Have CEOs really been silent on climate change?

During an eventful program last week in New York around climate action and international development, one of the most powerful speeches came from Simon Stiell, the executive secretary of the UN’s climate change programme.

Investments in clean energy are on the rise, Stiell noted, with the world on track to invest more than $500 billion this year in solar energy alone.

However, most of that money goes to projects in the biggest economies – including rich ones like the US, as well as developing country powers like India. Large numbers of people in many other developing countries are still seeing little benefit from the green investment boom.

“Unless more developing economies see much more of this growing deluge of climate investment, we will quickly consolidate a dangerous two-speed global transition,” Stiell warned.

Broadening the scope of the global energy transition, while increasing its pace, will be a key focus of intergovernmental discussions at November’s COP29 climate summit in Azerbaijan, where international climate finance will be high on the agenda.

Serious progress on these issues will require a lot of government support, but also strong involvement from the private sector. No wonder, then, that many are concerned about what they see as a softening of interest in climate issues by corporate leaders. But as we point out in today’s edition, while many CEOs have indeed become quieter on these topics, it’s worth keeping this in perspective.

Sustainability

Executives ride the sustainability roller coaster

Vicki Hollub may not have been completely unprepared for her experience at Climate Week NYC last week, but that didn’t make it any less mortifying.

Hollub, the chief executive of US oil group Occidental Petroleum, had just taken the stage at a New York Times event when a group of protesters stormed her with signs accusing her of trying to mislead the public about her company’s role in the energy transition.

“Tricky Vicki, you can’t hide; we charge you with ecocide,” they chanted, before being rounded up by police.

“I feel bad that they don’t have anything better to do with their time,” Hollub said when he finally resumed his interview, in which he talked about Occidental’s plan to use carbon capture technology to reduce the impact on the climate of its oil and gas production.

Some might see Hollub’s ordeal as further evidence that CEOs should avoid speaking publicly about climate change, let alone similar issues like diversity and inclusion.

Those who do are liable to be attacked from the right as “woke capitalists”, and from the left for trying to wash their image by “greenwashing”. Why bother?

There’s been a lot of talk in the last year or two about “greenhushing”: companies, and especially their top executives, going silent on anything that has a whiff of sustainability. But the data suggest that this phenomenon, while real, is limited.

We got an exclusive early look at the latest research from two firms that tracked CEOs’ discussions of environmental and social topics in their analyst calls. Germany-based IoT Analytics analyzed more than 95,000 earnings calls from 6,300 US-listed companies.

CEOs mentioned the word “sustainability” in 7.4% of these calls in the first quarter of 2019. This figure reached a peak of 26.6% in the first quarter of 2022. In the third quarter of this year (from September 27). ) was 19.3 percent—down from the peak, but still much higher than at the start of the study.

The mention rate for the word “emissions” showed a similar pattern. It rose from 6.7% in the first quarter of 2019 to a high of 17.6% in the first three months of 2022, before falling to 11.1% in the last quarter.

Data from US-based AlphaSense corroborates the general trend. Tracking US-listed companies’ earnings calls identified 845 mentions of “sustainability”, “environmental, social and governance” or “diversity, equity and inclusion” (or their acronyms) in the first quarter of 2018. These reached a peak of 3,650. in the second quarter of 2021, before falling to 2,151 between July 1 and September 27 this year.

So even in the US, where perceptions of corporate greenbacks have been strongest, the idea that CEOs have simply stopped mentioning these issues is clearly muted. Despite the political backlash, they still talk about them on analyst calls far more than they did five years ago.

These figures will still seem alarming to some readers. If the global energy transition were truly on track, one might think, CEO focus on and public discussion of these topics should inexorably increase. Carbon emissions should be mentioned on 100% of these earnings calls, some would argue.

But the data challenge the idea that corporate attention to sustainability was a passing fad that is now behind us. What has clearly passed is a spike in excitement around low-substance green marketing efforts. Around 2021, some companies seemed to see climate commitments as a cheap and trendy way to boost their brands.

The later withdrawal of many of these commitments was due in some cases to the haste and lack of rigor with which they were written. Another factor was the control of standards in the voluntary carbon market, which scared off some companies who saw it as a cheap ticket to net zero status. Conservative political pressure in the US has given many companies an additional incentive to back away from sustainability commitments.

But even those CEOs who prefer not to talk about carbon emissions in their earnings calls may be forced to do so by analysts. The EU’s new carbon border tariffs and new sustainability disclosure rules imposed by securities regulators around the world will make it increasingly difficult for corporate leaders to avoid these topics – even if Hollub’s incident in New York might make them wish they could.

Smart reading

With more than 50 deaths and tens of billions of dollars in expected damage, Hurricane Helene highlighted the serious threat that climate change poses to the US Southeast.