How Effective Has Engagement Been?

By Sheila Thorne - Fossil Free California, April 15, 2023

CalPERS insists engagement is the most effective way to address climate change. In 2017 it co-founded Climate Action 100+, a coalition of 700 large investors who engage with 167 of the worst carbon-emitting companies in order to promote climate awareness in the company's governance and persuade them to disclose the company's climate risk and reduce emissions to net zero by 2050.

How effective has it been?

An evaluation of the impact of CalPERS climate engagements authored by Dr. Clair Brown, Professor of Economics at U.C. Berkeley, profiles 10 major oil companies with which CalPERS engages. It shows that only five of the ten have set emissions targets of net zero by 2050, and none of them have set short or medium term emission reduction goals. There are no consequences for these failures. A review of the 2022 proxy season along with past votes shows that CalPERS usually continues to support directors regardless of a company's failure to make progress in reducing emissions.

CalPERS' own "Addressing Climate Change Report" ( June 2020) admitted that only 9% of companies in the Climate Action 100+ group had targets in line with the Paris Agreement goals and only 8% had lobbying efforts aligned with necessary climate action.

This report considered one of its "significant impacts of engagement" the fact that Shell announced targets for reductions every 3 to 5 years towards a goal of shrinking its net carbon by about half by 2050 and agreed to include its emissions across its supply and demand chains (Scopes 1,2, and 3). However, one half of net carbon emission by 2050 is hardly something to boast about. Worse, a Financial Times article (May 17, 2020) revealed a disclaimer at the end of Shells's announcement that it will NOT change its strategy or capital deployment plans in line with its announcement until society acts. Thus it is going ahead with a new project in Nigeria to produce 30 million tons of liquefied natural gas a year to meet with what it expects to be doubled demand by 2040. And, according to Carbon Brief, Shell's global energy vision "Sky 1.5" plans for continued use of oil, gas, and coal until the end of the century.

The CalPERS Report also claimed it an accomplishment of engagement that Chevron announced reduction goals for GHG intensity in production. However, Chevron at the same time announced plans to double its production in the Permian Basin over 5 years and expected 900,000 barrels by 2023; thus its overall emissions and especially Scope 3 emissions could only rise.

Exxon Mobil, in the same kind of doublespeak, promised reductions of flaring and methane emissions while planning to triple daily production in the Permian Basin. CalPERS boasts about the successful shareholder vote for 3 new "climate friendly" Exxon Board members in May 2021. Yet the company since then has made no changes in climate-related policy and has announced expanded greenfield drilling in Guyana.

Duke Energy, another major with which CalPERS engages, also promised net zero by 2050, but a 2020 study by The Sierra Club revealed it plans to keep coal on line as late as 2048.

Thus the big picture of CalPERS' vaunted Climate Action 100+ is that the companies announce misleading targets of reduced carbon intensity in production rather than overall greenhouse gas reduction, or set goals of net zero by 2050 without concrete interim steps. The companies then tout these resolutions to maintain the support of their investors, while actually making huge investments in hydrocarbon expansion in expectation of increased demand (and increased profits) through at least 2040.

Other studies show similar failures in engagement. Researchers at the University of Cambridge reviewed two decades worth of research on shareholder engagements and concluded it was an ineffective strategy for forcing the level of change needed at the pace needed in fossil fuel companies (Invest-Divest 2021).

A May 2021 report by the research group Carbon Tracker found that "nearly all oil companies with net zero commitments either exclude part of their production or emissions, leave open the option of actually increasing emissions through a focus on 'carbon intensity,' or rely on unrealistic projections of unproven carbon capture technology.The group's September 2021 report noted that, despite net zero commitments, no major oil company has actually stopped new drilling or other capital expenditures… ."

Not surprisingly, in December 2022 the House Oversight Committee, after a year-long investigation, released a damning report demonstrating that the major fossil fuel companies such as Chevron, Exxon, BP, and Shell have no intention of moving away from oil and gas production but are instead using false "net zero" commitments to mislead the public while doubling down on expansion and production. The committee published an internal memo of the American Petroleum Institute written by the CEO, Mike Summers, that says it all: publicizing the industry's [paltry] efforts to reduce emissions from natural gas production presents "an opportunity to further secure the industry's license to operate."

Disclaimer: The views expressed here are not the official position of the IWW (or even the IWW’s EUC) and do not necessarily represent the views of anyone but the author.