HEAT

Mindy Lubber

lubber

She's president of Ceres, the Coalition for Environmentally Responsible Economies, a network of investors and environmental leaders working to help business develop environmentally responsible practices. She also directs the Investor Network on Climate Risk that organizes dissident shareholders. This is the edited transcript of an interview conducted on Sept. 28, 2007.

“Terms like 'environmentalist' don't work anymore. If it's only environmentalists who are concerned about solving climate change, we won't win.”

What is Ceres, and what is your leverage?

Ceres is an organization; it's a coming together of environmental leaders and investor leaders to put financial value on issues like climate change and sustainability and to bring them into the core work of corporations, of financial institutions, of Wall Street money managers -- not because it's an environmental campaign, [but] because issues like climate change have real financial cost to our economy, and we've got to be taking them as seriously ... as public health issues or environmental issues. Climate change is a fundamental economic issue.

Unpack that a little bit. What do you mean when you say it has fundamental economic value to our economy?

Well, if we act on climate change and build a new energy infrastructure and really prepare for the next century and deal with what is an urgent world crisis, we could create new energy systems, jobs. If we don't act on this catastrophe of climate change and what it means to our future, the implications are huge for our economy across the board; they're huge for industries and companies.

And let me give you some examples. For some industries and companies -- the agricultural industry, the skiing industry, the transportation industry, the transmission pipeline industry -- modest changes in weather could change the environment in a way that ruins crops, that changes weather patterns so the storms like Katrina are more substantial. Every one of those issues brings up billions of dollars of impact to our economy, to people's lives.

And companies that produce carbon, that put out carbon pollution, or Wall Street firms that evaluate companies, they need to look at, is this company strong, or might they be in trouble because they've got a huge carbon footprint?

Another financial implication of climate change is the regulations are changing every day, without question. Companies' lives and how they're regulated and how much carbon pollution they could put in the air are changing every single day. Twelve states have passed laws. The Congress over the next three years will pass laws, and it will make it very different for how companies act. Companies that move now understand that climate is a financial risk as well as an environmental and a national security risk for companies that are going to be out ahead of the curve.

So not only are businesses in our economy affected by the physical impacts of climate change and the regulatory impacts, lawsuits are being filed every single day. And companies are in danger of litigation if they are not taking climate change seriously.

And then look at the opportunity side. We are seeing companies whose employee workforces are happier, are more motivated, because they're proactive on climate change, and we are seeing consumers flocking to companies that they feel are being environmentally responsible. There are new jobs; there are more motivated employees; there are new consumers for a company that sees an issue like climate change or water shortages as as much a business issue as it is an environmental issue.

What gives [Ceres its] strength?

... One of our great strengths is an Investor Network on Climate Risk, a special project of Ceres, that's $4.5 trillion worth of institutional investors, large public pension funds and labor pension funds, and asset managers who have said the following: "We are going to start factoring in the cost of climate change into our analysis of companies. We're going to engage with companies, meaning we're going to meet with them and talk to them and push them, and sometimes file shareholder resolutions to push them and make sure that the companies are acting to bring their carbon footprint down, to produce less carbon pollution, to change their facilities, to change their products, to push their suppliers to be more responsible on the environment."

These investors realize the risk, and they are engaging with companies every single day. They never did that before.

Companies are changing their practices because of shareholder resolutions, or because CalPERS [the California Public Employees' Retirement System] or the New York City comptroller comes to them and says, "You've got to change the way you're playing the game"?

Well, it's a combination of things. Without question, over the last two years, the fact that climate is a business issue as much as it is an environmental organizations' issue has really started to change practices. Ceres runs a corporate board training institute where we convene corporate board members who now see climate as a governance issue, as something they need to factor into the highest levels because of the risk and the cost to their firms.

Companies are also changing because their investors are asking them to change. ... CalPERS or the New York State Comptroller's Office or the Connecticut state treasurer sit down with the CEO of a company, as we have with dozens of companies, and say: "We want you to tell us how you're analyzing this risk of climate. We'd like you to disclose it, be transparent. We'd like you to start setting very specific goals for bringing your carbon footprint down, and we'd like you to support public policy as the right market signal that puts a limit on carbon." It is as much a business leaders' issue these days as it is an environmental leaders' issue.

People are going to be a little skeptical of this. General Motors has been under pressure, Ford has been under pressure for years, to clean up its act, to increase fuel efficiency, and we've seen very little progress. So why are they going to change now?

Right. It is indisputable that, in the end, what we need is a law, a federal statute, that puts a limit on carbon. Right now, carbon pollution costs zero, so people make more of it.

Right now, CAFE [Corporate Average Fuel Economy] ,the standards that regulate how many miles per gallon a car needs to be produced at and put on the road, haven't been changed for years. The way the entire auto industry will change is when CAFE standards change. And for the first time in what is well over a decade, there are serious discussions. And I would predict over the next year, if not two years, we will see changes in CAFE standards.

But short of that, until we see mandatory controls on carbon coming out of Washington, we do need to make sure that companies are acting, not making the problem worse. Right now, we're saying we need to bring our carbon footprint down by 75 percent by the year 2050. And it's growing every single day. We can't wait.

