These days it seems as if anything newsworthy that doesn’t include the White House fades into invisibility. But in the case of climate change, the White House has decided to become invisible. As investors, we don’t have that option: Ignoring climate change will only make it more of a disaster for our portfolios.
COP 24, or the 24th Conference of the Parties to the United Nations Framework Convention on Climate Change, is underway in Poland. There’s one of these every year; the first happened in Berlin in 1995. The ones that attracted the most attention were COP 21, held in 2015 in Paris, at which 196 countries agreed to commit to reducing greenhouse gas emissions by specified amounts, and COP 3, in Kyoto, where the delegates hammered out a document that outlined greenhouse gas emissions reduction plans for the 43 largest emitters (developed countries and economies in transition). That document, known as the Kyoto Protocol, was never ratified by the United States, but many other countries did ratify it — enough that it entered into force in February 2005. As if guided by fate, that was just in time for the United States to witness one of its worst hurricane years ever, one that included four Category 5 storms: Katrina, Rita, Wilma and Emily. Back then, there were a lot more climate skeptics, and it was as if nature was serving a wake-up call.
The alarm bells are ringing more loudly now. Hurricanes Florence and Michael both made destructive landfalls in the Southeastern United States this year, and for perhaps the first time, destructive wildfires covered enough territory to become a major climate story, with unprecedented blazes in areas that seldom see that kind of heat, including parts of Sweden north of the Arctic Circle, and now the record-demolishing California fire season. One recent estimate projects that the California wildfires could include insured losses of $13 billion (with, of course, much higher uninsured losses). For many homeowners and businesses in coastal areas, flood insurance is becoming far more expensive, just as fire insurance is for homeowners and businesses in areas that are growing hotter and drier, like California.
This kind of reality makes success in negotiating a fair, global solution to climate change, which is what all the COPs pursue, ever more important for all of us — citizens, parents, policymakers, workers, investors. That is why COP 24, like other conferences of the parties before this one, will focus on ways to achieve climate neutrality — taking carbon out of the atmosphere and advancing technologies that will help us lower the carbon intensity of daily living and commerce.
But this COP comes at a time when the United States has a president who has called climate change a hoax and has nominated a former coal industry lobbyist to head the Environmental Protection Agency. Will the U.S. be a constructive participant in this COP? Doubtful. But that doesn’t mean there’s nothing we can do.
Especially for investors, there’s a lot we can do. What we do at Pax World Funds is laid out in our report for the Task Force on Climate-Related Financial Disclosure: We benchmark the carbon intensity of our funds and have established goals to keep some funds’ carbon intensity at or below a specified fraction of their passive benchmarks. We have two funds that are expected to be fossil-fuel free as a result of their investment strategies. In all our portfolios, we avoid investing in the most carbon-intensive fuels and activities, including coal mining, oil sands production and utilities whose dependence on coal exceeds the national average. We engage with companies in our portfolios, urging them to report, manage and reduce their own emissions and climate risks, and we are part of investor initiatives — like RE100, Climate Action 100+ and CDP — that aim to mitigate climate change, company by company. Even as a company we strive to lighten our footprints: We offset our carbon emissions every year, including travel-related emissions, and we provide monetary incentives to employees who purchase hybrid or electric vehicles.
Yet, it’s not enough. There is more for us to do, and there is more for every firm, every investor, every person on Earth to do. We’re not the first species to have changed the earth; more than two billion years ago, cyanobacteria began producing oxygen, which, over eons, transformed our atmosphere into something that supported us and most of the rest of Earth’s inhabitants. But we are the first species to know that we’re transforming the planet in ways that will have profound effects on our patterns of civilization, the other species that share our planet and the wheels of commerce.
Yes, it matters that the United States government will probably not play a constructive role in Poland at COP 24. But for those investors who have committed not to jump off the climate cliff, there are many tools we can use to construct a low-carbon economy. We remain committed to that, and we will redouble our efforts to make the contributions we can through investment and engagement. Like members of CDP and PRI and many others, at Pax, we are still in.