Hi everyone, welcome back to Net Zero. Every spring, giant global companies host their annual gener͏‌  ͏‌  ͏‌  ͏‌  ͏‌  ͏‌ 
semafor

Net Zero


cloudy Kyivsunny New York Citysunny Carmel-by-the-Sea

Hi everyone, welcome back to Net Zero.

Every spring, giant global companies host their annual general meetings — a tightly scripted snoozefest even for most investors, but increasingly open season for activist investors who want to change companies approaches to energy and climate.

I spoke this week to one of the most powerful activists, the New York City Comptroller Brad Lander, who manages $242 billion in pensions for teachers, cops, and other city employees. Read on for how he’s trying to use that pool of money to pull other asset managers along.

Also: How to shop for an electric vehicle, how to run Ukraine’s electric grid, and a golf tip.

If you like what you’re reading, spread the word!

Sparks/Snags

Spark: Investors are pouring as much money into the energy transition as fossil fuels. Global investment in clean energy technologies — including wind, solar, batteries, electric vehicles, and other key hardware — reached $1.1 trillion in 2022, according to Bloomberg. That’s a record, and the first time it’s matched fossil fuel investment.

Snag: Maybe don’t buy that Tesla quite yet. The U.S. Inflation Reduction Act offers a $7,500 tax credit for electric vehicles if they meet domestic sourcing criteria for raw materials — but nobody can quite figure out which cars the regulations apply to. West Virginia Sen. Joe Manchin this week said he plans to introduce legislation that would apply the criteria retroactively — meaning anyone who bought a non-qualifying car now wouldn’t get the tax credit, if the legislation were to pass.

Semafor Stat

Tesla’s net income in the fourth quarter of 2022, a record for the company. The company’s stock has tanked since CEO Elon Musk’s messy takeover of Twitter in October, but picked back up over the last few weeks as Tesla slashed car prices in a bid to boost sales. It delivered about 400,000 cars in the fourth quarter.

Tim McDonnell

New York City’s climate-conscious pension funds put BlackRock on notice

Reuters/Brendan McDermid

THE SCOOP

New York City’s comptroller wants several major U.S. banks to do more on climate change — and told Semafor that BlackRock and the other asset managers that oversee its $242 billion in pension funds should back him up or risk losing his business.

The comptroller, Brad Lander, filed shareholder resolutions this week at Bank of America, Goldman Sachs, JPMorgan Chase, and Royal Bank of Canada demanding they set hard caps on what they finance that produces emissions in 2030.

At the moment, those banks have only set “intensity” targets (i.e., tons of CO2 per dollar in their total lending and underwriting portfolios), which leaves room for total emissions to increase. The three New York City pension plans sponsoring the resolutions collectively control $850 million worth of shares in the four targeted banks, equal to an about 0.1% stake each in the three U.S. banks and 0.02% of RBC.

“These banks say they have net zero commitments, but if they don't have absolute emissions targets, they don't really have a net zero plan,” Lander said in an interview in his City Hall office.

He said any manager that votes against its climate proposals could get the ax — which, for BlackRock, would be a $43 billion loss.

“Voting for these resolutions is about the lowest bar you can have,” he said. “We're only going to be able to hit our net zero targets if our asset managers raise the bar. We will, therefore, begin to look at our manager selection through the lens of our commitments.”

BlackRock and Bank of America declined to comment on the resolutions.

Separately, other shareholder advocacy groups — which include Trillium Asset Management and the Sierra Club Foundation — this week filed resolutions at Bank of America, Wells Fargo, JPMorgan Chase, Goldman Sachs, and Morgan Stanley, asking the banks to commit to a timeline to end financing for new oil and gas drilling, and to publish more details about their strategies to reduce the carbon footprint of their loan books over the next decade.

These and other shareholder groups have raised climate-related proposals in the past, asking for the banks to measure and disclose their financed emissions, which these banks have started to do. The proposals this year are more pointed in asking for strategic decarbonization details and a timeline for phasing out fossil fuels.

KNOW MORE

Most large public companies, including banks, have by now set some kind of decarbonization goal. But in the U.S., there’s little government oversight of these goals, leaving it to shareholders to press for more ambition and higher quality. Over the last few years, the number of climate-related shareholder resolutions has been rising, up to a record 101 at U.S. companies last year, of which 10% passed — also a record.

Corporate carbon-cutting goals are especially important for pension funds and other institutional investors that own a broad range of shares across the economy and are focused on long-term returns. If the impacts of climate change tank the global economy a couple of decades from now, they have the most money to lose. At companies that give shareholders a vote on climate strategy, a growing number of shareholders are voting against those that are out of step with climate science, according to index firm MSCI.