Large businesses need to be up front and moving. And not every one of them [is], but we're certainly seeing some progress. DuPont has made huge commitments. Citigroup -- not an environmental organization, but we're talking about one of the largest banks -- put $50 billion on the line a couple of months ago, saying that's what they're going to spend to green their buildings, to change the products they offer, to offer incentives to their employees, and to make massive changes on this issue. Bank of America, a $20 billion program. So businesses are starting to get it, that it's real, that they ought not to wait for Congress to act, and they ought to be ahead of the curve because it could be good for business.

Now, why are businesses moving? The science is clear. I think [acting] puts them, in the end, at a competitive advantage.

Citibank is putting up $50 billion and greening their buildings. Of course, greening their buildings only increases their efficiency and increases their bottom line. ... Wal-Mart, same deal. General Electric has a great business in selling turbines, whether they're for good, clean coal plants or dirty coal plants or for windmills. So a lot of this is PR, or just good business practice? For instance, these banks that you mention are also funding new coal plants.

Well, let's go to your first point. And I would say, isn't that the point? The fact that a business makes money while doing something good, that's OK. We are never going to drive the economy or move the economy in a way we need to if it is all about pain and suffering and losing money. Things don't work that way. It will take mandatory controls, so Washington, in the end, is going to have to move companies.

But if companies are acting now -- to get a first-mover advantage and to bring their carbon footprint down, and to stand up and support public policy, and to put billions of dollars on the line to help mitigate the problem -- it's OK if they're making money as well. In the end, that's going to be what drives the economy.

General Electric, with their Ecomagination [campaign], saying, "We're going to build energy-efficiency engines and put out all kinds of new products because we know there's going to be a market," well, that's smart business, and it's good for the environment. Wal-Mart -- well, Wal-Mart's a complicated business. Not everything they do is leadership on corporate and social responsibility, but what they're doing on climate is real. You can calculate it. They're setting goals; they're bringing their own carbon pollution down. They are now asking all of their suppliers to do the same. We want big players like that to get involved, to be part of the campaign to stop the climate problem, rather than to be part of the problem.

In a sense, though, that's the easy side of things. The difficult side of it is that we don't have a way of supplying enormous amounts of electricity that we need to supply to people in the future without burning more coal. I mean, isn't that the real hard nut of the problem? ... There's no pain, no gain, I thought.

Right. Well, there's some gain without pain. But it isn't possible to think this is an easy calculation, that we're just going to, tomorrow, have a windmill on every street corner and a solar panel on every house and it's all easy, peaches and cream.

But you ask, can we move forward without a coal economy, an entirely coal-driven economy? I would say, first of all, we have to, which doesn't mean coal is going to go out of existence. The first thing we need to do is make sure that we come up with the technology -- I think it's a decade away, but it's not three decades away, and maybe it's less -- to capture the carbon and to sequester it.

To be fair, carbon capture and sequestration is, perhaps, never.

Well, perhaps never. The scientists are saying it's not never. ... It's not ready today. We've got to be realistic.

At the same time, if we do everything we can in our economy in terms of energy efficiency before we even get to having to come up with more solar and more wind and more geothermal energy -- and some support more nuclear power; that wouldn't be my first choice -- there is 20 percent of our energy system that is just being wasted. If we do everything we can, from light bulbs to changing the way we drive to the cars we drive to allowing people to work at home to greening our buildings, ... we can forestall building coal-fired power plants -- in the United States, at least -- for another five years or eight years while we're building new technology. It's not impossible.

How do you do that? How do you get it so that a utility sells less electricity and is happy with that?

Right. That's a perfect question. Right now, our systems of regulation, in almost every state in the country, say the following: If you build a new centralized generating facility, if you build a new coal plant or a new nuclear power plant, we'll allow that cost to go into the rate base. We'll allow you to be compensated for building that. If [an electric utility company] come[s] up with programs to save energy, to get your customers to use yet less energy, and it costs you, as a utility company, to come up with those programs, we won't allow you to put it in the rate base. So as a start, that needs to change. It needs to change now. Every state needs to come up with a mechanism, not dissimilar to California, where we reward energy efficiency, where we don't reward building new coal-fired power plants.

Another way to deal with sending the right market signals is [to] put a cap and a price on carbon. Right now, carbon pollution is free, and when something is free, we keep doing more of it. We've got to say there is a cost to putting carbon into the environment. That will come from putting either a tax on carbon or instituting a mandatory cap-and-trade program. That has to happen. It should have happened five years ago. The United States needs to lead, and not be behind the rest of the world.

For the consumer, would that mean that they would pay more for less electricity?

Well, what it may mean is they will pay about the same, whether or not they're using less electricity or getting more from a coal-fired power plant. And this is not in a million years; this is not about sitting in the dark. This is not about all suffering for the consumer. ...

We all have two TVs, three TVs, people have four, and they're all on standby. Nobody wants to wait 1/10 of a second. We want to click that button and have it go on immediately. The amount of energy that our appliances at home are wasting are things that need to be changed, can be changed. And the consumer is not going to suffer if we have to wait half a second rather than a quarter of a second for our televisions to go on.

