Ceres CEO: Forget Bleeding Hearts, Pursestrings Will Win Paris

2015-12-03 09.07.15

Long gone is the narrative of climate change as a crisis manufactured by bleeding-heart liberals. Institutional investors are moving assets away from fossil fuels to the tune of $3.4 trillion. Stranded fossil fuel assets are pegged at $2.2 trillion. And regulatory bodies like the U.S. Securities and Exchange Commission have mandated that companies disclose climate change risks to their investors.

No, bleeding hearts won’t solve the climate crisis — or lead to a bold resolution coming out of Paris. It will be the pursestrings of big-money investors and multinational companies that will make the difference, as Ceres CEO Mindy Lubber underscored at a COP21 side-event focused on stranded assets.

“As we, as a community, take on the complex issue of climate change and its implications for humanity, for the environment, for public health, for national security, for our children, some people don’t hear that message quite well enough,” Lubber said on Thursday. “The issue with climate change is also one of the greatest financial risks facing us, which is why companies and investors are acting — and acting now in greater ways than they have before.”

Earlier Thursday afternoon, former U.S. Vice President Al Gore compared the financial risks associated with stranded assets to the sub-prime mortgage bubble — a notion Lubber doubled-down on in her remarks.

“We saw sub-prime mortgages … nearly take down our economy internationally,” Lubber said. ” … Whether you want to believe every scientist or not — we may want to, other skeptics may not — this is a financial issue of unknown proportions.”

After thinking a moment on that last bit, she rephrased: “Well, frankly, we now know it. But we’ve got to look at it, and we’ve got to act on it.”

A reality check for the fossil fuel industry

The price of oil is plunging. At press time, prices sat at $39.98 a barrel, down from just under $100 a barrel this time two years ago. Late last month, Barclays released a white paper predicting prices would settle at around $60 a barrel by 2016, but even that puts a serious dent in oil company profits. But somehow the industry has yet to accept these realities.

“Right now, the fossil fuel industry somehow thinks that, in most cases, they can keep going on the track they’re going. But oil is no longer $100 a barrel,” Lubber continued. “It is a very high-priced industry. They can’t succeed and be a good bet for the financial community if in fact the price of oil goes down to $60 as Barclays says, or it goes down to $40 or $50 as we’re seeing [now], and survive as a profitable industry. They just can’t.”

Citing changes in the energy market, she added, “They also can’t survive if demand keeps going down.” She referenced two underlying factors driving down demand for fossil fuels:

Falling renewable prices and rising electrification: As oil prices continue in a free-fall, the cost of renewable energy technologies, much to the chagrin of the fossil fuel industry, continues to do the same. And investors are taking notice, moving their money away from risky fossil fuel assets and into promising new clean-technology solutions.

“As the vice president said, this is the first year in history we’ve seen more money invested in renewables than in fossil fuels — and that’s only going to grow,” Lubber emphasized on Thursday. The continued electrification of the transport sector, a trend we’re already seeing around the world, will only further the drop in fossil fuel demand, Lubber added.

Efficiency driven by big data: “The other reason demand is going down, well beyond just the obvious … is the big-data world,” Lubber continued. “We are seeing changes — whether it is in the way railroads are run, how aviation is run, how technology is used — that is changing the dynamic overnight.” The aviation industry, Lubber explained, is already projecting a 10 to 20 percent decline in its fossil fuel needs due to efficiency improvements driven by big data. A similar drop is expected in the rail sector, Lubber said.

Investors respond

“The bottom line is: We have an industry that can function at $50 a barrel or at a lower demand, and that is changing the mix in the eyes of investors — again, not because it’s the right thing, the moral thing, the compelling thing, but because it is a financial risk that no longer makes sense,” Lubber continued, with a forthright pragmatism that would make even Milton Friedman sit up and take notice.

