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The Office of Climate Sustainability hosted the sixth installment of its Investing in Mission-Driven Institutions seminar series on Tuesday night, exploring the power shareholders exercise in investment decisions in the wake of recent regulatory debates.
Duke University students and faculty gathered in the Holsti-Anderson Family Meeting Room in the Rubenstein Library, moderated by senior Emily Nagamoto, president of the School of Environmental Studies Environmental Union, and Sarah Bloom Raskin, Colin W. Brown Distinguished Professor of the Practice of Law. We had a conversation.
Raskin put forward this argument in the context of two recent developments in the regulatory world: the U.S. Securities and Exchange Commission’s updated policy on carbon emissions reporting and ExxonMobil’s lawsuit against corporate shareholders.
Jim Cox, Brainerd Currie Distinguished Professor of Law and former chair of the Investment Responsibility Advisory Committee, and Daniel Fougere, president and chief counsel of the shareholder advocacy group As You So, joined via Zoom to discuss Duke Climate Change Coalition Co-Chair Senior Abby Sachs also joined via Zoom. , spoke directly.
Much of the question-and-answer portion of the session focused on how shareholder influence can be applied to the management of Duke University’s endowment by the Duke University Management Company (DUMAC). Duke University’s endowment has been the subject of controversy in recent months as the debate over fossil fuel divestment continues. It got hot on campus.
Cox, who serves on DUMAC’s risk management and audit committee, said the main reason the company has difficulty controlling precisely where its funds are invested is the fact that investment decisions are delegated to other managers. He claimed that there was.
“We’re not buying stocks…we give a lump sum to an investment manager, and that investment manager goes out and spreads it around,” Cox said. “It’s quite far away.”
Speakers were divided over the question of whether DUMAC could successfully divest from fossil fuels and whether it had a responsibility to do so.
Cox believes that if institutions with large endowments divest from fossil fuels, they will not be able to maintain the level of financial returns needed to sustain their operations.
“The cornerstone of risk management for large pools of money is that, unfortunately, you can’t do that by moving away from fossil fuels,” he said, adding, “DUMAC currently has $22 billion in funds under management. It exceeds that.”
Fougere disagrees, saying that while her firm has a growing number of funds that don’t invest in fossil fuels, they are “actually making more money than the funds that do invest in fossil fuels.” She predicts that the global trend toward clean energy alternatives will make divestment from fossil fuels a more attractive financial strategy over time.
Sachs is adamantly opposed to investing in fossil fuel companies for both practical and ethical reasons. He agreed with Mr. Fougere that divestment makes economic sense in a decarbonizing world, but noted the negative impact climate change will have on the social, economic and environmental health of communities around the world. argued that this provides the strongest case for making divestment a top priority.
“We are so discouraged by the idea of working with fossil fuel companies when all they have to do is lie to us and destroy our future,” Sachs said. He spoke on behalf of climate change activists.
He was reacting to a recent report released by ACIR that recommended that Duke University refrain from divesting from fossil fuel companies, saying that this action would “do more harm than good when it comes to the goal of reducing greenhouse gas emissions.” There is a possibility.”
“When we looked into it more closely, we found that a lot of the logic didn’t apply,” Sachs said. “I don’t know if reducing fossil fuel emissions or reducing Scope 3 emissions is really a goal for Duke University at this point.
SEC Climate Disclosure Policy Changes
The SEC voted 3-2 Wednesday to approve a controversial policy that would require companies to report to investors their greenhouse gas emissions as well as climate-related business risks from flooding, rising temperatures, natural disasters and more. Approved the watered down version.
But opposition from Republican lawmakers and industry representatives prompted the committee to remove language that would have enforced these new rules on emissions across a company’s value chain: suppliers and consumers. Many small businesses are completely exempted from the requirement, and companies no longer need to disclose the climate expertise of their board members.
The SEC has already faced backlash from this policy change, with a coalition of 10 states arguing that the SEC is exceeding its statutory authority and potentially violating First Amendment free speech protections. The company has announced its intention to file a legal challenge to the new regulations.
The day before the final decision was announced, seminar participants discussed the possible implications of policy changes in incorporating climate change considerations into investment decisions.
Fougere expressed that the new policy is promising in that it will streamline carbon emissions reporting standards across the industry and make it easier for investment managers to assess risk.
“If everyone is reporting differently…that’s a problem,” she says. “We want to make sure that shareholders are not misled because they are not climate change experts.”
Fougere also pointed out that in a globalized world moving rapidly towards decarbonisation, it is becoming increasingly important to incorporate climate risks into investment decisions.
Cox commented on the limitations the SEC may face in pursuing a stronger stance on climate issues, noting that a hostile political atmosphere makes more ambitious action difficult. He expressed that more comprehensive climate action will not be possible without strong Congressional support from the SEC.
“We need to have a tremendous number of people in the Senate and House of Representatives who are recognized to care about markets and investors,” Cox said. “This is going to be a campaign. This is going to take several years.”
Exxon shareholder lawsuit
Exxon filed a lawsuit against two Exxon shareholders on January 22 in response to a proposal submitted in December that required oil companies to set Scope 3 carbon emissions targets that would also regulate emissions from Exxon’s suppliers.
Shareholders, US activist investment firm Arjuna Capital and Amsterdam-based shareholder activist group Follow This, withdrew the resolution in February after pressure from the company. However, Exxon continued to pursue the lawsuit, asking the court to exclude shareholders from the company’s 2024 proxy statement.
The case marks the first time Exxon has sought to eliminate shareholder proposals through the courts, instead of filing a “request to do nothing” with the SEC, which is standard practice for similar companies.
Exxon is the only one of the five Western “supermajors” that has not adopted Scope 3 targets, unlike BP, Shell, Chevron and Total Energy.
Mr. Fougere spoke about the importance of adopting Scope 3 targets, noting that 75% of a company’s emissions fall under Scope 3 targets.
“If you don’t report, shareholders may not know how much risk there is to the company and its emissions,” she says.
Commenting on the overall Exxon case, Sachs called the move “further evidence that shareholder advocacy at the scale of fossil fuel companies doesn’t work.”
“Their business model has always been based on profits from oil and gas exploration, and that’s not going to change anytime soon,” Sachs said.
Fougere said he believes the lawsuit shows Exxon’s “desperation” and that the company is becoming “increasingly irrelevant” as the global energy economy shifts to renewable alternatives. Ta.
“More and more money is flowing into green technology… harnessing solar, wind and geothermal energy is becoming cheaper and cheaper,” Fugere said. “That’s where the world is heading.”
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| Associate News Editor
Zoe Korenovsky is a sophomore at Trinity University and an associate news editor in the press department.
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