But they may pay more.

Well, in the end, let's be realistic. Right now, the cost of things like Katrina, which -- our environment is changing in a way that it is costing us not only human lives, ... but it's costing billions and billions and billions of dollars. In the end, we will pay more if we don't solve this problem.

So will there be costs? Perhaps. Hopefully they'll be minor. But those are the costs of living. In the end, it will cost us not to act a whole lot more than it will cost us to act.

I want to talk about ethanol a little bit. It's being touted as a solution to climate change. But it seems a perfect example of where politics and big business have taken us down a road that, in fact, is not to our advantage. How do we avoid that kind of thing?

Right. Well, you're absolutely right. Everybody thought, new gold rush, ethanol, ... let's make as much of it [as we can], and we saw investments from Wall Street, from pension funds across the board --

And venture capitalists.

And venture capitalists. And, in fact, ethanol may very well be part of the solution, but it's got to be made differently. It's got to be made in a way that's not creating more pollution. It's got to be made in a way that's not using food resources that people in other countries need.

And the ethanol story is both good and bad. We may have moved too quickly, but it showed that there is venture capital; there's other capital interested in the solutions. As soon as the policy-makers and scientists realized that it wasn't, perhaps, being done in the most efficient way, the capital stopped. It shows me that the markets work, and that there's capital to be invested in renewable energy and energy conservation and efficiency. We've just got to put the right signals in place, and you're going to see huge amounts of capital flowing in the right direction.

Let's talk about some sectors and some companies. In the utility sector, if you could just give me a rundown of who the big companies are and what pressure you can or have brought to bear. ... How do you interact with these companies?

Well, take AEP [American Electric Power], a large emitter of carbon. I'm not sitting here to tell you that they've just won the award for being the green giant. On the other hand, when our investors went to AEP and said, "You've got to start analyzing your risk from carbon differently; you've got to start setting goals and moving forward in a way that's looking at doing things other than just building coal-fired power plants," the company did move and has been acting.

One is, they did a rigorous analysis that, I think, provided information that even the company didn't have and that shareholders wanted on the cost [of] being a coal-fired industry. Number two, recently they did a comprehensive sustainability report, setting goals for how they start bringing their carbon footprint down, how they invest in cleaner technology -- I think they just made a big purchase of wind energy -- how they invest substantially in carbon capture and sequestration, all of which are good things, all of which came from the cost of carbon and our group of investors and others prevailing on the company. Now, that said, the company is still talking about building four new coal-fired power plants, two traditional, two ultra-super-critical that are a little bit less offensive, but still problematic in the extreme. So the company still has a long way to go.

Now, a surprise that will show us all that the world is changing -- just a month ago, AEP lost [a battle] in a state where the state public utility commission denied their permit to build a new coal-fired power plant. What that tells me is clearly, the message is going out. Nobody a year ago would have guessed that AEP would not have been allowed to build a new coal-fired power plant. But at the moment, they can't get a permit. It says that policy-makers are seeing the huge impacts of building pulverized coal-fired power plants and what it does to this enormous problem. And they're starting to act -- not necessarily quickly enough, but they're starting to act. ...

Let me talk about [CEO Michael G.] Morris and AEP. I mean, a year ago he said he didn't support mandatory caps. Now he's joined USCAP [U.S. Climate Action Partnership]. You've been there during the education of Mike Morris. Can you remember your first meetings with him and what's happened since?

You know, it is a perfect example. We've got to give human beings the right to change, I guess. And no doubt there's enormous pressure. And he reads the newspapers, and he hears from his investors. But Mike Morris is a smart guy. He and his top lieutenant on this, a senior VP, Dennis Welch, were willing to sit down and listen to advocates, I'm sure far and wide. But we spent an enormous amount of time talking with them, educating them, looking at the options that they have beyond just pulverized coal-fired, and really talking about the opposition that are going to see to any new coal-fired power plant.

Mike Morris, a year and a half ago or two years ago, wasn't receptive. And today he is saying, "We need mandatory controls on carbon; we need to invest more money on carbon capture and sequestration." And, more than that, he's sitting and listening to stakeholders who he never would have sat and talked to.

We had a group of his greatest critics sit down with him. He invited us in. He sat and listened for hours -- labor folks and local community folks who have opposed some of their facilities. And Mike, to his credit, at the end of the day said: "I learned a lot. People have credibility. They have good points to make, and it will have an impact on how I run my business." Mike Morris is trying to figure out how to be part of the solution at this point.

Now, again, anyone who is still building coal-fired power plants in this day and age and not really realizing they need to do everything in their power to do anything but build those facilities, needs to continue to have those discussions be pushed. ... But Mike Morris is now open to [other options]. He's looking for alternatives; he's listening; and, most importantly, he's supporting mandatory controls on carbon, which is really the best market signal that we're going to see.

And he's beginning to invest his millions in renewable energy sources.

Hundreds of millions of dollars they are putting in renewable energy and research on carbon capture and sequestration. They deserve credit for that.

