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January 04, 2013

Top Sustainable Investment Stories of 2012, Part 4
    by Robert Kropp

Will the re-election of Barack Obama help further the sustainability agenda? Despite legislative inaction by Congress, regulatory agencies issued rules addressing climate change and corporate governance in 2012.

SocialFunds.com -- As much as too many climate deniers in Congress wish it were otherwise, climate change is the single most important sustainability issue confronting us today, as Hurricane Sandy reminded us in 2012. That it was barely mentioned by the Presidential candidates during the 2012 election campaign defies reason. Although Barack Obama's record on climate change has not been all that environmentalists wish for, at least the candidate who won doesn't waffle over whether human agency has anything to do with global warming and extreme weather events.

Defeated Republican candidate Mitt Romney, on the other hand, stated in 2011, "My view is that we don't know what's causing climate change on this planet." That the percentage of Americans who believe that climate change is real increased by 13% over a two-year period, and is now 70%, may have been a contributing factor to Romney's defeat. Furthermore, more than half of Americans believe that human activity is the primary cause of climate change.

During Obama's first term, ambitious fuel economy goals were established. The 2009 economic stimulus provided an estimated $90 billion for renewable energy technologies, and wind energy in particular has accounted for a significant portion of new energy installations since then.

Also, as a result of this week's last-minute legislation addressing the so-called fiscal cliff, the wind energy Production Tax Credit (PTC) was extended. According to the American Wind Energy Association (AWEA), the PTC "drives up to $20 billion a year of private investment into US wind farms, creating demand that allows US manufacturing to compete in a global market." Business and investor networks such as Business for Innovative Climate and Energy Policy (BICEP) and the Investor Network on Climate Risk (INCR), both of which are coordinated by Ceres, called for the extension of the PTC.

During the campaign, the Obama administration called on Congress to extend the credits, while Romney said he wanted them to expire.

So while most sustainable investors probably got the President they wanted, their expectations for action on transitioning to a low-carbon economy are high. Mindy Lubber, President of Ceres, stated, "Ceres calls on President Obama and Congress to expand clean energy with the goal of 20% renewable energy by 2020 and 30% by 2030; reduce greenhouse gas emissions to levels that avoid the worst impacts of climate change; and build the resilience of our communities as they prepare for more pronounced extreme weather, such as last week's devastating Hurricane Sandy."

"We cannot afford more delays," Lubber continued. "We need action now."

With Expiration Looming, Groups Call for Extension of Production Tax Credit
Climate Change Action in Obama's Second Term?

On social issues such as health care and growing income inequality, the differences between the candidates were even starker. One issue that Obama fought for relentlessly, with the widespread support of the sustainable investment industry, has been health care. The Affordable Care Act, passed in 2010, will extend health insurance coverage to tens of millions of Americans.

While Romney was governor of Massachusetts, he signed into law a health care law similar in many respects to what is now widely known as Obamacare. As a Presidential candidate, however, he said he would repeal the Affordable Care Act on day one of his term.

On the subject of financial reform, sustainable investors spoke out loudly in support of the Dodd-Frank legislation that attempted to return a semblance of a regulatory framework of a financial industry that by causing the financial crisis clearly demonstrated its inability to govern itself. When the President signed the legislation in 2010, he said, "Our financial system only works—our market is only free—when there are clear rules and basic safeguards that prevent abuse, that check excess, that ensure that it is more profitable to play by the rules than to game the system."

Romney, on the other hand, stated his intention to "repeal and replace" Dodd-Frank.

On wealth inequality, a leaked video caught Romney writing off 47% of the American electorate as believing "they are victims" and thus entitled to the largesse provided by government programs. He supported lower tax rates for the wealthy and on capital gains.

Obama's support for higher tax rates for the wealthiest Americans became law with passage of the fiscal cliff legislation.

Romney Charged with Ethics Violation for Failing to Disclose Hedge Fund Investment
Senate Republicans Quash Findings on Wealth Inequality
For Sustainable Investors, Obama or Romney?

Despite the absence of meaningful legislative activity addressing climate change, the Environmental Protection Agency (EPA) under Lisa Jackson battled industry trade groups such as the US Chamber of Commerce to enact rules governing emissions. The Agency established new rules for mercury emissions and greenhouse gas (GHG) reporting from the largest emitters. It also issued regulations on fine particle pollution.

And along with the Department of Transportation (DOT), EPA finalized new fuel efficiency standards for cars and light-duty trucks on Tuesday, mandating an average of 54.5 miles per gallon by 2025.

Also in 2012, the Securities and Exchange Commission (SEC) adopted rules mandating disclosure by companies on two issues of critical importance for global social justice. Disclosing Payments by Issuers Engaged in Resource Extraction requires companies in the oil and gas and mining sectors that are engaged in resource extraction in resource-rich countries to disclose their payments to governments.

And Disclosing the Use of Conflict Minerals requires US corporations to disclose whether their products contain conflict minerals, including tantalum, tin, gold, and tungsten, which have been smuggled out of the Democratic Republic of the Congo (DRC). Armed groups use payments for them to fund a conflict which has resulted in the loss of more than five million lives.

Trade associations including the US Chamber of Commerce and the American Petroleum Institute (API) filed lawsuits seeking to overturn the rule governing disclosure of payments to governments. In advance of a court hearing, the SEC refused the trade associations' request for a stay of the rule. The trade associations failed to adequately demonstrate that implementation of the rule would cause "irreparable harm" due to the cost of compliance, and their argument that it would result in competitive disadvantage for US companies was, the Commission stated, "speculative and unsupported by evidence."

SEC Issues Rules on Conflict Minerals and Payments to Governments
Fuel Efficiency Standards Finalized
SEC Refuses to Delay Extractives Transparency Rule
EPA Finalizes Standards for Soot Pollution

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