In January 2016, a group of investors and regulators convened at the Manhattan headquarters of the United Nations for a summit co-hosted by the environmental activist nonprofit group Ceres.
The reported purpose of the Investor Summit on Climate Risk was to organize billions of dollars in private investment to finance the clean energy transition. But a subsequent recap of the meeting found an organized effort to leverage Environmental, Social, and Governance (ESG) investment analysis, financial divestment, and “death-by-disclosure” to undermine America’s traditional energy industry.
A report published last month by Consumer’s Research details Ceres’s efforts to influence the Securities and Exchange Commission and other government officials in a decade-long mission to impose climate disclosures on public energy companies.
To build its case, Ceres uses its investor networks to create the appearance of mass investor demand for climate disclosure, and force disclosure into the market via shareholder activism. The goal of this strategy – to decapitalize the oil and gas industry – was made clear at the 2016 investor summit where one attendee described the approach as “divestment through value destruction.”
The 2016 summit’s objectives seemed a stretch at the time; less so today. Wall Street, progressive politicians and environmental activists have used the ESG framework to weaponize the corporate governance system against U.S. energy companies.
The strategy to push financial giants and regulators to decapitalize the oil and gas industry goes much deeper than investor conferences, though, and the consequences have had wide-ranging impacts that harm consumers and the free market.
Ceres has largely flown under the radar despite its immense influence in political and financial circles. The Consumer’s Research report details how Ceres used affiliate and owned groups like Climate Action 100+ and the Net Zero Asset Managers initiative to pressure asset managers, state financial officials, and regulators to support costly disclosure frameworks.
The report shines a light on a strategy to build influence with financial regulators and use public companies’ shareholder resolution process to promote climate-related financial disclosures. This aligns with broader trends in the business world where environmental, social, and governance (ESG) factors have gained prominence in investment decisions and corporate practices.
Imposing climate-related financial disclosures on the energy sector, or any industry, comes with real risks. Climate-related disclosures are a burden that puts energy companies at a competitive disadvantage compared to companies in other sectors.
Ceres President Mindy Lubber recently received a subpoena from the U.S. House Judiciary Committee for what appears to be deceptive and anticompetitive activity. According to the Consumers Research report, Ceres has influenced the Securities and Exchange Commission’s (SEC) efforts to impose mandatory climate disclosures on energy companies for the past decade.
The Consumers Research report claims Ceres maintained a list of energy companies to target for shareholder activism and coordinated asset managers and pension funds campaigns against those companies marked as “good food” for climate-related resolutions. The effort to mobilize shareholder activism made it appear that most of the public supported climate disclosure, when the truth is that the shareholders in question were limited in number, held immense concentrated wealth, and secretly coordinated their activities.
Ceres’ effort gained momentum through the Trump years until Biden-appointed SEC Commissioners Allison Herren Lee and Gary Gensler launched a rulemaking process to require climate-related disclosures of publicly traded companies. Fast-forward to today, and Ceres is moving full-steam ahead to impose its climate policy agenda on public companies through SEC regulations.
Ceres and its affiliate Climate Action 100+ were mentioned at least 31 times in the resulting proposed rule, showing their early and established influence.
Lobbying the SEC and spinning up investor demand is just the tip of the iceberg of Ceres’ activities. Anticipating legal challenges to the rule, Ceres teamed up with a carbon accounting startup to commission a study providing the sole support for the SEC’s lowballed cost of compliance estimate, a crucial component of any rulemaking process.
Implementing and reporting climate-related financial disclosures can be complex and resource-intensive. Energy companies have diverse operations with complex supply chains, making it challenging to measure and report emissions and other environmental data accurately. Overly burdensome disclosure requirements increase costs, diverting resources from other areas.
While energy companies face the threat of rising costs, Ceres’s co-author on the study, Persefoni, the self-described “TurboTax of greenhouse gas reporting” stands to profit from climate-related financial disclosures.
Public records show collaboration between Ceres, Persefoni and the government regulators, and suggest that the study was tailor-made to complement the SEC’s economic analysis. According to public record requests, the SEC communicated the concept of an external cost of compliance study with Ceres and Persefoni while the rulemaking was in its early stages. Before launching its rulemaking, the SEC was aware of the methodology and timeline of the Ceres study and even pointed out areas where Ceres should supplement its work.
Ceres and Persefoni have aggressively positioned their cost study to validate the SEC’s estimates. They even wrote to the SEC to discredit cost assessments from other organizations, including the U.S. Chamber of Commerce and the Business Roundtable.
In June, Senate Banking Committee Ranking Member Tim Scott (R-South Carolina) and House Oversight Committee Chairman James Comer sent a letter to the SEC requesting any records related to Ceres and Persefoni. The House Judiciary Committee has also taken notice of Ceres’ attempts to influence regulators and is looking into potential antitrust violations.
The House Committee’s ESG antitrust investigation has recently expanded to cover the asset managers’ and proxy advisory firms’ collusive behavior as well. While the focus on the proxy firms and the asset managers is welcomed, Ceres should be held accountable for its behind-the-scenes activities to explicitly target oil and gas companies.
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