So is he an environmentalist, or is he a pragmatist?

He's a pragmatist. But, you know, terms like "environmentalist" don't work anymore. If, in fact, it's only environmentalists who are concerned about solving the climate change catastrophe that's looming ,we won't win. There is no way we're going to solve this problem without bringing in every constituency.

And at the moment, today, the business community is further along than the public-policy-makers in Washington, because we're hearing a chorus of business leaders saying, "We need mandatory controls," and Washington has yet to act.

This brings up the issue of just what this responsibility is. ... We sat in on an analyst's call with Mike Morris and his chief financial officer, and there he is, having to answer to Wall Street on a quarterly basis. At the same time, you're pressuring him, and he's trying to figure out how to balance these pressures. What you're trying to do is get the business incentives to push them rather than appeal to any larger sense of responsibility to the planet, to the environment. Is that correct?

Well, largely it's correct. I mean, Mike Morris is also a moral guy. And so I'm not willing to take the fact that this is the most compelling issue as it relates to the future of our children, our grandchildren -- he's got a family; he's got other neighbors and people he cares about -- so I'm not willing to take that out of the equation.

But Mike Morris has a lot of responsibilities. One, as the CEO of a corporation, he's got a responsibility to his shareholders. Coming out with a program that's going to show him losing a lot of money for his shareholders is going to accomplish one thing and accomplish it very quickly: make sure he's out of a job in the next week. His shareholders are going to want to make money. We are making the case that they could make money, they could exist as a corporation, and they could start doing it in a way that's less problematic for the environment, specifically around carbon pollution. And that has got to be the equation.

I mean, let's look at General Electric's Ecomagination. You're right. They're starting a whole new product line to make money. But it's a product line that's about more energy-efficient engines, that's going to have less carbon pollution. That's a good thing. Am I offended by the fact that Toyota is making a lot of money by producing better hybrids and more hybrids than any other auto company? It's a good thing. It's the only way we're going to get the hybrids on the street and get them out quickly. We've got to find the formula where companies can be smart and innovative, because consumers do care about this, and they're going to buy more and more products that are energy-efficient and that are less offensive to the environment. The smart business, and the businessperson, in this day and age, is going to tell you that doing something good for the environment is good business practice.

Peter Darbee was in town, the CEO of PG&E [Pacific Gas and Electric], recently, and he said he has never had a more motivated workforce, ever, than when he started going out and speaking on behalf of climate change and the need to fix the problem, and when he went out to support Gov. [Arnold] Schwarzenegger in the state of California. In the end, he will tell you it's good for recruiting the best and the brightest; it's good for motivating his workforce; it's good for his consumers. And being out in front is going to put him out there as a leader. And his company is doing better because of it.

Well, you've done something that's kind of interesting. You've kind of gone upstream from the corporations and gone to the analysts themselves. What did you do there?

Well, we go to a lot of different players. But yes, we do run a program where we train analysts on the value of carbon and why it should be integrated into the costs and their analysis of companies. Of the $4.5 trillion worth of institutional investors whom we represent, ... in some of their RFPs, their requests for a proposal, they're asking Wall Street to really let them know what's their competency for analyzing climate risk.

We want to run a program for corporate board members to talk about climate as a governance risk, why climate belongs at the governance level. And, you know, a year ago, even one year ago, we would get, on average, five corporate board members interested in coming to a discussion on that. Now 25 arrive for every meeting. In our analysts' briefings, there are 100 analysts who are coming to really talk about the nuance of how we analyze climate risk.

They're not just sending their interns.

The day has changed. Four years ago, when climate risk wasn't even a word -- it didn't exist as a term -- and we brought the first institutional investor summit together on climate risk with 500 financial leaders, many of the Wall Street leaders thought it was a discussion that only environmentalists should be [involved in].

We finally got them in the room, and if nothing else, they left there at the end of the day realizing that climate belongs on the agenda of Wall Street as much as it belongs on the agenda of the next Greenpeace conference. Last year at Davos, at the World Economic Forum, with 2,000 world leaders, business leaders -- this wasn't an environmental conference; I saw no other environmentalists there, maybe five out of 2,000 -- on the first day, in a strong vote, climate change was nominated as one of the most grave world issues that we need to address, we need to mitigate, we need to move on quickly. Again, that's 2,000 world business leaders.

This issue has made it to Wall Street, although Wall Street isn't fully acting. It has made it to the analyst community. Corporate board members have finally seen this belongs on the board agenda because it's a risk issue. They've got an obligation to build it into the strategic plan of their companies. They need to analyze the risk, and they need to consider the opportunities.

Was there a time when climate change became a business issue?

... Really just three and even two years ago, climate change was considered an environmental issue, a national security issue, a public health issue. There was no consensus that it was as much an economic issue as all the others. Today you'd be hard-pressed to find me a business leader who would say that they don't need to consider the implications of climate as well as consider the opportunities that they may have from acting on it sooner rather than later.

