There's no more low hanging fruit on the sustainability tree
Corporations with sustainability initiatives have largely exhausted their “easy” options for climate change. Enter the era of hard choices.
Something like 80% of S&P 500 companies have sustainability reports - but what good has it done? The climate emergency is only just beginning, and markets are not ready for it. The number one global risk in the coming decade, according to the World Economic Forum, is Climate Action Failure. In a report released this month on the physical hazards of climate change, McKinsey suggests that the physical impacts of climate change will affect vulnerable populations the most.
While so many companies create annual sustainability reports, they often don’t uncover a company’s underlying reliance on fossil fuels. A couple examples:
Royal Dutch Shell does a credible and robust scenario analysis on three different future carbon-constrained scenarios. However, when it comes to their future revenue streams and business strategies, fossil fuels is still the dominant source. Looking under the hood at Shell’s financial reporting, at the end of 2018 95% of its multi-billion dollar R&D budget was for fossil fuel research. Only five percent was in the “clean energy” category.
Amazon recently set ambitious zero emission goals for its entire global infrastructure - this is huge. It includes, shipping, its own Amazon-branded products, energy for AWS data centers, and more. However - what does it exclude? Amazon Web Services’ growing revenue from the fossil fuel industry.
Bank of America, JP Morgan, and Citi are each making incredible commitments to renewable power for their own operations and investments in clean energy infrastructure more broadly. Yet, according to BankTrack, these banks are the top three lenders to the fossil fuel industry.
All of the corporations listed above have good or great scores from MSCI’s ESG research, they all produce high quality, GRI-aligned sustainability reports, and the reports are assured by big-four accounting firms. Yet no reporting or indicators clearly highlight, for investors or other stakeholders, how beholden the firms are the fossil fuel industry and the current energy system.
That’s the tea.
