The Trump administration is making a push to combat shareholder climate change advocacy as part of an effort to break barriers to fossil fuel use and development.
President Trump issued an executive order Wednesday primarily designed to curb states’ power to block pipelines and other energy infrastructure projects.
But it also contained a short provision requiring the Labor Department to study pension funds’ energy sector investments and to investigate whether the growing and successful shareholder campaign for pension managers to consider companies’ exposure to climate change risks is harming the economic performance of the funds.
Trump also wants the Labor Department to explore whether activist investors’ so-called “environmental, social and governance efforts” emphasizing climate change risks is discouraging financing of energy projects in capital markets.
“The ‘keep it in the ground’ movement has two tools,” said Kevin Book, a managing director of the ClearView energy research group who studies oil and gas. “It’s not just cutting off pipelines. The second part is cutting off capital, either making it so capital is more expensive or discouraging capital market investments in energy producing companies. Trump’s executive order pushes back on both things.”
Trump critics say his administration’s targeting of shareholder climate change advocacy is irresponsible.
“The Trump administration’s attempt to intimidate pension funds that have decided not to invest their members’ savings in the very companies whose activities put the global economy at risk is a new low,” Sen. Sheldon Whitehouse, D-R.I., told the Washington Examiner.
Trump’s order focuses specifically on employer-sponsored retirement funds, such as 401(k) accounts and pensions, which the Labor Department is empowered to regulate under the Employee Retirement Income Security Act.
In recent years, activist shareholders have pushed for resolutions calling on major oil and companies to disclose the risk posed to their business by climate change. These shareholders argue the stocks of fossil fuel-dependent energy companies are overvalued because of climate change risk, and fossil fuel debt is risky considering the future effects of global warming and the potential of government regulation over carbon emissions.
The pressure has resulted in many companies publishing, or committing to release, reports on climate risk, and promising actions to reduce that risk.
For example, Shell recently announced it is leaving a major industry lobbying group, American Fuel & Petrochemical Manufacturers, because of the trade association’s inaction on climate policy.
Shell acted after it reached an agreement last year with activist shareholder groups to set short-term carbon emissions reduction targets.
“There is a growing number of shareholder groups asking for proxy votes where shareholders require oil-producing or coal-producing hydrocarbon-intensive companies to make decisions constraining their activities, lowering their carbon footprint, or disclosing what their climate risks are,” Book said.
Book said Trump wants the Labor Department to investigate the financial effects of pension managers, driven by shareholder pressure, prioritizing climate change concerns over profitability in making investments.
Supporters of Trump’s effort say the push to prioritize climate risk efforts runs counter to pension managers’ fiduciary obligations to employees.
“What they are doing is responding to what they and others on the center-right believe is a corporate governance shareholder process that has been hijacked to push a social and political agenda that wasn’t able to get through the halls of Congress and now is not able to come through the administrative state with Trump in charge,” said Tim Doyle, vice president of policy and general counsel at the American Council for Capital Formation. “They are putting people on notice.”
The shareholder climate disclosure effort recently suffered a setback when the Securities and Exchange Commission granted ExxonMobil’s request to dismiss an investor resolution that would have pushed the company to disclose greenhouse gas emission reduction targets aligned with the goals of the Paris climate change agreement.
The SEC agreed with Exxon’s position that the resolution would unfairly “micromanage” the oil and gas company’s affairs.
Book said that SEC decision, and Trump’s move to review shareholder climate change advocacy, could slow such efforts but “may not put the genie back in the bottle now that large energy producers have started to report climate risk.”
