Preventable Surprises is pleased to launch the third Corporate Lobbying Alignment Project (CLAP) discussion note focused on the fossil fuel sector. Fossil fuels is one of the few sectors where the topic is taking hold. As BP and potentially Shell look to pivot their focus away from fossil fuels, the year ahead will be bumpy. Are investors ready to challenge corporate capture of climate policy in the United States, Canada, Australia, and other jurisdictions through the Covid-19 recovery period and beyond? We will discuss these questions and more in our online roundtable on 29 October (10am New York, 2pm London, 3pm Amsterdam) with experts from North America and Europe.
The latest CLAP discussion note assesses the extent and impact of corporate lobbying at all levels of government to block climate action. Prominent recent examples include Shell and other oil majors’ successfully undermining the EU 2030 renewable energy targets in 2014. The continued celebration of natural gas at the heart of the EU’s 2050 long-term climate strategy, and its role as a “bridge fuel” is part of the official government climate change narrative in Canada and other G20 jurisdictions. Given the success of fossil fuel companies and their trade associations in hobbling action on climate targets since the Paris Agreement, the note considers how this success will create new systemic risks for investors as fossil fuels enter decline and climate impacts create new market risks.
Lobbying to block climate action ramps up heading into COP26
NGO Influence Map’s recent analysis shows how two of the most powerful trade associations advocating for deregulation on climate change and energy, the US Chamber of Commerce and the National Association of Manufacturers, successfully lobbied for the United States’ withdrawal from the Paris Climate Agreement. The American Petroleum Institute, the American Fuel & Petrochemical Manufacturers and the Alliance of Automobile Manufacturers have also been effective in blocking climate policy progress, including winning regulatory rollbacks on methane emissions and automotive fuel economy standards in 2018-2019.
Demanding accountability on corporate lobbying & ratcheting up climate action
These climate policy rollbacks in the US from 2016 onward are expected to release more than 200 million metric tons of additional GHG emissions each year across the fossil fuel sector, putting the US on a path to increase average global temperature by 4°C. Similar efforts in Canada, Australia, and the EU by fossil fuel companies risk derailing the prospect of meaningful progress at COP26, when countries are supposed to submit enhanced Nationally Determined Contributions to reflect the “ratchet mechanism” contained in the Paris Agreement. Heading into the delayed COP26 in 2021, investors have an opportunity to demand more accountability and transparency from companies, and to hold laggards to account at the next AGM season.
The world’s largest investors and their representative bodies have not yet taken a strong public position on the need for a systematic wind-down of the fossil fuel sector. There is an opportunity for them to do so, and to tackle the most egregious corporate lobbying practices heading into the 2021 proxy season. With this in mind, the discussion note flags a number of forceful stewardship actions that investors, including members of investor groups like the ICGN and UN-PRI could undertake this year that include:
- Bringing sector wide shareholder resolutions demanding lobbying disclosure by all major fossil fuel companies;
- Incorporating climate lobbying alignment questions and benchmarking metrics into existing stewardship activities;
- Requesting board-level engagement on corporate climate lobbying alignment and request meetings with corporate counsel on this issue.
Mark Campanale, Founder, Carbon Tracker Initiative;
Clare Richards. Senior Engagement Manager, Church of England Pensions Board;
Sarah Couturier-Tanoh, Senior Shareholder Engagement & Policy Analyst, SHARE; and
Edward Collins, Director, Lobbying and Corporate Influence, Influence Map