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Engaging in shareholder activism to stop fossil fuel expansion projects

Published April 26, 2022 - Philathropy News Digest

I am a climate philanthropist. I write checks to environmental nonprofits and sit on several boards. I grew up playing in the woods of western Massachusetts; now I hike the Rockies. Season by season I’m sadly witnessing the damage wrought by drought and fires, and, like so many others, I hope to protect this planet from the worsening climate crisis.

I’ve learned that writing checks isn’t enough.

In 2020, when I learned about Enbridge’s Line 3, the tar sands pipeline being pushed through northern Minnesota, I eagerly wrote checks to support the Ojibwe water protectors working to stop it. These brave people were camping on the pipeline route in the freezing winter, lying down in front of bulldozers, praying, singing, and getting arrested. I was more than glad to help. But I soon learned the sad truth: While I was writing checks to stop Line 3, my bank, Bank of America, was loaning Enbridge billions of dollars to build it. My money was funding the very projects we need to prevent.

Frustrated, I called my bank and had a respectful conversation with the chief sustainability officer. One person’s phone call didn’t change anything; a few weeks later the credit facility for Enbridge was completed. I also thought of divesting—moving my money out of these banks. The divestment movement is powerful. But I’m not Harvard or a public pension fund—my divestment would be neither newsworthy nor financially impactful enough for my bank to notice. Were I to divest, I would forgo any leverage I have.

So I decided not to divest but to engage, and this shareholder season, a huge opportunity to stop these projects awaits. Shareholder resolutions requiring banks to stop funding fossil fuel expansion projects have been filed against the big six U.S. banks: JPMorgan Chase, Bank of America, Goldman Sachs, Citibank, Morgan Stanley, and Wells Fargo. Shareholders, particularly high-net-worth shareholders and major clients of asset managers like Blackrock, State Street, Vanguard, Schwab, and Fidelity, can tell their asset managers to vote for these pro-climate resolutions.

Stopping fossil fuel expansion projects is the key to keeping our global temperature from rising more than 1.5°C and avoid worsening climate crisis catastrophes. Last spring, the International Energy Agency (IEA) released its seminal report on the path to reach net zero carbon emissions by 2050. They came to one overarching conclusion: Net Zero by 2050 is doable if we cease, “from today, no new investment in fossil fuel supply.”

Everything begins with money and that money comes from our banks. Our banks have invested $4.6 trillion in fossil fuels just since 2015. Fortunately, public pressure to hold banks accountable for their role in the climate crisis is growing. In the months leading up to the United Nations Climate Change Conference (COP26) in Glasgow, 106 banks and 236 asset managers joined the Glasgow Financial Alliance for Net Zero (GFANZ), making commitments to reach net zero financed carbon emissions by 2050. They made these pledges. Let’s help them fulfill those commitments.

As fiduciaries, asset managers are duty bound to protect our assets from risk, including material and stranded asset risk. Today’s investments in new fossil fuel supply projects will be tomorrow’s write-off, as advances in technology continue to drive down the cost of renewables. In Indiana, Illinois, Colorado, and Georgia, as well as in Japan and India, planned gas and coal plants are being scrapped and replaced with renewables and storage. As the fossil fuel industry spends billions on exploration and drilling, the day is coming sooner than they would like when we won’t need their product. The industry will be writing down these huge investments, damaging their bottom line and those of top banks, asset managers, and their clients.

Large asset managers hold a huge percentage of bank shares. When they vote, the vote goes their way. In 2021, a tiny hedge fund named Engine #1 managed to replace three ExxonMobil board members after they convinced Vanguard, Black Rock, and State Street to vote against Exxon management. These asset managers did so because Exxon’s inaction on climate threats was putting their investments at risk.

I’m stepping out from behind my checkbook to advocate for calling our asset managers to vote “for” these pro-climate shareholder resolutions. Money is power; these resolutions are the first step to using that power to stop fossil fuel expansion. Here, at the tipping point of a humanitarian and planetary crisis, let’s use it for good—to protect the planet and our future.

Jill Soffer, Our Part


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