UK firm Legal and General has over $1.2 trillion in assets, and the company has promised to punish companies that have a bad record on climate change by stripping them of funding.
Helena Morrissey is the head of personal investing for the company and she said that the firm is going to start “naming and shaming” companies by next week so they can begin the process of stripping companies of their funding.
Morrissey explained at a conference in London last Monday on why enough is enough and why her company is doing this, “There comes a time when the talk is over, and it’s time to vote with our feet. Money talks as they say.” At the event, she explained that the financial sector needs to start driving change, by making sustainable investments through “profit and purpose.”
In 2016 the New York Times published an op-ed on the financial sector and climate change by Moises Velasquez-Manoff where he details more companies looking to cash in on climate change solving efforts and to stop cashing in on fossil fuel companies altogether.
To give an example, about sixty-nine percent of Fortune 500 said that they demanded low carbon products this year, according to the nonprofit Carbon Disclosure Project. In response, someone of the largest pension funds in the country including the California State Teachers’ Retirement System, and New York State’s retirement fund began to make the change away from fossil fuels.
Investors have been calling this “socially responsible investing,” they claim it’s not only the morally right decision to make but also that fossil fuels are a losing bet long term.
In December, there was a corporate announcement that tried to tie climate change to how much investors would calculate their risk for gigantic companies like Exxon Mobil. Ever since Exxon was found to have known about their company’s effects on the environment, investors for the company have asked for more transparency.
The resolution from New York state’s pension plan asked Exxon to quantify and analyze how the rising temperatures affect its business. The quantification goes by the standards of the 2015 Paris Agreements goal of restricting global temperatures.
The Task Force on Climate-Related Financial Disclosures (TCFD) established in June a plan to develop standard financial risk disclosure for companies, said that they doubled its corporate membership to 237 members, with more than $6.3 trillion of a combined market value.
Another report from KPMG shows that around 52 percent of the largest 250 companies in the world don’t acknowledge climate change as a financial risk in their annual reports.
The report claimed that “Of the minority that do acknowledge climate risk, very few attempts to quantify or model the business value at stake, the statistics support the need for initiatives.”
Katherine Blue from KPMG’s US sustainability services leader wrote in a blog post about the findings in the report, “Why aren’t companies disclosing climate information? Most have never had to before, and there are no widely established processes for the scenario-based climate risk reporting that the TCFD recommends.”
Legal and General is not the only company that is pushing this idea of the market driving positive purposes, and according to Morrissey, “Legal and General runs almost a trillion pounds of money so we are doing a lot with that. But if we add all our trillions together, we can certainly drive change.”