US State Treasurers to press investors and consultants on climate risk

One Treasurer told RI it is considering voting against directors not acting on climate risk

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A group 16 of US State Treasurers managing more than $1.2trn of assets combined will be sending a statement on the urgency of dealing with climate risk to major investment firms, companies, investment consultants and fellow US State Treasurers. 

Speaking to RI, Deborah Goldberg, Massachusetts State Treasurer and a signatory to the statement, said: “It is the role of state treasurers to be forward thinking in terms of the long term impact of the health of their pension funds. However it’s not enough. You’re not going to impact climate risk by individual states setting standards. This needs to be universal.”

The statement, signed by the likes of California State Treasurer Fiona Ma and Rhode Island General Treasurer Seth Magaziner, says climate change will impose systemic, undiversifiable, portfolio-wide risks to long-term and institutional investors and calls for financial institutions to measure, disclose and eliminate their Scope 1,2 and 3 by 2050. 

It also calls on federal regulators to identify climate change as a systemic risk and stress test organisations. It urges the US Securities and Exchange Commission to mandate climate and ESG risk disclosure and asks the US Department of Labor (DOL) to reverse proxy voting rules under the Employee Retirement Income Security Act (ERISA) that undermine ESG integration. The DOL will not enforce the latter rules until the publication of further guidance, but they have not been formally dropped. 

In the letter, coordinated by NGO Majority Action, the State Treasurers also say they will support efforts to hold corporate directors accountable at companies in climate-critical sectors that are not setting targets to limit global warming to 1.5C. 

Treasurer Michael Frerichs of Illinois, also a signatory to the statement, told RI that it is starting to vote against directors who are failing to address climate risk. “I think we need to hold companies responsible for their failure. Failing to provide a clear path to dealing with these risks is not acceptable, and we made changes to our policy earlier this year.” 

In related news, Washington think tank Center for American Progress said yesterday that U.S. regulators should tackle climate risk through stress tests and capital requirements. Its paper says regulators should force banks to hold more capital if they are exposed to carbon-intensive industries.