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| | | | |  | | By Debra Kahn, Catherine Boudreau and Jordan Wolman | | | | | 
California's corporate diversity law was struck down by a judge. | Damian Dovarganes, File/AP Photo | DIVERSITY DOWNER — A California judge has dealt a blow to the state's efforts to get more people of color and diverse sexual orientations onto corporate boards. A 2020 law requires public companies with executive offices in California to draw at least one of their board members from "underrepresented communities" — defined as Black, Asian, Latino, Pacific Islander, Native American and LGBT people. The requirement increases this year to at least two out of a 5- to 8-member board, and at least three on a board of nine or more. Los Angeles Superior Court Judge Terry Green shot it down Friday, ruling that it violated the state's constitutional guarantee of equal treatment for individuals. He said lawmakers should have first tried a disclosure requirement, rather than "skip directly to mandating heterogeneous boards." "It is not difficult to accept the proposition that diverse boards may be 'good for business,'" Green, an appointee of former California Gov. Pete Wilson, wrote in his 24-page decision . "Nor is it hard to believe that the knock-on effects of strong businesses include more tax revenue, better performance for pension funds, and better workplaces with happier employees. But if these downstream, indirect effects were to be compelling interests, there is no limit to what might be allowed, providing the economic data were properly massaged." Requirements for companies to disclose the diversity of their boards are proliferating. But California's law is the only mandate of its kind in the country. The plaintiff, Judicial Watch, cheered the ruling as rejecting "the Left’s pernicious efforts to undo anti-discrimination protections." It's hard to tell what effect the decision will have. A 2018 California law aimed at getting more women on boards (which Judicial Watch is also challenging) is being partly complied with. Women went from 15.5 percent of public boards in 2018 to 29.6 percent last year, according to the nonprofit Cal Partners Project. That's about the same concentration as at all S&P 500 companies, as we reported last week. Much like the corporate push for sustainability and climate disclosures, the board diversity movement is a tidal wave that one ruling won’t turn. NASDAQ has a rule (which is also being challenged in court) that requires listed companies to disclose board-level diversity statistics starting this year and explain why they don't have at least one diverse director starting in 2023. "Obviously every tool that we could have in the toolbox to increase board diversity is going to be helpful, so in that sense it's a disappointment," said Linda Akutagawa, CEO of Leadership Education for Asian Pacifics and immediate past chair of the Alliance for Board Diversity. "I do believe that ultimately the push for greater corporate board diversity is going to continue."
| | | Team Sustainability is editor Greg Mott, deputy editor Debra Kahn, reporters Lorraine Woellert and Catherine Boudreau, and digital producer Jordan Wolman. Reach them at gmott@politico.com, dkahn@politico.com, lwoellert@politico.com, cboudreau@politico.com and jwolman@politico.com. Want more? Don’t we all. Sign up for the Long Game. Four days a week and still free!
| | | | SUBSCRIBE TO NATIONAL SECURITY DAILY : Keep up with the latest critical developments from Ukraine and across Europe in our daily newsletter, National Security Daily. The Russian invasion of Ukraine could disrupt the established world order and result in a refugee crisis, increased cyberattacks, rising energy costs and additional disruption to global supply chains. Go inside the top national security and foreign-policymaking shops for insight on the global threats faced by the U.S. and its allies and what actions world leaders are taking to address them. Subscribe today. | | | | | | | | TIME'S ALMOST UP – There is still time for the world to avoid the worst effects of climate change, but that window is quickly closing, top researchers and economists warned on Monday. Greenhouse gas emissions must peak by 2025 at the latest, and then drop by more than 40 percent by the end of the decade to limit global temperature rise to 1.5 degrees Celsius over preindustrial levels, according to the latest report by the U.N.’s Intergovernmental Panel on Climate Change. That may seem impossible given our track record. Emissions have been rising since 1850. Between 2010 and 2019, they were higher than any previous decade. One silver lining: the rate of growth did slow compared with the 2000s. Countries’ current plans already put the world on track to warm 3.2 degrees Celsius by the year 2100, the IPCC said. Major transformations are needed: Shutting down coal and natural gas plants or deploying carbon capture technology – which has yet to take off – along with adding more renewables to the power grid. Electrifying transportation and buildings. Switching to low-carbon fuels. Recycling more raw materials. Energy efficiency improvements. Agriculture and forests can help solve the crisis, researchers said, but land can’t compensate for other sectors delaying emissions cuts. A nod to the burgeoning carbon offset market? Sounds like it. There are glimmers of hope. Here’s what caught our eye. — Prices for solar energy and lithium-ion batteries have plummeted 85 percent since 2010, while the cost of wind turbines has fallen by more than half. — Electric vehicle sales shot up by more than 100 percent between 2010 and 2019. Researchers said EVs – charged on a cleaner electric grid – are the best option for slashing emissions from the road, while lower-carbon fuels like hydrogen are better suited for ships and planes. — It’s possible to make basic materials like steel, cement and plastics with net-zero emissions, but the sector needs new production techniques that aren’t commercialized yet. Mining and manufacturing already have some tools, though, including electrification, low-carbon fuels and recycling. — Finance for climate mitigation and adaptation jumped 60 percent between 2013 and 2020, but governments and companies need to spend up to six times more each year. The gap is largest in developing countries, which are bearing the brunt of climate change even as they emit far less than rich nations. So what’s with all these IPCC reports? We’re glad you asked. Monday's report detailing the steps governments and companies can take is the final installment in a major three-part climate assessment. The first two sections, published in February and August, outlined how the climate is changing and who is being affected. Chelsea Harvey of POLITICO’s E&E News has more.
