It’s only June, but for Mindy Lubber, the CEO of Ceres, the environmentally minded watchdog and shareholder advocacy group, 2021 has already been a year of successes.
The U.S. has rejoined the Paris agreement to combat global warming and the Biden Administration has made key environmental moves. Companies and investors have signed on to net-zero-emissions targets. Even energy giants
(ticker: XOM) and
(CVX) are feeling the pressure: Exxon is being forced by shareholders to add three more climate-friendly directors to its board, and 61% of Chevron shareholders supported a proposal calling for deeper cuts to the company’s Scope 3 greenhouse gas emissions.
Lubber got her start in college, working with activist
on a campaign to push auto companies to make safer cars. She helped found Green Century Funds, a line of fossil fuel-free funds, and served as a regulator for the Environmental Protection Agency before joining Ceres.
There’s plenty of work left to do, Lubber says. We checked in with Lubber before the historic Exxon vote. Here’s an edited and condensed version of our conversation.
Barron’s: Ceres has pushed for action on global warming for years. That’s paid off this year.
Lubber: We’re coming out of four years where climate wasn’t seen as a problem or a legitimate issue. Change is coming from the government, from the private sector, from investors. These are the three worlds we [operate] in, domestically and internationally. The administration is showing climate is a priority. The Treasury Secretary for the first time said climate is something we need to [address] to protect against the systemic risks to the economy. We’ll see the Securities and Exchange Commission mandating disclosure of climate risk. The Federal Reserve has finally said that climate is a systemic risk to our entire financial system. The entire federal financial system is being asked to define climate risk and act on it. The EPA has made climate change a priority, and acting on methane [a greenhouse gas is 25 times more potent than carbon dioxide]. We don’t know if the infrastructure bill will pass, or in what size, but it has the ability to profoundly change the future of our economy.
We also need a global solution. So we’re seeing China reconsider whether its goal of net zero by 2060 should be moved up. India and Japan are reconsidering new commitments. The other difference is the private sector. Today we have hundreds of companies setting net zero goals. Our goal now is to [get them to] commit to short-, medium-, and long- term goals and be transparent. We put out a road map of best practices on leadership.
We launched Climate Action 100-plus a couple of years ago with 20 investors. Now we have 540 global investors supporting Climate Action 100-plus, with $53 trillion, saying they’ll get to net zero [in their portfolios], not by financing the wrong things, but by investing in the right things. It’s a new day and we’re seeing a difference.
What do you expect from the SEC, which has asked for input from companies and investors about climate-related disclosure in public company filings?
It’s not legitimate to say climate is not a material risk. The SEC needs to make sure that companies disclose that material risk. That’s why we have to argue that there are short-, medium- and long-term goals [for the process] and they have to be transparent. The SEC mandating climate risk disclosure will go a long way. When companies are required to put out information as part of the law, they have to stand by it. We’ll see mandatory disclosure in the next year or two.
When will we see it in the 10-K and 10-Q annual and quarterly reports?
In 18 months or so.
This proxy season is remarkable, not least for the number of climate-related shareholder proposals, such as asking companies to publish a climate-action plan and progress report.
Resolutions are a democratic process. People don’t file resolutions until they hit a brick wall. We’ve seen many “Say On Climate” shareholder resolutions even before today. It’s just another layer of asking for a climate action plan and making sure [the plan] is transparent. People want to make sure the strongest possible plan is put out. Climate has become a fiduciary issue and is a material risk. Boards have a duty to respond.
What happens if a new administration comes in 2024 and reverses all the Biden administration’s initiatives?
It’s a sobering question. I’d like to think that almost all the changes we’re talking about have become far more accepted by the private sector and public sector. It’s not only the public sector pushing forward with a vengeance, it’s the private sector coming out and supporting it. It will be harder if there’s an administration that opposes [these initiatives]. Companies and investors don’t like being jerked around and they don’t do well with world changing. I think these things will stick. Auto companies are now changing what the next decade will look like.
(F) says that by 2035 we won’t see a combustion-engine passenger vehicle come off the production line. It takes seven years to design a car. There are too many forces moving forward. Consumers are now more clear than ever. Employees are saying that they want to work for a values-driven company. It’s far harder to flip the switch when so much of society, including loudest and most powerful voices in the private sector, are now standing behind reducing methane and hydrocarbons and committing to net zero.
Last year, the Commodity Futures Trading Commission recommended that Congress establish a price for carbon to discourage polluters. The administration isn’t there.
Carbon pricing is exceedingly important. The capital markets, investors of the world and so on live by honest pricing signals. Right now carbon pollution costs us tens of billions of dollars a year, and in most parts of the world it’s priced at zero. It’s not on the top tier of the administration’s [objectives] but hopefully it will be, and they will do it in a way that’s equitable. We have to get there.
Which company is doing the best?
These large enterprises are complicated. None of them are there. None of these companies want to be liars. If they make a commitment, they want to do it.
What are your next campaigns?
None of these [the current campaigns] are finished yet. We want to work with the Administration to pass substantial changes in our federal regulatory system, for mortgage overseers and others [regarding climate]. And companies and investors committing to net zero—what does that look like in the short term? Our job now is to define what that looks like and the methodology to get there.
Write to Leslie P. Norton at firstname.lastname@example.org