March 22 – The U.S. private and public sectors are investing in a stronger, more resilient, more dynamic economy. Each month, manufacturers are announcing billions of dollars’ worth of new factories that will employ thousands building clean energy technology, as a potent mix of private investment and federal and state policies has quickly established the U.S. as a global leader in these fast-growing markets.
Leading companies are quickly shifting to reliable and affordable clean energy and electric vehicles to mitigate the risks of volatile energy markets, global instability, and climate change. And investors are carefully assessing their portfolios and championing solutions that ensure they are properly accounting for climate risks.
Real progress is happening because all of these stakeholders recognize the monumental economic opportunity in addressing the climate crisis and the severe financial risk in failing to do so.
Yet this extraordinary success has also fueled a growing political backlash that stands as a threat to the clean energy transition and the long-term prosperity and growth of our economy. This unfortunate, coordinated, nationwide effort seeks to warp capital markets against climate action by using state laws to restrict sustainable investment and banking practices.
Last year, a first wave of states passed new policies intended to block investors and banks from state business — such as managing the retirement funds of public servants like police officers, teachers, and firefighters — simply for considering the clear financial impacts of climate change and other sustainability issues. Several other states are considering similar policies this year.
But cracks are emerging in this effort as investors, companies, trade groups, and even the states’ own fund managers and advisors push back against these reckless restrictions. From Virginia to Indiana to North Dakota and Wyoming, these policies have suffered a string of recent rejections.
It only takes a moment of reflection to realize how self-defeating and self-destructive it is to stand in the way of sustainable investing. Investors are trusted to properly manage risk so they can generate long-term returns for their beneficiaries.
If they aren’t managing the risks of climate change impacts like flood, drought, and severe weather — which threaten major ramifications for supply chains, workforces, property, infrastructure, and facilities — then they risk undermining their own long-term performance.
And if states force investors to take those risks with pension funds and other state business, they’ll gamble the retirement funds of their own residents while limiting competition and putting taxpayer dollars at risk. Just look to Kansas, where officials recently projected that proposed sustainable investment restrictions would reduce pension returns of $3.6 billion over 10 years.
It is quite literally an unsustainable position — environmentally, yes, but also financially and politically.
Proponents of these policies have spent months cynically describing sustainable investing as some sort of covert ideological takeover of the financial system. Yet the most effective pushback has come from mainstream businesses, investment houses, and trade groups, which know that assessing and managing risk is a basic responsibility of capital market actors. They simply demand the freedom to invest responsibly.
Private sector and capital market leaders are tired of their work, on the behalf of their investors, beneficiaries, employees, and communities, being miscast for political reasons.
The latest show of force came just this week in a call to policymakers released at Ceres Global. More than 250 investors and companies from across the country signed on to a statement to remind policymakers of their responsibility to factor all material financial risks into decision-making.
Signatories to the statement reaffirmed their commitment to sustainable investment and business practices as a prudent risk management strategy and a smart way to analyze opportunities that best serve their stakeholders.
It wasn’t too long ago that blacklists and boycotts of responsible investment practices would have seemed unthinkable in states that have approved them, like Texas, Kentucky, and Oklahoma. For years, these states’ policymakers advocated for letting markets operate free of government interference, stating that allowing them to do so was the best way to address the challenges facing the nation and the world.
Yet now that the market is indeed moving to address the financial risks of climate change, it seems some officials have decided to dismiss that principle outright to protect an old, entrenched, and dirty way of doing business.
The best way to counter these efforts is for private and public sector leaders to stay the course and make clear that sustainable investment and business practices are in the best interest of their portfolios, their beneficiaries, their companies, and our economy, while efforts to restrict them threaten to make financial markets less efficient and higher risk.
As capital continues to flow across the U.S. toward building a stronger and more resilient clean energy economy, it is now up to these leaders to protect the freedom to invest responsibly.Read Original