But the biggest asset managers — BlackRock, State Street, and Vanguard — still vote against most climate resolutions, because those firms are typically hard-wired to back companies’ managers and because they view many climate resolutions as overly prescriptive. Without those managers’ support, these resolutions are mostly doomed to fail.

TIM’S VIEW

This year’s climate-related proxy battles are as much a litmus test for the big asset managers as they are for the banks targeted by resolutions. BlackRock and its peers have to walk a razor’s edge between opposite ends of the political spectrum, and are bound to look too green to some clients and not green enough to others, with billions of dollars in managed assets at stake. As these climate resolutions come to a vote during companies’ annual meetings over the next few months, we’ll see which side they’re more concerned with alienating.

Up to now, most pressure has come from the right: Florida, Texas, and other Republican-led states have been rolling out rules to blacklist asset managers perceived as biased against fossil fuels. Going forward, expect to see more pressure from the left.

ROOM FOR DISAGREEMENT

Notwithstanding Lander’s threat, shareholder advocacy as a method for pushing corporate climate action, in general, is severely constrained by the power wielded by a handful of big asset managers.

Because they control the majority of shares at a majority of public companies, “shareholder democracy is by and large broken,” said Shivaram Rajgopal, an expert on climate-related corporate governance at Columbia University. “We don’t have a great mechanism for shareholders to really ask about what they want done with their money.”

Lander’s ability to leverage BlackRock is also constrained by his fiduciary responsibility to get the best deal for his pensioners. Without competition from the world’s biggest asset manager, rival firms could be in a position to push the pensions for higher fees. In Texas, rules to blacklist “anti-fossil” banks ended up costing taxpayers hundreds of millions of dollars in higher interest rates on bonds.

THE VIEW FROM LONDON

As with oil and gas companies, European banks are far ahead of their American counterparts on climate. In December, HSBC became the first large multinational bank to commit to end financing for oil and gas expansion, the same demand shareholder advocates are now making of U.S. banks. It helps that European regulators, too, are ahead of the curve: This year a raft of new regulations are expected that will force banks to disclose their climate risks and publish plans to mitigate them.

Watchdogs
REUTERS/Angus Mordant

Leaky pipes are robbing taxpayers. In the process of drilling and transporting oil and natural gas, some methane gas is intentionally flared or vented off, or escapes from leaky pipes and other equipment. The Environmental Defense Fund found that more than$500 million worth of gas got lost in 2019 costing the government more than  $63 million in royalties.

Text

One Good Text ...with Maxim Timchenko

Glossary

The crack is widening. The U.S. crack spread hit its highest level in three months this week, up to $42 per barrel. Demand for refined products is rising quickly, especially as China reopens, at the same time that several big U.S. refineries have been taken offline because of maintenance, fires, and storms. In practical terms, that means more expensive gasoline — the nationwide average is 40 cents higher per gallon than a month ago.

Green Shoots
Unsplash/Courtney Cook

Don’t let climate change ruin your golf game. Nick Cavanaugh started his career as a climate scientist at the University of California, crunching huge volumes of historical and real-time climate data to make predictions about future weather events. Then he took that skill to a London hedge fund for a few years, leveraging his forecasting prowess to help the firm make bets on energy consumption trends.

By the time his friends understood what he was up to, they had a more practical question: “They were asking me when they should go skiing,” he said. “And I realized I can answer this question for people at scale.” And monetize that information.

Two years ago he launched Sensible Weather, a data analytics company that predicts the odds that bad weather will screw up your camping trip, stadium concert, or any other outdoor recreation. And it allows you to insure the experience, for a premium equal to roughly 10% of the ticket price. As climate change scrambles weather patterns, Cavanaugh said, past experience is becoming a less reliable guide for when conditions for outdoor recreation will be in your favor. Similar technology is already in widespread use for crop insurance for farmers.

Last week, the company struck a partnership with the Professional Golfers’ Association of America (PGA), to make its services available to those who, for example, spend $500 or more months in advance to secure a slot at Pebble Beach. “If your tee time gets rained out, we can compensate you for that loss,” he said.

How Are We Doing?

If you’re enjoying Net Zero, please share with your family, friends and colleagues. I’d love to have them read it, too.

You can reach me either by replying to this email, or on netzero@semafor.com.

To ensure this email doesn’t go to your junk folder, add netzero@semafor.com to your contacts. In Gmail you should drag this newsletter over to your ‘Primary’ tab.

Thanks for reading and see you next week!

Want more Semafor? Explore all our newsletters at semafor.com/newsletters

— Tim (with Jeronimo Gonzalez, Preeti Jha, and Gina Chon)