Pension Funds Point Finger at Lobbyists of Polluting Companies

(Bloomberg) -- A group of pension funds that control $2 trillion are pushing for 55 large European energy, mining and transportation companies to scale back their anti-climate lobbying.

Sweden’s AP7, Legal & General Group Plc, the Church of England’s pension fund and Robeco of the Netherlands wrote to the chairman of each company, asking them not to use organizations that try to ease governments’ environmental rules and to be transparent about their own lobbying. The list of recipients includes 10 oil and gas companies such as Royal Dutch Shell Plc and Total SA as well as Renault SA, Glencore Plc and Airbus SE.

“If these lobbying positions are inconsistent with the goals of the Paris Agreement, we would encourage you to ensure they adopt positions which are in line with these goals,” they said in the letter.

Lobbying by large companies and industry associations can have a significant impact on a government’s stance on an issue. A study by Drexel University showed that the oil and gas industry spent $2 billion between 2010 and 2016 to try to influence the U.S. government on climate legislation.

This is a significant barrier to governments delivering on their Paris agreement promises. In 2015, nearly 200 countries signed a landmark deal pledging to try to keep temperatures from rising more than 2 degrees Celsius (3.6 Fahrenheit) above pre-industrial levels.

“Long-term investors have a clear interest in the Paris Agreement being implemented to support the necessary transition to a low-carbon global economy,” said Stephanie Pfeiffer, chief executive officer of the Institutional Investors Group on Climate Change. “Shareholders should rightly expect companies in which they invest to advocate for the climate policy required for this to happen.”

Central banks are warning financial institutions that climate risk isn’t adequately priced in to asset valuations. Bank of England governor Mark Carney has previously said that this could result in a “climate Minsky moment,” a term for the sudden collapse of asset values. Two key issues are physical risk from extreme weather and transition risk, which could result in rapid repricing and stranded assets.

The letter identifies other risks: 
  • Regulation -- delayed action may result in stronger regulatory action in the future, which could affect companies
  • Reputation -- companies could face backlash from their consumers, investors and stakeholders if they’re seen to be blocking climate action
  • Legal -- companies that continue to invest in high-emitting projects or with misleading corporate disclosure could be exposed 

“AP7 has identified that weaknesses in current climate policy globally pose a risk to the long-term value growth of our pension portfolios,” said Charlotta Dawidowski, the environmental, social and governance manager at one of Sweden’s largest pension funds. “At this point in time we find it unacceptable that companies counteract ambitious climate policy.”

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