This week, the owners of more than 62 percent of ExxonMobil’s shares voted in favor of a resolution instructing the company to report to shareholders on the impact of measures to keep future global warming to 2⁰. That follows a similar vote margin in May on a similar proposal at Occidental Petroleum.
Investors, including the big ones, are interested in what climate change will do to corporate performance.
So is the Trump administration. The President has announced that the U.S. will withdraw from the Paris agreement.
But this isn’t a story about the Oval Office and Wall Street agreeing. The Administration is convinced that tackling climate change will hurt the economy. Wall Street is more convinced that not doing so will hurt the economy. And so is Main Street: some of the largest companies in the U.S. are on record exhorting the Administration not to withdraw from the Paris Agreement. That list of companies includes ExxonMobil.
Politically, it’s quite possible to do what Michael Lewis describes as fitting the evidence to the theory, rather than the theory to the evidence. That is, if your political stance is that tackling climate change is going to wreck the economy, it is possible to cast the decline in coal jobs as a consequence of that, and generalize that to the entire economy. But in the real economy, that is a strategy based more on luck than fact. Most companies don’t live in casinos.
Investors see not adapting business plans to a low-carbon world as a risk and so do many companies. The reason is simple: competitiveness. If the rest of the world values low or zero carbon technologies, U.S. companies that want to do business in those countries probably need to operate in that reality, rather than take comfort from what might well turn out to be a temporary hiatus in U.S. policy support for limiting climate change.
195 countries signed the Paris accords. When the U.S. drops out, there will still be 194 signatories. And there are hundreds of companies that have already committed to reducing emissions at a rate compatible with Paris’s emission reduction goals, or committed to 100% renewable energy. Companies are voting with their feet.
That’s just one set of facts. There are lots of others. For example, jobs: solar energy jobs alone outnumber jobs in fossil fuel electricity generation, and solar energy employs over twice as many people as coal mining. Or, think about the cost of not tackling greenhouse gas emissions: that cost will run into the trillions. Or $44 trillion, according to Citigroup.
Finally, as I’ve said before, Washington D.C. is not the only place that makes public policy. While the Trump administration is pulling out of the Paris agreement, California is proposing to institute a more ambitious GHG cap and trade program to limit emissions. It’s not the only state tackling emissions, but even if it were, it’s still almost 1/6 of the whole U.S. economy. With the U.S. out of the Paris agreement, progress on tackling emissions will be more difficult, but it’s unlikely to stop progress, even in the U.S. And if the pullout damages America’s foreign relations and terms of trade, that could be even more harmful to the economy.
Alternative facts may work in politics. But not on Main Street.