signing agreements with California to continue reducing vehicle greenhouse gas emissions annually through to 2026 at a rate similar to the former federal standards that President Trump, is still seeking to roll back.

In a press release for the Authenticity Meter, Victoria Mills, managing director of EDF+Business, EDF’s corporate engagement programme, said: “Corporate climate leadership must include using the most powerful tool that companies have to fight climate change: their political influence.”

It is early days for the Meter – it was launched at the beginning of October – thus it does not represent anything like a comprehensive analysis of good and bad corporate lobbying actions even over the past couple of months; though there is nothing stopping EDF from uploading its insights from the rest of the year and classifying them as supportive or obstructive to climate policy. But it is a good start.

The conclusion these two pieces of analysis point to, however, is that US corporate political lobbying, either direct or indirect, is one of the main reasons for both the lack of positive action on climate policy by the current US administration and its reversal of the ‘supportive’ policies put in place under Barack Obama. The massive Washington DC lobbying machine is the reason the US is a climate laggard and no longer supporting the Paris Agreement.

US lobbying and political spending are the ‘obstructions’ that led to the nominee for the US Supreme Court Amy Barrett saying in her recent confirmation hearings that climate change was “still in dispute”, and that it is a “very contentious matter of public debate” that she would not say she had firm views on. Barrett’s father is an oil company executive.