Some businesses fight climate change quietly – but they still do it » Yale Climate Connections

Not long ago, businesses and investors liked to brag about their commitments to reduce their climate-warming greenhouse gas emissions to net zero by 2050. 

Not anymore. 

Now net zero talk is a political football, with more than a dozen Republican majority state legislatures castigating banks, investment management companies, and businesses that talk about climate change and have goals to reduce their emissions. Nonetheless, companies and investors recognize the financial risks of climate change and, for the most part, are keeping those pledges and taking initial steps to achieve them. They’re just not talking about it so much. 

The polarized election year exacerbated the trend of “greenhushing.” It’s right up there with greenwashing when it comes to confusing the public about what the business sector is really doing about climate change. 

How did this happen? 

Businesses have been feeling a financial toll from climate change with massive wildfires, droughts, heat waves, and destructive hurricanes like Helene and Milton – each estimated to have cost more than $50 billion in damages. Climate-intensified extreme weather events have wiped out factories, crops, hotels, infrastructure, and power plants. The U.S. economy in recent years has been hit with an average of $150 billion in annual damages due to climate change, according to the federal government’s Fifth National Climate Assessment, the latest in a series produced every few years since 1990. Globally, climate change is projected to slice 17% off the global economy, or gross domestic product, by 2050.

For decades the scientific consensus has forecast that extreme weather will worsen as the atmosphere warms further from the burning of fossil fuels and deforestation. Governments, businesses, and investors slowly began to worry about the economic impact of climate change.

Countries that signed the 2015 United Nations Framework Convention on Climate Change Paris Agreement agreed to take steps to help limit the increase in the average global temperature to less than 2 degrees Celsius above the preindustrial era. But in 2018, scientists in the Intergovernmental Panel on Climate Change issued a report forecasting significant losses to industrial production, agriculture, and infrastructure if temperatures rose 2 degrees Celsius. 

At subsequent COPs, the Paris Agreement signers agreed to aim for limiting warming to 1.5 degrees. Preventing the 1.5-degree tipping point became a rallying cry for governments and businesses alike. 

Buy-in from businesses

Major companies including Apple, Best Buy, General Mills, Google, Ikea, JLL real estate, Microsoft, Morgan Stanley, Salesforce, Walmart, Unilever, and others committed to reducing their emissions to net zero by 2050, according to the sustainability nonprofit Ceres, and many aim to cut emissions in half by 2030. Big public pension funds in New York, California, Illinois, and across Europe committed to reducing the emissions represented in their portfolios to net zero either by gradually shifting their holdings or engaging with companies in their portfolios to lower emissions. 

Moreover with the surprising results of the 2016 presidential election, businesses realized they could not rely on the federal government to enact policies to mitigate climate change, since the new president did not believe in climate science. It was up to them, the private sector, to take actions to protect the economy, and people, from the destructive forces of runaway climate change. Companies, investors, nongovernmental organizations, universities and everyday citizens stepped up to fill the vacuum left by federal inaction. Investment in clean energy steadily grew.

Signs are that will happen again during Trump’s second term. On Friday, November 8, 2024, a coalition of 2,942 businesses, 170 investors, 11 states, 353 cities, and hundreds of faith groups, universities, tribal nations and cultural organizations, which formed at the beginning of the first Trump administration, stated they reaffirm an “America is All In” commitment to fulfill the Paris Agreement. Moreover, there is some $910 billion invested in clean energy and transportation and climate solutions in the U.S. and investors are not likely to drop those investments.

By late 2019 at the COP 25 climate meeting, 177 major companies had committed to significantly reduce their emissions, according to the UNFCCC, alongside scores of big investment management companies that likewise pledged to reach net zero in their portfolios by 2050. Hundreds of big investors joined a movement called Climate Action 100+ pledging to work with high-emitting companies in their portfolios to lower emissions and improve climate governance. 

Still, many other mainstream companies continued business as usual without promising or taking steps to lower emissions or become more efficient in energy use, rationalizing they were not in the business of fighting climate change. 

A gauntlet thrown

In 2020, the CEO of the world’s largest investment company, BlackRock, told the thousands of companies in which it invests that “Climate change has become a defining factor in companies’ long-term prospects” and their response matters. “The evidence on climate risk is compelling investors to reassess core assumptions about modern finance,” as more investors are “recognizing that climate risk is investment risk.” The letter from CEO Larry Fink said BlackRock wanted companies to start disclosing their climate risk so BlackRock could fully assess their investment-worthiness. 

The BlackRock letter threw a gauntlet down to the rest of Wall Street and the business world. Companies could no longer regard climate change as a side issue to be dealt with by one department. Instead, Fink was arguing – and more and more companies were realizing – that climate risk needed to be a core consideration in a business’ strategic thinking. 

