Warren Buffett Faces Climate Change Challenges Renewed by Investors

Investors concerned about climate change have developed effective handbooks to get companies to set more ambitious goals for reducing greenhouse gas emissions by pressuring, humiliating, and cajoling executives.

But that tactic didn’t work with Warren Buffett and his Berkshire Hathaway conglomerate, which owns energy companies, railroads, insurance companies, and other businesses that pump huge amounts of carbon dioxide into the atmosphere. As stated by Mr. Buffett, critics complain that Berkshire businesses are doing less to reduce emissions than similar companies.

Mr Buffett has repeatedly turned down shareholders who want Berkshire to provide detailed climate disclosures that cover the entire company, not just parts of it, and spend more on sustainability. His stance may seem odd to some, given that he has at times supported progressive goals, including higher taxes on the rich. He has also pledged to give away nearly all of his wealth, and has given billions to causes espoused by the left.

Mr Buffett argues that subsidiaries like Berkshire Hathaway Energy disclose a lot of information about their emissions and spend billions of dollars on renewable energy.

“I don’t think they read our annual report,” Buffett said at last year’s meeting, referring to the shareholder group.

Berkshire and its energy subsidiaries declined to comment for this article.

Despite the insistence of Mr. Buffett says his business is doing a lot to fight climate change, energy subsidiaries in particular have set weaker carbon emission targets than other utilities like Duke Energy and Dominion Energy.

“They lag behind their peers,” said Dan Bakal, senior program director at Ceres, a nonprofit group that works 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 meeting – a simple affair often referred to as “Wood stock for capitalists.” Shareholders will vote on proposals from dissident investors calling on Berkshire to overhaul the way it views climate risk and take other environmental actions.

The proposal, like a similar one last year, is non-binding and is likely to be defeated because Mr. Buffett holds special stock that gives him more votes than any other shareholder.

But the vote count could still be embarrassing for Mr. Buffett if that means that most shareholders disagree with him.

Activist investors argue that their proposal last year won majority support among many shareholders, including big investment firms such as BlackRock, Vanguard and State Street, which are not part of Berkshire’s inner circle of Mr. Buffett and the people and entities he belongs to. old ties with.

Several analysts who follow the company say they are not surprised Mr Buffett is against the climate change proposal because they have long felt that Berkshire is not disclosing enough details about his corporate empire.

“This is just a continuation of the corporate style – and the corporate style that is becoming obsolete,” said Cathy Seifert, an analyst at CFRA Research who follows Berkshire. “And I think we’ll see how ancient the shareholder vote is.”

Activist investors say that if Mr. Buffett is set in his ways, they are too. Their playbook is well sharpened and relatively easy. First, they try to force companies to strictly estimate and disclose their carbon emissions under the principle that you can’t increase what you don’t measure. Once companies know roughly how much carbon they are releasing, activists pressure them to come up with plans for reducing emissions in the medium and long term. The company can then be assessed against the plan, and more pressure can be applied when the business fails to meet targets.

So far, activists are stuck in the first phase with Mr Buffett — Berkshire does not disclose its comprehensive emissions across its businesses, although some subsidiaries, such as Berkshire Hathaway Energy, provide some information. Others, such as his insurance business, which invests in companies that may produce and consume fossil fuels, gave few details about their impact on the planet.

As companies take steps to go greener, they have pledged to reduce emissions from their own operations and the power plants from which they buy electricity. Some even go further and intend to reduce the carbon footprint of their suppliers and customers, known as Scope 3 emissions.

The gold standard for climate commitments is achieving “net zero” — meaning that companies no longer emit greenhouse gases in their entirety, including from their supply chains and customer use of their products. Many businesses hope to reach that point by turning to renewable energy and finding ways — such as tree planting and direct capture of carbon from the air — to offset the carbon dioxide they still emit.

As more companies publish details of their emissions and plans, it becomes easier to compare businesses.

Climate Action 100+, an investor-backed group that tracks climate commitments from the biggest corporate issuers, said last year Berkshire Hathaway failed to meet one of the group’s criteria. It found that other large US companies met or partially met at least some of the criteria.

For example, three major electric utilities — Duke, Dominion, and Xcel Energy — aim to reduce some Scope 3 emissions. But Berkshire Hathaway Energy has not publicly pledged to reduce Scope 3 emissions.

“The Duke and Dominion are now leading energy companies in this area,” said Danielle Fugere, president of As You Sow, a shareholder advocacy group that represented investors on recent shareholder proposals on climate change in the companies. The proposal was withdrawn after the company changed their climate plans.

To achieve net zero, Berkshire Hathaway Energy used more lax language than other utilities, saying “striving to achieve zero greenhouse gas emissions by 2050 in a way that our customers can afford, our regulators will allow and support technological advances.” Xcel Energy and Duke Energy have said they are committed to achieving net zero carbon emissions by 2050.

Since the net zero target date is still decades away—typically 2050—many investors also want companies to set interim goals. By 2030, Berkshire Hathaway Energy aims to halve its greenhouse gas emissions from 2005 levels, according to Berkshire’s latest annual report. During the same period, Xcel Energy plans to reduce emissions by 80 percent of its electrical operations.

“This is a step in the right direction,” said Mr. Will be from Ceres about Berkshire Hathaway Energy’s interim targets, “but that’s nowhere near what the leading companies are doing.”

Berkshire may soon have to produce the kind of fuller climate disclosures that dissident shareholders want. The Securities and Exchange Commission has proposed rules requiring public companies to perform standard climate reporting. But the rules are likely to face legal challenges and could be watered down or overturned by the courts.

Berkshire’s renegade shareholders include the California Public Service Pension System and the New Jersey pension fund, and they may be able to again count on support from BlackRock, Vanguard and State Street, the index mutual fund giants.

Berkshire countered, saying the shareholder group’s assertion that it won a majority last year among outside shareholders was “untrue,” but the company has refused to disclose a detailed vote tally that would support its claim.

One potential wild card is how the Bill & Melinda Gates Foundation selected a large block of Berkshire stock, which was donated by Mr. Buffett to nonprofits for many years. Mr Gates might be expected to back Mr Buffett, an old friend, in a tough shareholder vote. But Gates has made tackling climate change a priority in recent years.

Berkshire shares owned by the Bill & Melinda Gates Foundation Trust are managed by Cascade Investments. Representatives for the foundation and Cascade declined to comment.

While activists are frustrated by Buffett’s refusal to agree to their demands, they argue that their pressure has had an impact. For example, Berkshire’s most recent annual report has a section written by Greg Abel, who heads Berkshire Hathaway Energy, which details some of the subsidiary’s climate-related efforts.

Even so, activists say they will continue to pressure Buffett to release a comprehensive climate disclosure and risk assessment for the entire conglomerate.

“They have $130 billion in cash,” said Timothy Youmans, an executive at EOS at Federated Hermes in North America, which is the sponsor of the climate proposal that will be voted on by Berkshire shareholders. “Spend the money, please, and collect this all.”

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