In response, Lubber explained, investors are beginning to demand transparency about climate change risks — a trend TriplePundit first noticed last year. The SEC guidance, issued in 2010, is also helpful. Lubber noted that it’s not always executed properly, but that it’s a step forward on the way to appropriate disclosure of risks. “There’s more focus particularly because of the size of the stranded assets,” she explained. “It is hard to deny that is a material risk that every fossil fuel company that files an SEC filing ought to be showing.”

Additionally, led by Ceres, 70 global investors managing more than $3 trillion in collective assets petitioned 45 of the world’s largest fossil fuel companies in late 2013 to stress-test the financial implications of conducting business in a 2-degree world (i.e., a world in which we stay below a 2 degrees Celsius temperature rise, considered by scientists to be the climate tipping point).

“It can be done,” Lubber insisted. “BHP Billiton did it, and other companies are starting to say they will — Shell and BP committed to doing it. But those other 40 companies that the investors have sent letters to are part of negotiations and part of shareholder resolutions, and they will be in play this year.”

A new messenger

So now, in this new scenario, rather than patchouli-wearing activists waving the climate action flag, it’s the big-money stakeholders in their custom Brooks Brothers. And, predictably, that’s changing the tide quickly.

“What makes this Paris set of discussions different than any before is that the financial leadership and corporate leadership are here in strength, saying we need to act on climate; we need a price on carbon; and we need to move sooner rather than later,” Lubber said firmly. “That wasn’t the case at Copenhagen; that wasn’t the case at COPs before that.

“The message has changed. The messengers have changed. The arguments are stronger; they’re more compelling. And I think with the strength of the financial and corporate community coming together with the policy community, the NGO community, the city and state community, we’ve got a great shot at moving forward — and I think we’re going to see it this week.”

Image credit: Mary Mazzoni

Mary Mazzoni

Based in Philadelphia, Mary Mazzoni is the senior editor of TriplePundit. She is also a freelance journalist with a passion for storytelling and sustainability. Her work has appeared in the Philadelphia Daily News, Earth911, the Huffington Post, Sustainable Brands and the Daily Meal.

Mary is a lifelong vegetarian with an interest in climate resilience, clean tech and social justice. You can contact her at mary@triplepundit.com.

2 responses

  1. I can agree purse strings will win Paris. But winning Paris and solving climate are two different objectives and purse strings will not solve climate change. That they will is a proposition based no more in mechanical realities than prayer will solve cancer. To put this in perspective we might ask what social problem purse strings have solved in the past as evidence purse string might solve this problem the same way we might ask who was cured of their cancer by prayer? The analogy is apt because some will claim they were cured of cancer by prayer, but it can’t be proven and it can’t be replicated.

    On the question at hand, the answer is money has never solved a social problem, because we as a species on this planet, all of us everywhere, deal with the exact same social problems without exception as any of our ancestors at any time. All purse strings do is shift relative experiences around our social problems, whether we are the royal or the pauper; the thief or the one who lives in fear of the thief; the shooter of the one in danger of being shot.

    Climate change is not a problem, technically. It is a symptom of a condition that itself qualifies as a true problem. The difference beteen the two is, if one solves a problem the symptom vanishes evidencing the solution worked. If one masks the symptom, the problem continues unabated to commit its damage without the warning of troubles which symptoms are.

    Climate change is not a problem, technically, but a symptom of the greater underlying social problem human beings have not been able to solve: our inability to cooperate with each other and the environment to mutual benefit. That and only that, by definition, will establish the sustainable experience within the sustainable environment.

    History shows money, as we’ve organized it as a technology for social interaction, does not increase cooperation but incites its opposites from stealing to cheating to fighting to killing – the conflicts that cause us to destroy each other and the environment and make life less secure, less safe, less predictable for all.

    I’m not trying to sell the proposition money is the root of all of all evil. I think money is an ingenious concept that if we solved our social problems would prove a valuable technology. I don’t see that evil exists – only human beings acting as they perceive they are able to improve their condition in the world. That doesn’t mean some don’t worry me.