The physical world was bearing that out. Damages soared under the record-breaking wildfires across North America in 2017, 2018, and 2019. Floodwaters submerged a third of Pakistan in 2022. Floods and freak weather crippled utilities in Texas; wildfires destroyed whole towns in California, and droughts wiped out corn and soybean crops in large swathes of the Midwest. Companies had to find new supply chains, rebuild infrastructure, and pony up for big hikes in insurance premiums. 

Investments in climate solutions and in renewable energy, already healthy, started booming. The category of investing in stocks and bonds of companies with favorable environmental, social, and governance, or ESG, practices grew from a niche to a major trend, as sustainable funds outperformed their peers, and ESG investing grew to an estimated $3.4 trillion by last year, according to Morgan Stanley. 

By 2023, close to half of Fortune 500 companies had pledged to reduce their greenhouse gas emissions to net zero by 2050, while 5,500 businesses worldwide had committed to specific science-based emissions reductions goals, according to the Science-Based Target Initiative. Meanwhile, about 325 big asset managers managing a combined $57 trillion in assets have committed to transition their portfolios to net zero emissions by 2050.

Some investors were more committed than others to fulfilling those commitments. Still, more than 600 institutional investors have been trying to engage with companies they own to reduce emissions and improve climate management, and about 134 companies have done so. 

Political backlash

Burning of fossil fuels is by far the largest source of emissions, so the changes were being felt by the oil industry. Republicans pushed back, especially officials in U.S. states that rely on revenues and jobs related to fossil fuels.

In the United States, 14 states where oil and gas are key industries passed laws in recent years restricting state agencies from doing business with financial institutions that consider climate risk in investment decisions or pledge to reduce emissions, according to a tally by Freedom to Invest, which aims to protect investors’ ability to assess risks. Influence Map has tied the drafting of much of this legislation to groups supported by the fossil fuel industry, such as members of the American Legislative Exchange Council and the West Virginia Coal Association. 

The fight intensified when the U.S. Securities and Exchange Commission began a proceeding on whether to require publicly traded companies to disclose their greenhouse gas emissions and climate risk to investors.

The Republican-led House Judiciary Committee subpoenaed records from big financial firms that had made emissions-reduction commitments, looking for antitrust activity. (They didn’t find any.) Then the committee muscled two bills through a House vote in September 2024 that would prohibit retirement fund managers from considering climate risk when making investment decisions unless they can prove a specific “pecuniary” impact on short-term returns. During the presidential election campaign, Republican nominee Donald Trump vowed to undo policies enacted to address climate change. 

The rise of greenhushing 

Many companies now have grown quiet about their work to address climate risk, reduce emissions, or better manage energy use. Some big investment management companies like Vanguard pulled out of public commitments to net zero emissions movements, like the Net Zero Asset Managers. Even BlackRock became quieter, reducing its commitment to that same group and voting for fewer shareholder proposals concerning climate risk. 

Geopolitics and post-pandemic inflation headwinds played a role too. Russia’s invasion of Ukraine created a spike in demand for oil and methane-laden natural gas when sanctions cut off Russian supplies to Europe. Demand for U.S. natural gas soared, which fracking made easy to meet. The COVID-19 pandemic roiled supply chains, oil company stock prices surged and Republican lawmakers bashed ESG investment strategies. All of this dampened investor enthusiasm for talking about climate and net zero emissions goals and progress. Still, according to a Ceres study of investors who have committed to reaching net zero emissions, 37 of the 48 largest investors have developed detailed plans on how to meet these commitments. 

During this year’s heated campaign, Democratic candidate Vice President Kamala Harris pledged to continue President Joe Biden’s historic federal investments in facilitating clean energy and clean transportation development, which resulted in 348 new manufacturing projects with hundreds of thousands of expected jobs. President-elect Trump and his allies pledged to gut every climate policy now in force.

Most businesses and investors still realize the urgency of the fight against climate change. They also recognize there are opportunities to profit by investing in clean energy technologies and climate solutions innovations, and they’ve invested trillions to capture them. Investment in clean energy hit $1.74 trillion in 2023, according to the International Energy Agency. 

Still the question, postelection, is what happens from here?

Boston Consulting Group Partner and Director Tim Mohin offered this forecast in a recent LinkedIn post: “Companies committed to sustainability will stay the course because it makes business sense. Investors will seek value by avoiding risks and betting on new, efficient green tech.” Bloomberg reported “the prospect of less federal support for new climate technologies is already motivating some investors to step in to fill the void.”