Now, let me be clear. The whole business community isn't acting yet. The problem is still as bad as it has been. Our carbon footprint is going up. We still have coal-fired power plants being considered here in the United States and many more in China and India. So I don't mean to paint an overly rosy picture, but we have reached critical mass in word and understanding.

So the conversation has shifted.

The conversation has shifted. Now we've got to reach critical mass in deed.

[Economist] Nicholas Stern says in his report that climate change is the biggest market failure in history. You agree with that?

Without question.

I mentioned that to [Duke Energy CEO] Jim Rogers yesterday. He said no, he disagrees with that. So why isn't he on the same page?

Right. Well, we may not agree on everything, although Jim Rogers has realized at his work with Duke Energy that building new coal-fired power plants is not the answer. And they're moving away from that, and Duke Energy --

He's got billions of dollars sitting in his cash accounts, waiting to build more coal plants when he can.

Well, at the moment they're looking to build more nuclear rather than coal-fired power plants. Now, I'm not a huge fan of nuclear power plants [either]. I think we've got to go after the efficiency dollar first, make sure we do as much energy efficiency as possible. And that will forestall building any new coal-fired power plants for a while, and maybe put off some of those nuclear power plants.

And Jim Rogers has, to his credit, said, "We've got to first, before we build new facilities, do as much energy efficiency as humanly possible." They're appealing to their regulatory commissions. And we're backing them to make sure that they'll be compensated for running energy-efficiency programs before they have to build new generating facilities.

So we may not agree on everything, but Nicholas Stern, the economist out of the U.K., did the most comprehensive study done on the economics of climate change. That report has [with]stood all sorts of criticism, and without question, his argument that this is one of the greatest economic threats we face moving forward is one that's accurate, that's substantiated and supported by economists worldwide.

I'm not sure what to make of a guy like Jim Rogers. He's one of the founding members of USCAP; he's been interested in this issue, taking it seriously for sometime, gets a lot of credit as a pioneer, as a progressive on it. At the same time, he said yesterday he made zero investments in renewable energy last year. Didn't begin until this year.

Right.

What are we to make of that?

Well, what we're to make of it is -- and again, we're talking about some of the good things businesses are doing, how they're finally recognizing that carbon is an issue. And there are good things going on. But none of these business leaders, and certainly none of us in particular, have got it all right.

Jim Rogers is doing a number of good things. First and foremost, he's aggressively supporting mandatory public policy. He wants caps on carbon because he knows that's the answer to get a level playing field for all businesses.

Well, that's good business.

Yes.

I mean, he doesn't want to have to do something that his competitors don't have to do.

And I agree with him on that. So that's a good thing. He's running a huge energy-efficiency program this year and rolling that out, and that's a good thing. But has he got it all right? ... The fact that they still have huge amounts of coal-fired power plants running without really having a solution for how to capture that carbon, that's a problem. Coal-fired power plants are one of the largest causes of climate change. So Jim Rogers, like other businesspeople, [is] balancing things. He's taking some good steps. Has he done it all? He's got a long way to go, as have all of us.

Here's what I don't understand. Germany gets 6 percent of its electrical energy from renewable sources. They've got more invested in solar per capita than any other country in the world. We all know Germany is pretty cloudy. North Carolina, where Jim Rogers operates, South Carolina, are fairly sunny. Why are the Europeans beating the Americans hands down on renewable-energy investment?

... One [reason] is, without question -- and this is the softer reason -- the ethic, the understanding of the fact that we don't have limitless resources and that we've got to act to preserve our resources. That ethic is much more real and integrated and ingrained into the psychology and the actions of people in Europe much more than here in the United States. People return [bottles]; they go to the supermarket, they bring their own bags. Doesn't happen here. If I do that at the supermarket, people think I'm crazy. So it's just across the board ingrained into their ethic. That's one part.

The second reason we are seeing more of that [in Europe] is because there have been caps put on the amount of carbon that people could put into the atmosphere. So when there is a limit to the amount of carbon, and every business has to operate under that limit, it has to operate under those caps, they start getting a little bit more creative and ingenious and thinking about how to make products that are less carbon intensive and how to manufacture products that people want that cause less carbon pollution, and, for that matter, how to get in front and build businesses that are about good jobs, that are about the economy. And that's about solar energy and wind energy and geothermal and research into carbon capture and sequestration. There's money to be made here. And that's an OK thing.

How is Southern [Company, another electricity generator,] doing?

Well, Southern Company still has a long way to go. They seem to be still believers that they can keep moving forward on building coal-fired power plants. I mean --

Don't they have to?

Well, they may have to for the very short term, but they need to do a lot of other things. Number one is they need to figure out how to do more energy efficiency and forestall building a coal-fired power plant. Two, they need to do what you were talking about: They need to be investing in renewable energy to provide their customers electricity that's not all built off of coal-fired power plants. And hopefully in five years from now, we'll have the technology to capture the carbon emissions, or in 10 years from now.

But building a pulverized coal-fired power plant when we are facing one of the gravest problems worldwide doesn't make any sense before exploring every other option before that. And we're not seeing that kind of exploration coming out of some of the coal-fired and the electric utility companies. We're still seeing some coal companies saying, "This is a problem we don't need to worry about."

