Last week, during his confirmation hearing to serve as the chair of the Securities and Exchange Commission (SEC), Gary Gensler said his agency would consider requiring public companies to disclose their political expenditures. If it happens, climate activists say it would finally force companies to answer to investors and regulators not only about the risk that climate change poses to their profit margins, but also about their own roles in funding the politicians and political groups blocking climate action.
The implications for the climate movement are major. All too often, businesses have flaunted media-friendly environmental policies while using dark-money channels to quietly fund politicians and groups actively working to suppress climate action. It hasn’t seemed to matter that bankrolling climate change denialism doesn’t just hurt the environment, but could also end up undermining their long-term bottom lines. With no obligation to ever go public about such shady political moves, there’s never been a pressing incentive for corporations to stop subsidizing regressive political players and their disastrous climate stances.
Now, if the SEC moves forward with the political contribution disclosure rule, companies would finally have to come clean about how they’ve been secretly funding the fight against climate action.
“Until something happens, we’re relying on companies to do the right thing, which isn’t the best proposition as we’ve learned with climate change,” said Dan Carroll, the vice president for programs at the Center for Political Accountability, which encourages companies to disclose their political contributions. “The political giving is the foundational element of it that enables the lack of regulation, and the lack of laws that address the issue.”
The Need for Corporate Transparency
The idea of requiring corporations to disclose their political spending first gained popularity following the Supreme Court’s 2010 Citizens United ruling. After the decision allowed unlimited corporate independent expenditures, a public petition calling for mandatory disclosure of political spending by public companies received 1.2 million comments, the most in SEC history. The majority of comments were in favor of the regulation.
However, President Barack Obama’s second SEC chair, Mary Jo White, refused to consider requiring such disclosures. GOP lawmakers also started attaching legislation to annual spending bills that prohibited the agency from spending any funds to advance a rule requiring companies to disclose their dark-money spending. Republicans attached the same language to the spending bill Congress passed in December.
Meanwhile, investor efforts to require political spending disclosures at individual companies were halted on many occasions by large asset managers like BlackRock and Vanguard, which have regularly used their immense shareholder voting power to shield companies from transparency.
Now with a new SEC chairman, transparency advocates see an opportunity for progress.
“People want to know who companies are bankrolling,” said US Rep. Andy Levin (D-Mich.). HR 1, the democracy reform package passed by House Democrats earlier this month, includes a bill from Levin to repeal the Republican measure blocking the SEC from requiring companies to disclose their political spending.
“Unfortunately, Republicans have made sure it’s not as simple as the SEC coming out with a rule,” Levin said. “We need to get rid of an outrageous appropriations rider that has blocked the SEC from doing just that.”
Greenwashing and Blocking Climate Action
Dark-money contributions have allowed companies to engage in political greenwashing on an unprecedented scale. While pledging action on climate change and committing to net-zero emission policies, many brands have been secretly funneling millions to political and trade organizations that are fighting government efforts on climate.
In a report published last summer, the Center for Political Accountability outlined one such example. In 2017, US companies that had been prominent public backers of the Paris Climate Agreement were reported to have donated significant sums of money to the Republican Attorneys General Association (RAGA), which had run a campaign to undermine the Obama administration’s Clean Power Plan.
Companies including Facebook, Bank of America, Uber, and JPMorgan Chase donated tens of thousands of dollars to RAGA in 2014, the political group supporting Republican attorneys general who sued to stop Obama’s landmark climate legislation from being implemented.
RAGA is a 527 political organization, so it’s required to disclose its donors, though the organization does receive substantial funding from dark-money nonprofits. In 2017, the Center for Public Integrity reported on the corporate contributions to RAGA and asked the companies why they had donated to a group that was undermining their stated climate goals.
Some of the companies said that they had backed the group to win political favor with the Republican Party or build relationships, but that the policy outcome had been unintended. In other words, financing the destruction of a key Obama-era climate initiative was purely accidental.
Thanks to the Citizens United decision, there are numerous other instances of climate action opponents amassing political donations away from the prying eyes of the public.
The Senate Democrats’ Special Committee on the Climate Crisis published a report last August which found that the Supreme Court decision “cost us a lost decade on our journey to responsible climate legislation,” adding that the decision “allowed fossil fuel political power to effectively capture Republican elected officials nationwide.”
Beyond the fossil fuel industry, The US Chamber of Commerce, Washington’s biggest business lobbying group, has spent $150 million on congressional races alone since the Citizens United decision, with most of that money going to politicians who oppose action on climate. A Bloomberg analysis found this fall that politicians who oppose action on climate have received twice as much corporation donations as those who don’t.
At the same time, while many corporations frame climate risk as something they must protect themselves against, they have proven to be largely unwilling to address their own roles in causing climate change through their business decisions and political contributions.
BlackRock CEO Larry Fink, for example, wrote in his 2020 annual letter that “Investors are increasingly reckoning with these questions and recognizing that climate risk is investment risk.” Fink reiterated in this year’s letter that the firm sees climate change as a monumental challenge and opportunity.
But over the past couple of years, BlackRock and other large asset managers have voted against most shareholder resolutions that would address climate change. BlackRock has also declined to publish shareholder’s proposed climate action resolutions, according to the Center for Political Accountability’s annual CPA-Zicklin index for 2020.
“There’s a big difference between risks to investments from climate change, and the risk to the climate from certain investments,” Moira Birss, the climate and finance director at Amazon Watch, told the Daily Poster. She added that it’s not just BlackRock’s lobbying against climate regulation, but “its record of lobbying against regulation of the financial industry” that should concern climate watchdogs.
Political pressure from the Biden administration might not be the only factor that forces companies to rethink their political strategies relating to climate action.
Climate change will increasingly move from a theoretical abstraction to a pressing business consideration. Every sector will be impacted by rising sea levels, increased frequency and intensity of natural disasters and pandemics, and the transition away from fossil fuels toward renewables.
Many corporations that have been actively funding anti-climate action politicians and trade groups are harming themselves in the long term, since the climate crisis will pose a greater financial risk the longer carbon emissions go unmitigated.
“Companies are moving forward and adopting policies to deal with climate change,” said Bruce Freed, the Center for Political Accountability’s president. “But the problem is that, in many cases, their political spending has not been aligned with those policies. That hurts a company business-wise, because it means that any policies that it’s seeking would be much harder to get enacted in Congress or at the state level because of the election of officeholders who would oppose addressing climate change.”
As BlackRock and other companies meet the mounting climate crisis with new promises to investors, regulators, and the public about their climate goals, political spending disclosures could, for the first time in over a decade, create a metric for judging the veracity of their climate commitments — and a way to hold corporations accountable for their role in delaying much-needed climate action.