Two recent events illustrate the challenges that climate justice advocates like United Church Funds (UCF) face in the transition to a low carbon, net zero future.

On February 15, several Wall Street banks and asset managers pulled out of Climate Action 100+ (CA100+), the largest investor engagement initiative focused on climate change. A couple weeks later, several states filed suit against the Securities and Exchange Commission (SEC) and its new climate reporting regulations.

UCF has been a member of CA100+ since its launch in 2017. The initiative is an investor-led effort to hold the world’s largest greenhouse gas emitters accountable for their global carbon footprint. (The initial focus on 100 companies has since grown to 170, which is why the “+” in its name.) As many as 77% of the companies on the CA100+ focus list have committed to achieving net zero emissions by 2050 or earlier, due in no small part due to the work of CA100+ and its network.

“Watching four major U.S. financial firms pull out of CA100+ is a testament to the entrenched power of oil and gas in our nation’s economy,” said Matthew Illian, UCF’s Director of Responsible Investing. “This power isn’t solely focused on the oil and gas companies. Manufacturing, airlines, agriculture and many other sectors rely heavily on fossil fuels.”

Political forces supporting oil and gas dependence came by way of lawsuits filed by states’ attorneys general seeking to invalidate the SEC’s climate reporting rules announced on March 6. These new rules would standardize and enhance public companies’ climate-related disclosures.

“These disclosure rules and guidance are needed because more and more investors, like UCF, are making decisions that are informed by climate risk,” Illian noted. “We’re living in a time with unprecedented extreme weather events and natural disasters.”

The lawsuit, now joined by 19 states, was filed despite final disclosure rules that were already significantly watered down from the SEC’s original proposal in March 2022. The New York Times on March 6 explained:

Under the original proposal, large companies would have been required to disclose not just planet-warming emissions from their own operations, but also emissions produced along what’s known as a company’s “value chain” — a term that encompasses everything from the parts or services bought from other suppliers, to the way that people who use the products ultimately dispose of them. Pollution created all along this value chain could add up. Now, that requirement is gone.

Despite these headline-grabbing events, most investors, including UCF, continue to recognize the urgency of addressing climate change not only for the sake of the earth, but also for the economy. Part of UCF’s Climate Justice Statement makes this point:

We believe that promoting climate justice in the capital markets supports corporate supply chain resilience, stakeholder trust and brand equity. All of these matters are critical to the success of the larger economy and long-term diversified investors.

As stewards of our clients’ assets, UCF intends to remain proactive in our approach to responsible investing. In partnership with CA100+, UCF will continue to participate in engagements with the largest greenhouse gas emitters and to call for measurable steps to decarbonize operations, reduce carbon footprint and improve environmental practices. By engaging with these companies, UCF firmly believes that we can generate long-term investment values for its clients while creating a more sustainable future.

While challenges persist, UCF remains committed to advocating for a more just and sustainable future.