I think if there is any other message that we ought to be sending, it's that the problem is now; that there's a sense of urgency that we all need to adopt, that we can mitigate and bring our carbon footprint down by 75 percent by the year 2050. But we can't do it if we don't act now, if we don't bring out new technology and if we don't stop creating large SUVs, coal-fired power plants, [start] building real estate and office buildings and homes that are highly energy-efficient. We could do this if we really see that there's an opportunity, that it's an economic opportunity and it makes sense to do. And any company that is ignoring it and somehow believes they can go about business as usual is not reading the newspapers, is not acting with the reality that we now have.

Well, a lot of the coal miners that I've met and folks at coal companies think that this is a conspiracy by Hollywood and some elitists to just run their kind into the ground, so to speak.

Right. Well, it's one opinion, but it happens to have been proven wrong, the conspiracy theory, or the fact that climate change is not one of the greatest problems we face. And we are seeing a consensus around it, not only from every leading scientist in the world, but from business leaders, national security experts. The evangelical movement adopted an aggressive platform that's about solving the climate crisis. Students on college campuses across the world now, and certainly across the United States, are making this their Vietnam War, faculty members.

What do you do with a company like ExxonMobil, which put money into ideological groups that fight the idea, fight the science?

Well, my answer is, shame on that. And that's a fairly simple statement. For a company as big and as smart and as capable and as well resourced as ExxonMobil to still be funding an opposition opinion on this matter, somehow funding the researchers who are trying to suggest that global warming is not a problem, is nothing short of atrocious. The company is smart; they make a lot of money. They need to get on the bandwagon and be part of the solution. And slowly they're going to get there. They're going to get there because the public wants them to get there; their owners want them to get there. We saw $4 trillion worth of investors at their annual meeting and elsewhere telling the company that it is time to change their practices, and eventually they're going to get there.

What did you do exactly? Did you go to [the company's headquarters in] Irving, [Tex.]?

A number of our members did. Largely, investors filed a shareholder resolution with ExxonMobil. ...

What's a shareholder resolution?

A shareholder resolution is when people who own shares -- small investors in the company, large investors -- file what is considered a petition, an action that has to be considered at the annual meeting. It has to be taken up by the board of directors of the company. And it's filed by investors, owners of the company, who don't want to see the company go down the tubes. What they want to see is the company be smart, make money, but do it in the right way.

Why wouldn't I want, as an investor, for ExxonMobil to just sell more oil? I mean, if you could just play it out for me how this took shape, ... and how did it play out, and what happened at the [shareholders'] meeting.

Well, let me answer the why with a little bit of history. Five years ago there were about four shareholder resolutions filed by owners of companies urging the companies to act on climate change.

By owners you mean shareholders?

Shareholders. And we used to get votes like 7 percent [favorable]. The owners of companies weren't as inclined to see this as an economic issue. This past year there were 42 shareholder resolutions filed -- again, not by activists, but by shareholders, people who have a stake in the company -- 42 resolutions filed with an average vote, for those resolutions that went to a vote, of about 27 percent.

That's way less than what you need to force the adoption of the resolution.

Shareholder resolutions almost never get 10 percent or 15 percent. Twenty-seven percent in this [scenario] is a resounding vote from owners of the company. At ExxonMobil, investors from across the company went to the board and filed shareholder resolutions and said: "We want you to address climate change; we as investors want that to happen because we think it's good for the company."

And why do they think it's good for the company? Because the economy is changing; because even the largest oil company is going to have to be part of a new generation of our energy systems, of what's driving our energy. Nobody is telling ExxonMobil to get out of the oil business tomorrow.

They're in the carbon business.

They are in the carbon business, but so is BP and Shell, and those companies are making huge -- billions of dollars -- investments in renewable energy. And that's what we need to see ExxonMobil doing. They're not going to not exist tomorrow.

They haven't moved.

But they're a company who has chosen to be stubborn, obstinate. And I think over time their shareholders, their customers, are going to say: "I'm going to vote on this. I'm going to either go buy gas down the road from ExxonMobil, or, as an owner of the company, I'm going to take my shares out of ExxonMobil and go elsewhere."

But for the meantime, the company needs to see what's going on, what other business leaders are doing. It is time to stop, somehow, denying that this is a problem, or stop avoiding the fact that they need to be part of the solution. Other leading multinational oil companies are moving, are changing, and ExxonMobil needs to get there as well.

Well, when you say these things to ExxonMobil, or when the shareholders file these petitions, what ... does ExxonMobil say to Ceres?

Well, they say to start is they're getting there, they're looking at options. But in the meantime they're making money, and they're not changing course. ...

Have you talked to [ExxonMobil CEO] Rex Tillerson?

Rex Tillerson, interestingly enough, has been one of the only CEOs who, when asked by huge investors to sit down and have a meeting, has denied them a meeting and instead has sent senior staff. I mean, we are talking about some of his largest owners, not activists, who have been asking for a meeting for years. The treasurer of Connecticut, Treasurer [Denise] Nappier, has asked to sit down and meet with him as an owner of the company.

