Aligning Corporate Lobbying with Climate Science

Published September 16, 2020

2020-09-16 12:25:42

With the 2020 hurricane season shaping up to be the most active season on record and triple digit temperatures exacerbating the West Coast’s wildfire season, burning 2.5 million acres in California alone, climate change is increasingly taking a toll on both our communities and our economy. Against this backdrop, a growing consensus is emerging among central banks and other financial regulators that climate change poses a systemic risk, one that affects the very stability of financial markets–and everyone who operates within them.

Companies recognize this too, and are starting to take action to mitigate their climate-risk exposure in their direct operations and supply chains. But too often, these efforts are undermined by their own lobbying efforts, both directly and through their trade associations.

Given the systemic risk that climate risk poses, Ceres has released a new report that argues that all corporate action — including corporate lobbying — should be proportional to the risk faced and aligned with the latest science on climate change. The report calls for all corporate lobbying to use  “science based policy” as the new north star.

This is a sentiment that is shared not just by the NGO community, but also the investment community. Investors are increasingly coming to understand that companies that lobby in a way that is misaligned with the latest climate science are, in effect, acting against their own best interest.

In 2018, institutional investors with $2 trillion in assets under management called on the 55 top greenhouse gas-emitting European companies to “ensure any engagement conducted on their behalf or with their support is aligned with our interest in a safe climate.” As a result of this investor focus, Royal Dutch Shell, BP, and Total have conducted assessments that analyze how much their large trade association memberships align with their positions on climate change.

Building on the success investor calls are having in Europe, in 2019, 200 institutional investors with a combined $6.5 trillion in investments asked 47 of the largest US publicly traded corporations to specifically align their climate lobbying with Paris Agreement goals. In the latest string of examples, Nordic asset manager Storebrand which manages $91 billion in investments, divested from ExxonMobil, Chevron and Rio Tinto in protest over the companies lobbying on climate change issues. “Climate change is one the greatest risks facing humanity and lobbying activities which undermine action to solve this crisis are simply unacceptable,” said Jan Erik Saugestad, Storebrand’s CEO, in a statement.

Given the need to act, how can companies align their lobbying with climate science?

Ceres new report calls on companies to take three broad steps:

  • Assess the climate-related risks to the company and the ways in which its lobbying efforts serve to exacerbate or mitigate these risks.

    • This includes ensuring that climate is considered as a systemic risk in a company’s risk management efforts, and assessing the extent to which a company’s current direct and indirect lobbying efforts align with science-based climate policy.

  • Govern to systematize decision-making on climate change across the company, including in all direct and indirect lobbying

    • This includes creating systems that align internal stakeholders, including risk, governance and government affairs, on discussions around climate lobbying, including trade association memberships. It is also critical to ensure that these issues are elevated to the board level.

  • Act to align both direct and indirect lobbying with science-based climate policies

    • This includes publicly affirming that the company supports science-based climate policy efforts, and building on that commitment to lobby directly and indirectly for science-based climate policy. This also includes engaging with trade associations on science-based climate policy and potentially moving the positions of these associations when they are inconsistent with climate science.

The systemic risk posed by climate change means no company will go untouched. Lobbying through a “risk-aware” climate lens will help companies drive the creation of a regulatory environment that opens up new opportunities for innovation and position them for resilient growth in a zero-carbon economy.

Margaret Fleming is Associate, Governance at Ceres. She is a contributing author of the Ceres Blueprint for Responsible Policy Engagement on Climate Change

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