State treasurers can be the forgotten children of public office. They don’t tend to have the name recognition of a governor or congressperson, and many of their own constituents don’t even have a clear sense of their job description. So how have state treasurers entered the spotlight in climate advocacy? And why are they banding together to change the ways corporations like ExxonMobil respond to the climate crisis?
Two weeks ago, 16 state treasurers from Oregon to Iowa to Massachusetts released a letter calling for corporate disclosure of climate risk and supporting efforts to boot corporate directors who fail to take appropriately urgent climate action. The letter packs a punch, representing treasurers managing more than $1 trillion in assets, and addresses corporations where these state assets are invested as well as investment firms like BlackRock, Vanguard, and State Street that often contract with states to manage those assets.
Shareholders are demanding leaders who will end climate delay
Their letter is just the tip of the iceberg. Campaigns by climate and financial activist groups, such as Stop the Money Pipeline and Majority Action, have been working with shareholders to reshape corporate boards of directors, voting off climate-denying or -delaying members and bringing in directors who will hold companies up to standard on climate action.
The letter was also published as climate risk disclosure takes its rightful the spotlight, with the Climate Risk Disclosure Act passing through the House Financial Services Committee this month, backed by 82 climate organizations, and President Biden issuing a complementary Executive Order on May 20.
Climate risk can get mandated through regulation or legislation at the federal level. But corporate boards are elected by a company’s shareholders, and the slate proposed by a company almost always passes with incredible ease — often with nearly 100 percent of investor votes.
This year, though, with state treasurers and climate-minded investors wanting to see quicker action from boards, companies are having to make the case for why their idling directors deserve a seat.
Perhaps if you, like me, have somehow made it onto ExxonMobil’s target demographic list, you’ve seen the ads the oil giant is serving up on social media to persuade investors to give its climate-lagging board another shot. The ads boost the profile of new directors ExxonMobil has appointed this year to enhance its public climate credentials, though the picks (a former fossil fuel CEO and a semi-reformed venture capitalist) leave little hope that they’ll usher in meaningful change:
Update: After this article was written, climate-considerate investors won two seats on ExxonMobil’s board.
State treasurers are responsible for protecting our futures
As it turns out, your state treasurer has a lot more power in the fight against climate change than you may have imagined.
State treasurers manage their state’s investments, which means they’re making big decisions about where big budget items, like public pensions, are being held. But, commonly, state treasurers aren’t making those investments directly. Just like an employer might contract a separate group to manage your retirement funds, state treasurers contract big asset managers such as BlackRock and Vanguard to do the nitty gritty work of choosing the companies where state assets get invested.
BlackRock and Vanguard are two of the world’s largest investors in fossil fuels, which means that if your treasurer is relying on them (or nearly any other major asset manager) to manage state funds, those funds are wrapped up in fossil fuels that continue to drive climate destruction. For state assets like pension funds — on which public employees such as teachers, firefighters, and bus drivers rely to retire — those fossil fuel investments are particularly risky.
I think of it this way: retirement funds are inherently designed to last for decades, which means the businesses they’re invested in need to be savvy investments for just as long.
In previous decades, investments in fossil fuel companies may have represented a smart opportunity to make those pensions grow. But now, fossil fuel company investments are only pulling them down. Not only did “Mad Money” host Jim Cramer declare fossil fuel investments “done” last year, but the industry-friendly International Energy Agency recently reported that to meet the goals of the Paris Climate Agreement, we need to stop new expansion of and investment in fossil fuel infrastructure.
What does that mean for state treasurers? Well, you might think that someone responsible for protecting the retirement funds for thousands of public employees might want to get that money out of high-risk companies and industries that are expected to stop returning on their investment. You might also think that at a fundamental level, protecting people’s future means protecting the planet they’ll need to live on by pulling away from destructive fossil fuels. You’d be right on both counts.