So is he a chicken?

Well, he certainly seems to be running away from the problem. I mean, to not at least entertain that person, to not at least have the discussion with his owners about why he's not acting on climate and hear them out about why, as shareholders, they think he's got to start changing the way he does business, is obstinate, is not the way the world is working.

Hey, they made $39 billion in profit last year. I mean, they seem to know how the world is working.

Right. Well, I think that is their ace in the hole. They keep thinking, we've always done it this way and we're making money, so we're going to keep doing it this way. And what some of his investors are starting to say is, "The world is changing, and you've got to change with it." It doesn't mean change overnight. It doesn't mean they don't want him to make money. But for the CEO of one of the largest companies in the world to deny a meeting to his largest owners who want to talk to him about building a business model that is about the next 50 years. ...

You know, I went to see [retired ExxonMobil CEO] Lee Raymond talk the other day, and he said: "Look, you know, we've built this infrastructure over 100 years. It's huge, and it's not going to change very fast, so relax." What do you say to that?

Well, you say you built the infrastructure and it's not going to change very fast, but you've got the resources to start building an alternative infrastructure. ... It is going to take ExxonMobil a long time to change; Lee Raymond's right. Starting today, though, and not starting 10 years from now, is what they ought to be doing.

They say they're giving $100 million to Stanford [University for research].

One hundred million dollars [to ExxonMobil] is pennies to the average American family. It's my putting a nickel into cancer research. That doesn't cut it. A company like ExxonMobil needs to be developing the technology to run their business where it's less polluting. They need to be part of the solution, and $100 million to research at Stanford doesn't cut it.

Let me say one thing about Stanford, to their credit, they are doing research for ExxonMobil. But when the shareholder resolution came up at ExxonMobil, the endowment at Stanford voted against the management of ExxonMobil and with investors saying the company has to start changing now. So Stanford is certainly seeing both sides of this problem; ExxonMobil isn't.

With the auto business -- CEO Rick Wagoner, General Motors -- are they doing any better?

They've got a long way to go. I mean, there's no doubt the American auto companies are in financial straits, but for the last decade, when it was very clear they needed to be bringing out different kinds of vehicles, more hybrid vehicles, more fuel-efficient vehicles across their entire fleet, we were seeing the American auto companies bring out more and more SUVs.

But why [was] it clear? People were buying SUVs as fast as they could.

People were buying SUVs, and the ad campaigns for the last decade were urging people to buy SUVs, were telling people, "If you want to be part of nature and go out and hunt, buy an SUV."

Yeah, it was a green car.

That's right. If you want to be part of nature and you want to go out and hunt -- and all of that is fine -- you could also buy a fuel-efficient vehicle that gets an average of 35 miles to the gallon rather than 17.

The American auto companies have been behind the Japanese companies in bringing hybrids to the market and bringing more fuel-efficient vehicles to the market. They are now starting to change. But it is a bit late. Their fleet should be far more fuel-efficient. Congress is going to finally act, I believe, to make them more fuel-efficient. But we've waited too long.

... Let me refocus you here. You went to Davos. You said that the Chinese and the Indians popped your bubble.

They sure did. You know, the first day ... at Davos, 2000 world leaders [examined] 12 of the world's most fundamental and compelling problems. And climate was one of the top one or two issues that demanded the attention of business leaders and political leaders around the world. And that was a good thing.

By day two, the Chinese business leaders and Indian business leaders said the following: "We've got to build our energy. The cheapest way for us to do that is by building it off of a coal-fired economic base. We've got people who are starving. We deserve to grow like the United States has grown, and for the moment we are going to build more coal-fired power plants."

Now, if, as the Chinese and Indians are thinking about, if 500 or so more coal-fired power plants go up, I know of no scientist who knows the answer to how we mitigate this problem of climate change and how we reach a number like a 75 percent reduction in carbon pollution by the year 2050. So we as the United States have a big job to do.

Number one, nobody's going to listen to us, [another] country telling them to bring their carbon pollution down, if we don't bring ours down. The United States hasn't been part of the Kyoto Protocol; we haven't passed mandatory controls on carbon. That is the first thing that has to change. It has to change now if we're going to have any clout with leaders in countries like China and India.

And secondly, if we in the United States put the money, the resources, send the right market signals to the economy to develop new technology and better technology, the Chinese are going to be happy to borrow that technology. They don't want more pollution. They understand and believe that global warming is a huge problem that has to be fixed. They are going to build their economy on polluting industries, polluting technology, until they get better technology.

So we need to solve the problem for them?

Well, we certainly need to be part of the solution. The United States dragging its feet is not the help that we need to do. If we want to have any clout, we need to move; we need to bring our carbon footprint down [now].

President Bush says we just need to tax their imports.

President Bush has done precious little on global warming. It is absolutely unconscionable that we have not, as a country, joined the Kyoto Protocol, joined world leaders, moved on mandatory controls on carbon, which is the only way we're going to have a level playing field and get every business into the system. And so President Bush hasn't done enough, with all due respect. Nor has this Congress. And we're waiting to see more.