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Sen. Joe Manchin says the SEC's climate disclosure rules could chill fossil fuel investments. | J. Scott Applewhite/AP Photo | MANCHIN STRIKES AGAIN — Sen. Joe Manchin (D-W.Va.) came out Monday against proposed SEC rules to require publicly listed companies to disclose risks to their bottom lines from climate change, POLITICO's Zack Colman reports. In a letter to SEC Chair Gary Gensler, Manchin suggested that making firms measure and track greenhouse gas emissions could chill investment in fossil fuel businesses while imposing costs on all affected companies. “The most concerning piece of the proposed rule is what appears to be the targeting of our nation’s fossil fuel companies," Manchin, a fossil fuel company owner himself, wrote. "Not only will these companies face heightened reporting requirements on account of their operations, but they will also be subjected to additional scrutiny for the Scope 3 emission disclosures of other companies that utilize their services and products.” He's just weighing in — the SEC is an independent agency. But it follows his recent moves to thwart the nomination of climate hawk Sarah Bloom Raskin to the Federal Reserve and torpedo Build Back Better talks. Read more from Zack here.
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JPMorgan Chase was named in a report analyzing banks' financed emissions. | Mark Lennihan/AP Photo | THE “E” WORD – Ready for a little nuance in the debate over divestment? Two environmental groups calling for companies and investors to pull their dollars out of the petroleum industry are highlighting pension funds’ ties to banks that finance fossil fuel projects. But the report from Climate Safe Pensions Network and Stand.earth calling out pension funds’ financed emissions isn't pushing for divestment. Rather, it's using the “e” word: engagement. That’s a notably different strategy than they advocated for in dealing with fossil fuels directly. A December report from the same groups urged 14 public pension funds from states including New Jersey, New York, Alaska, California and Oregon to divest $82 billion worth of fossil fuel holdings, citing financial risk and the industry’s projected future losses: “Engagement is not enough,” the December report read. The new report finds those same 14 funds have $61 billion invested in fossil-exposed banks, including top financier JPMorgan Chase & Co. and Bank of America Corp., which was ExxonMobil Corp.'s seventh-largest stockholder last year. It argues that banks' financing and investment activities expose them to the same risks as fossil fuel companies themselves. So what’s a pension fund to do? The groups say funds should vote in favor of climate-related shareholder resolutions and push their asset managers to do the same, plus engage banks to change their lending practices by 2030 — but also shift funds to cleaner banks. “Unlike fossil fuel divestment, full divestment by pension funds from big banks is probably a near impossibility at this time, as these banks represent omnipresent gatekeepers to the financial markets,” the report says. “However, it is imperative that pension funds engage with banks and use their clout as large investors and customers to push banks to be better on fossil fuel divestment, investment in the green economy and climate justice.”
| | | — The war in Ukraine has shined a spotlight on the difficulties and intricacies involved with getting off fossil fuels and combating climate change, NPR reports. New infrastructure to export American natural gas to Europe will help reduce reliance on Russia, but could lock in climate-warming emissions. — There's a familiar debate going on in West Virginia over how to handle the possibilities that come with an extractive industry. This time, it's with rare earth elements. Some state officials are wary of "giving away the farm" too soon in terms of tax breaks and other incentives, Mountain State Spotlight reports.
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