Investors concerned about climate change have developed an effective handbook to get companies to set more ambitious targets to reduce greenhouse gas emissions by pressuring, evicting and enticing leaders.
But that tactic does not work on Warren Buffett and his Berkshire Hathaway conglomerate, which owns energy companies, a railroad, insurance companies and other companies that pump huge amounts of carbon dioxide into the atmosphere. As Mr Buffett claims, critics complain that Berkshire’s companies are doing less to reduce emissions than similar companies.
Mr. Buffett has repeatedly opposed shareholders who want Berkshire to provide detailed climate information that covers the entire company, not just parts of it, and spends more on sustainability. His attitude may seem strange to some people, given that he has at times supported progressive causes, including higher taxes on the wealthy. He has also promised to give away almost all of his wealth and has given billions to causes embraced by the left.
Mr. Buffett has claimed that subsidiaries like Berkshire Hathaway Energy disclose lots of information about their emissions and spend billions of dollars on renewable energy.
“I do not think they are reading our annual reports,” said Mr. Buffett at last year’s meeting with reference to the shareholder group.
Berkshire and its energy subsidiary declined to comment for this article.
Despite Mr Buffett’s insistence that his companies do much to combat climate change, the company’s energy subsidiary in particular has set weaker targets for carbon emissions than other utilities such as Duke Energy and Dominion Energy.
“They lag behind their peers,” said Dan Bakal, a senior program director at Ceres, a nonprofit group working with investors and companies on environmental issues.
The confrontation between climate activists and Mr Buffett is likely to flare up again next weekend at Berkshire’s annual rally – a popular affair often referred to as “Woodstock for Capitalists.” Shareholders will vote on a proposal from dissident investors asking Berkshire to review how it views climate risks and take other environmental measures.
The proposal, like a similar one last year, is not binding and is likely to be rejected because Mr Buffett holds special shares that give him more votes than other shareholders.
But the turnout could still be embarrassing for Mr Buffett if it signals that most shareholders disagree with him.
The activist investors claim that their proposal last year won majority support among the many shareholders, including large investment companies such as BlackRock, Vanguard and State Street, which are not part of a Berkshire inner circle made up of Mr Buffett and people and entities, he has long-standing ties to.
Some analysts who follow the company say they are not surprised that Mr Buffett is opposed to the climate change proposal because they have long felt that Berkshire does not reveal enough details about its corporate empire.
“This is just a continuation of a corporate style – and a corporate style that is becoming obsolete,” said Cathy Seifert, an analyst at CFRA Research who follows Berkshire. “And I think we’re going to see how outdated the shareholders’ voice is. “
The activist investors said that if Mr Buffett was set on his path, so were they. Their playbook is well polished and relatively straightforward. First, they try to force companies to strictly estimate and publish their CO2 emissions under the principle that you can not improve what you do not measure. Once companies know roughly how much carbon they are releasing, activists are pushing them to release a plan to reduce emissions in the medium and long term. Companies can then be judged in relation to these plans, and more pressure can be put on when companies do not reach the goals.
So far, the activists are stuck in the first phase with Mr. Buffett – Berkshire does not disclose its large-scale emissions across its companies, although some subsidiaries, such as Berkshire Hathaway Energy, provide some information. Others, like its insurance companies that invest in companies that can produce and consume fossil fuels, provide very little detail about their impact on the planet.
As companies take steps to become greener, they have promised to reduce emissions from their own operations and the power plants from which they purchase electricity. Some go even further and intend to reduce their suppliers ‘and customers’ CO2 footprints, known as Scope 3 emissions.
The gold standard for climate commitments is to reach “net zero” – which means that a company no longer emits greenhouse gases overall, including any from its supply chain and the use of its products by customers. Many companies hope to get to that point by switching to renewable energy and finding ways – such as tree planting and direct carbon capture from the air – to compensate for any carbon dioxide they still emit.
As more companies publish details about their emissions and plans, it becomes easier to compare companies.
Climate Action 100+, an investor-backed group that tracks climate commitments for the largest companies emitting, said that last year, Berkshire Hathaway did not meet any of the group’s criteria. It found that other large US companies met or partially met at least some of its criteria.
For example, three major power companies – Duke, Dominion and Xcel Energy – are aiming to reduce some Scope 3 emissions. But Berkshire Hathaway Energy has not publicly promised to reduce Scope 3 emissions.
“Both Duke and Dominion are now leading energy companies on this front,” said Danielle Fugere, chairman of As You Sow, the shareholder group that represented investors in recent shareholder proposals on climate change in these companies. The proposals were withdrawn after companies renewed their climate plans.
By reaching net zero, Berkshire Hathaway Energy uses a looser language than other utilities and says it “strives to achieve net zero greenhouse gas emissions by 2050 in a way that our customers can afford, our regulators will allow, and the technology promotes support . ” Xcel Energy and Duke Energy have said they are committed to achieving net zero CO2 emissions by 2050.
Since net-zero target dates are decades away – usually 2050 – many investors also want companies to set preliminary targets. By 2030, Berkshire Hathaway Energy aims to have halved its greenhouse gas emissions from 2005 levels, according to Berkshire’s latest annual report. During the same period, Xcel Energy is planning an 80 percent reduction in emissions from its electric power plant.
“It’s a step in the right direction,” Mr Bakal of Ceres said of Berkshire Hathaway Energy’s preliminary goals, “but it’s nowhere near what the leading companies are doing.”
Berkshire may soon have to produce the full-fledged climate revelations that dissident shareholders want. The Securities and Exchange Commission has proposed a rule requiring public companies to do standardized climate reporting. But the rule would most likely face legal challenges and could be diluted or beaten down by the courts.
The rebellious Berkshire shareholders include the California Public Employees’ Retirement System and a New Jersey pension fund, and they can probably count on the support of BlackRock, Vanguard and State Street, the index fund giants.
Berkshire is fighting back, saying the shareholder group’s claim that it won a majority among external shareholders last year was “wrong”, but the company has refused to disclose detailed votes that would support its claim.
A potential wild card is how the Bill & Melinda Gates Foundation votes over its large block of Berkshire shares, which Mr. Buffett donated to the nonprofit over the years. Sir. Gates could be expected to support Mr. Buffett, a longtime friend, in a difficult shareholder vote. But Mr. Gates has made tackling climate change a priority in recent years.
The Berkshire shares, which are owned by the Bill & Melinda Gates Foundation Trust, are managed by Cascade Investment. Representatives of the fund and Cascade declined to comment.
While activists are frustrated by Mr Buffett’s refusal to meet their demands, they claim their pressure has had an impact. For example, Berkshire’s most recent annual report has a section written by Greg Abel, head of Berkshire Hathaway Energy, which describes some of the subsidiary’s climate-related efforts.
Still, activists say they will continue to pressure Mr Buffett to release comprehensive climate information and risk assessments for the entire conglomerate.
“They have $ 130 billion in cash,” said Timothy Youmans, director of EOS at Federated Hermes in North America, which sponsors the climate proposal that Berkshire shareholders will vote on. “Spend some money, thank you, and take it all together.”