And that has disabled us. If you go around the world, we have very little clout and credibility on this issue. People think the United States hasn't acted enough, and that's true. And until we do, we're going to have a lot less clout asking other countries to clean up their act if we haven't cleaned up ours. ...

What is corporate responsibility?

Well, corporate responsibility means a lot of things to a lot of companies. But in my judgment, what corporate responsibility means is taking a slightly broader look at what it means to run a corporation, looking at impacts on labor, looking at impacts on sustainability, figuring out the cost of polluting.

But this is what you think corporate responsibility should be. I'm asking you, is this a term with any coherent definition across business? I mean, we hear them talk about it all the time, but obviously it seems to me Exxon has a very different idea than GE what corporate responsibility might be.

Well, Exxon does have a different idea. But we are seeing more and more companies realize that issues like global warming, like water shortages, those issues have a financial role in which corporations do well or not, and they've got to be factored into the strategic planning of a company. And any company that's not looking at issues like that and factoring them into their risks and into their opportunities and how they might retool their manufacturing systems, what kind of new products to bring out, those are companies that are not going to do well in the long run. So corporate responsibility, it is looking at the impacts that their company has on the world around them.

But it's a term that's, in a way, up for grabs, isn't it?

Up for grabs, sure. But we're seeing more and more of it every day. ...

The banks have obviously played a big role in this, because they fund the capital expansion projects. They fund new coal plants, which cost millions and millions of dollars or more. They fund new oil wells. ...

Right. Well, we're not there yet, but we have made progress, whether it's Bank of America and a $20 billion climate program, Citigroup and a $50 billion program. ...

These sound like big numbers -- but they aren't.

No, they're not enough. We've got to keep pushing. There is no question that they ought not to be funding risky propositions. And I would argue, in this day and age, funding a carbon plant, a coal-fired power plant, is going to get riskier and riskier over time.

And I do know that the banks are starting to analyze that risk in a very clear way, which they haven't been doing before. Out of Wall Street over the last 10 months, we've seen massive new reports on the risk of investing on coal-fired power plants and the value of being responsible on carbon. So Wall Street is starting to get it. They're not there yet. They are still financing some of these plants. But I can bet in two years it's going to be a different story. We're making progress.

So you're sort of a cautious optimist?

I am a cautious optimist. We've got no choice [but] to be that.

[Former BP CEO] John Browne got the "Best Impression of an Environmentalist" award from Greenpeace a few years back. Is that fair?

You know, it's complicated. These huge businesses, none of them are getting it all right. And they've been in business for a long time, in polluting industries, and they're not going to turn on a dime. They're huge.

So John Browne, he's done good things at BP. The company has [a long way] to go. They've had worker-safety issues; they've had pollution in Alaska. They're certainly far from the perfect company. And no company is perfect. What John Browne did do is come out pretty early acknowledging that climate change is a problem, and that the business community needs to be part of solving it. He did come out pretty early putting huge amounts of money into renewable energy -- now, not huge by proportion to his overall business, but large amounts of money. And he started business leaders talking about climate change. Has he gotten everything right? Absolutely not.

You're kind of like a patient mom with a bunch of unruly teenagers.

Well, I'm not overly patient. I need to tell you, this problem needs to be solved. We can't start fixing it 10 years from now, eight years from now, six years from now. ... I've got two kids; no doubt you've got kids. ... This will be the first time in history we are about to leave them a future that's not as sound as what we received and what are our parents received from those before them. ...

So I will tell you, I'm not all that patient. There is a sense of urgency that we have to have, that business leaders have to have, and the United States' Congress needs to have. And we need to act now.

That said, we've got to do it smart, strategically. If we say to any company, "You need to shut down everything you've done for the last 50 years that's allowing you to make money and just start in new tomorrow with something different," that's not going to happen. We've got to do it [in a] smart and realistic, disciplined, focused manner.. ...

You believe in clean coal? Mike Morris says it's not going to even start until 2020, and that's like saying we're not so sure it's ever going to happen.

Well, what I believe is we need alternatives to coal. I don't think that coal is, in the end, a long-term answer for our energy base. Now, there will be some coal for the short term. But right now I believe we need to be doing more on energy efficiency, bringing out renewables, doing everything we can to capture the carbon pollution from coal-fired power plants. And starting anything in 2020 versus starting in 2007, tomorrow, is not the answer. We have got to move [on] this problem....

There are technologies out there. We've got to invest the resources into developing them. Venture capitalists are waiting to spend money. Wall Street is waiting to invest money. It's not going to happen in huge proportion until we pass the law that limits carbon, that requires every business to operate under a cap. They're going to be wanting to buy technology that helps them do that the day after that law is passed. Let's put good American ingenuity to work. There's technology that can fix these problems. We've fixed big problems before. But we've got to send the right market signals. ...

posted october 21, 2008

heat home page · watch online · dvd/transcript · credits · site map
FRONTLINE series home · privacy policy · journalistic guidelines

FRONTLINE is a registered trademark of wgbh educational foundation.
main photograph © corbis, all rights reserved
web site copyright 1995-2014 WGBH educational foundation