Trading Profit for Environmental Wokeness

April 7, 2021

Companies are being pushed hard into the world of political correctness through “environmental wokeness.” From endless documentation on carbon emissions, to big banks divesting fossil fuels, when will groups like Say on Climate stop demanding companies trade profit for environmentalism? Will enough ever be enough?

Say on Climate, an initiative from the Children’s Investment Fund Foundation (CIFF), pushes companies to adapt to climate change standards. The idea is similar to Say on Pay, which requires investor transparency and a vote on executive compensation.  

If a company adopts a Say on Climate resolution, they open themselves up to new extralegal bureaucratic requirements. Companies must provide an annual emissions disclosure and develop a plan to manage them. At their annual meeting, they must then hold a shareholder vote on the plan. The downsides of the resolution should make every company take notice.

No Relationship Between Disclosures and Action 

What is a disclosure, anyway? It’s the release of information about a company’s performance, diversity, environmental impact, or other consideration that may influence an investor’s decision on how to vote on a shareholder proposal, or even on whether to keep investing in the company. Federal regulations require some disclosures for the sake of transparency, specifically around a company’s financial standings, executive compensation and operational procedures.

But disclosures’ costs quickly outweigh the benefits when environmental activists insist on companies revealing their “carbon footprint.” There is a very poor implementation rate for shareholder resolutions that only require disclosures. On top of that, there is little to no compelling evidence of a relationship between disclosures and improved performance. 

If a company adopts Say on Climate’s shareholder resolutions, what is keeping them from running business as usual? By a corporation’s standards, if they are reporting on their emissions, why do anything else? 

If history repeats itself, this disclosure will create nothing more than wasted manpower and additional paperwork. Why push companies to make empty disclosures when they can instead work to benefit both shareholders and the environment? Shareholders should push for real-world outcomes with concrete evidence of positive impact, not just more bureaucracy. 

‘Say on Climate,’ or Do Something on Climate?

Increasingly, corporations are choosing to trade profit for being environmentally woke. But the companies who should receive accolades are doing both: increasing investments for shareholders and improving the environment. If anyone can solve environmental problems within a free market, innovative American business-owners can. 

Being a responsible business-owner and improving the environment is a good thing. But sustainability goals are just too fluid and subjective for businesses to base operations around. There is not enough evidence that aligning to Paris Climate goals or other sustainability measures results in higher returns. 

Go After Directors, Not Disclosures 

Instead of pushing disclosures, we should emphasize the election and re-election of solid Board Directors. We might not have much say in the day-to-day business of companies where we invest, but we do have the power of the vote. 

Voting for level-headed, business-minded investors has proven to be more effective than pushing more paperwork with no follow-up. As shareholders, we should vote out directors with agendas anything other than what is best for the company and its investors.