    Before the climate problem can be solved we must address what as of today is an unsolvable problem, our inability to cooperate with each other or the environment (it’s impossible in a durably cooperate with one without cooperating with the other). It is a solvable problem because we are physically entities in a physical universe where laws of physics govern all behavior. All behavior. Social systems are not an anomaly related only to human beings but a fundamental and essential system in play throughout the universe. Just as it was possible to learn the physics of cell dynamics or flight it is possible to study the physics of social systems and learn their mechanics.

    Knowledge of the physics, then, of social systems will enable us to learn how to use the technology of money in a way that allows us to cooperate with each and the environment. Money is not very powerful. No amount of money could build an airplane or create an antiobiotic until we learned the physics of the phenomenon. But until we learn the physics of cooperation, all money can do, like all other technology in the past, is offer its promise as a solution and continue to prove itself to be part of the problem.

    History should warn us green technology will not be any more beneficial in the long run than other previous technologies, many of which, upon discovery were touted as having the potential to solve social problems. Many previous technologies shone for a short while and then proved to be quite toxic to humans and the planet. No one knows for certain there will not be deleterious repercussion from wind farms, wave machines, solar cells, and all these electric batteries. But history shows human technology has been touted as and failed time and time again to solve human social problems, and it is the human social dilemma that drives climate destruction.

    The purse strings may win Paris but they will not solve climate change.

  2. I can agree purse strings will win Paris. But winning Paris and solving climate are two different objectives and purse strings will not solve climate change. That they will is a proposition based no more in mechanical realities than prayer will solve cancer. To put this in perspective we might ask what social problem purse strings have solved in the past as evidence purse string might solve this problem the same way we might ask who was cured of their cancer by prayer? The analogy is apt because some will claim they were cured of cancer by prayer, but it can’t be proven and it can’t be replicated.

    On the question at hand, the answer is money has never solved a social problem, because we as a species on this planet, all of us everywhere, deal with the exact same social problems without exception as any of our ancestors at any time. All purse strings do is shift relative experiences around our social problems, whether we are the royal or the pauper; the thief or the one who lives in fear of the thief; the shooter of the one in danger of being shot.

    Climate change is not a problem, technically, but a symptom of the greater underlying social problem human beings have not been able to solve: our inability to cooperate with each other and the environment to mutual benefit. That and only that, by definition, will establish the sustainable experience within the sustainable environment.

    History shows money, as we’ve organized it as a technology for social interaction, does not increase cooperation but incites its opposites from stealing to cheating to fighting to killing – the conflicts that cause us to destroy each other and the environment and make life less secure, less safe, less predictable for all.

    I’m not trying to sell the proposition money is the root of all of all evil. I think money is an ingenious concept that if we solved our social problems would prove a valuable technology. I don’t see that evil exists – only human beings acting as they perceive they are able to improve their condition in the world. That doesn’t mean some don’t worry me.

    Before the climate problem can be solved we must address what as of today is an unsolvable problem, our inability to cooperate with each other or the environment (it’s impossible in a durably cooperate with one without cooperating with the other). It is a solvable problem because we are physically entities in a physical universe where laws of physics govern all behavior. All behavior. Social systems are not an anomaly related only to human beings but a fundamental and essential system in play throughout the universe. Just as it was possible to learn the physics of cell dynamics or flight it is possible to study the physics of social systems and learn their mechanics.

    Knowledge of the physics, then, of social systems will enable us to learn how to use the technology of money in a way that allows us to cooperate with each and the environment. Money is not very powerful. No amount of money could build an airplane or create an antiobiotic until we learned the physics of the phenomenon. But until we learn the physics of cooperation, all money can do, like all other technology in the past, is offer its promise as a solution and continue to prove itself to be part of the problem.

    History should warn us green technology will not be any more beneficial in the long run than other previous technologies, many of which, upon discovery, were touted as having the potential to solve social problems. Many – even oil – shone for a short while and then proved to be quite toxic to humans and the planet. No one knows for certain there will not be deleterious repercussion from wind farms, wave machines, solar cells, and all these electric batteries. But history shows human technology has been touted as the way to the promised land and proved the path to a cesspool.

    The purse strings may win Paris but they will not solve climate change.

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