Net-zero Burns Down the Village to Save It

By Chris Nicholson

Climate change concerns are now the single largest focus of shareholder proposals. Most aim to achieve the Paris Agreement’s goal of limiting global warming to 1.5 degrees Celsius by compelling companies to cut their greenhouse gas emissions to net-zero by 2050. 

The surge in net-zero emissions shareholder proposals follows new Securities and Exchange Commission guidance allowing shareholders to essentially micromanage companies to achieve social policies. Environmentalists feel increasing urgency to implement the Paris Agreement because the window to achieve its 1.5- degree target is rapidly closing — a new report from the Intergovernmental Panel on Climate Change says the world is on track to break through the 1.5-degree threshold by the early 2030s. Activists are turning to market power in a last-ditch effort to force through dramatic emissions cuts. A sympathetic SEC has now cleared the way for them.

These net-zero proposals are motivated by environmental concerns, not financial ones. They’re usually disconnected from companies’ missions and could require them to sacrifice their customers’ interests in pursuit of a political goal. They ask for radical changes in short time frames without regard to financial discipline. They’re not legally required. These proposals have no clear connection to increasing shareholder value, so shareholders should oppose them.

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