Reaffirm commitment to factor all material financial risks in decision-making as more positive policy momentum builds in key states
Hundreds of investors, companies, and other capital market leaders convening at Ceres Global are urging state and federal policymakers to protect the freedom to invest responsibly in light of a political backlash against sustainable investment and business practices.
Under the banner, “Freedom to Invest,” these leaders are reminding policymakers that they must be free to consider all material financial risks and opportunities, including those related to the climate crisis, to plan for the long-term and build a stronger, more resilient economy. Building profitable businesses and portfolios demands an analysis of all major financial risks – from inflation to climate change – and policies to limit that simply defy responsible investing and business practices.
In a new statement, Investors and Businesses Call on Policymakers to Protect the Freedom to Invest Responsibly, with a growing list of signatories released today, more than 270 investors and companies emphasized the importance of prudent investment strategies and smart risk management, as well as their commitment to continuing these mainstream practices to protect their investments and business operations.
“Neglecting the robust economic benefits of the clean energy economy — and the substantial public and private investment opportunities that are necessary to achieve this shift — would represent a failure to build a stronger, more resilient U.S. economy and a betrayal of the interests of our stakeholders, shareholders, beneficiaries, customers, and the communities where we do business and live,” the signatories wrote.
“Managing risk and opportunities is our job as investors,” said Anne Simpson, Global Head of Sustainability, Franklin Templeton. “Our duty and our loyalty are with the people who entrust us with their money. If we don’t pay attention to the accelerating frequency of severe weather disasters and the hundreds of billions of dollars they cause, nor to scientists’ forecasts for severe risk of more of that, and to entrepreneurial companies’ innovations for solving the resulting market needs, then we are not fulfilling our fiduciary duty.”
Ceres and the We Mean Business Coalition coordinated the statement and are calling on new investors and companies to sign on here.
The statement comes as legislative efforts aimed at restricting sustainable investment opportunities and banking practices are considered in states across the U.S. Some of these efforts including those in North Dakota, Virginia, and Wyoming have been scuttled amid revelations about the millions of dollars in additional taxpayer costs these policies would result in, as well as growing wariness over interfering with investor freedom to invest responsibly and protect the long-term value of their investments. Additionally, new research developed by the economic consultant firm ESI and released by Ceres and other organizations found that taxpayers in six states could have been on the hook for up to $700 million in excess interest payments if such restrictions on sustainable investing had been passed and implemented.
“As responsible fiduciaries and investors, our goal is to maximize risk adjusted returns which requires considering myriad factors that threaten an individual company’s value and the economy as a whole,” said Brad Lander, Office of the New York City Comptroller. “We are witnessing misinformed, misguided, and ultimately dangerous efforts to restrict the decision making of fiduciaries and prevent them from addressing risks to their portfolio that impact current and retired workers, working families, and the global economy.”
Signatories to the statement are part of a larger movement of leaders redirecting the national dialogue to focus on the financial implications – both risks and opportunities – tied to climate progress and the enormous benefits of climate policies. Historic laws, including the Inflation Reduction Act, the largest federal investment in climate and clean energy investments, are key to addressing climate risk. They are making their long-term commitment to climate action known, as the transition to a cleaner, more sustainable, and resilient economy gains speed and urgency. And the new federal law has provided even stronger financial incentives for clean energy investment and development.
“Investment professionals assess all risks and opportunities facing their portfolios, such as interest-rate changes, supply-chain disruptions and damages from extreme weather events,” said Kirsty Jenkinson, investment director, Sustainable Investment and Stewardship Strategies at the California State Teachers’ Retirement System (CalSTRS), the world’s largest educator-only public pension fund. “To ask us to ignore pervasive risks such as the market disruptions caused by climate change and to ignore investment opportunities in the transition to a low-carbon economy is asking us to stop doing our jobs.”
“At Akamai, we believe in delivering business results the right way,” said Mike Mattera, director, corporate sustainability and ESG officer, Akamai Technologies, Inc. “That means reducing our emissions through platform efficiencies, data center partnerships, and renewable energy procurement. We recognize that in our role as the leading cloud computing, security, and content delivery provider, we share the responsibility for reducing the world’s carbon emissions while powering and protecting life online.”
Banking associations, business groups, and state financial officers are also among those speaking out about the financial risks of interfering with the freedom to invest. A broad group of state financial officers released a statement saying, “states that focus solely on the short term will fail to compete over the longer time horizon that is necessary for them and their pension funds to succeed.” Even in conservative states like North Dakota, business associations are characterizing these efforts as government overreach.
“From powerful storms that damage infrastructure to wildfires and drought that impact crop yields and water supply, climate change threatens to bring untold risks to companies and their supply chains,” said Stuart Landesberg, Co-Founder and CEO of Grove Collaborative. “Investors and companies must take action to manage these material financial risks and adopt pragmatic solutions that are good for economic growth and mitigate risks. Grove Collaborative is proud to stand up for the Freedom to Invest because we know that operating a resilient business is crucial to the future of our company and our economy.”
As more investors and companies stand up for the freedom to invest responsibly, they are also standing up for U.S. policy and regulatory action consistent with the global goal of limiting average temperature rise to no more than 1.5 degrees Celsius and cutting greenhouse gas emissions in half by 2030. In addition to the Inflation Reduction Act, other policies and regulations that support this goal include the Securities and Exchange Commission rule that would provide more transparency to the market about climate risk disclosure and the Department of Labor rule that would level the playing field so fiduciaries can consider all financially relevant factors in making investment decisions.