The White House Versus the Senate - Where Next for U.S. Climate Policy? - Impax Asset Management
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Winter 2021 | A Newsletter for Sustainable Investors
INSIDE The White House Versus the Senate —
THE PHYSICAL RISKS
OF CLIMATE CHANGE:
Where Next for U.S. Climate Policy?
BUILDING A RESILIENT
By Joseph Keefe, President of Impax Asset Management
RESPONSE
The Democrats’ failure to wrest control of the elements linked to job creation, in line with
PINPOINTING RISKS
U.S. Senate from the Republican majority — the approach in the Biden climate plan.
NEW PAX INSIGHTS pending the outcome of two special elections Infrastructure spending could potentially
in Georgia — will pose significant challenges create employment across the country,
CONVERSATION PIECES for President-elect Joe Biden to pursue his including in Republican-leaning areas where
climate and energy policies with legislation. senators will come under political pressure
SHAREHOLDER CORNER:
However, the White House wields significant to support additional fiscal stimulus. While
IRA CONTRIBUTIONS
executive power and can accomplish at legislation is unlikely to be passed before
least some of the Biden agenda without full Inauguration Day, work on the shape of the
cooperation from the Senate. package has already begun.
The Biden election platform included a climate Moreover, the White House retains significant
plan to invest $2 trillion over four years in executive powers that a Biden presidency
clean energy, low-carbon transport, building will exercise in pursuit of its climate and
energy efficiency and infrastructure. The plan energy objectives.
targets zero-emissions power generation by
In a November 4 tweet, the President-elect
2035 and a net-zero economy by 2050, and it
confirmed that his administration would
is oriented heavily toward job creation.
rejoin the Paris Agreement. It can do so
If the Republican Senate leadership reverts to without congressional approval, and such a
its strategy during the Obama years — out- move would be positive for the international
right refusal to work across the aisle on any climate effort. While other leading countries
legislative proposals — then a significant and regions have doubled down on their
portion of this agenda likely will be compro- commitments to tackle climate change,
Editor: Tracey Bentley
mised. Even without an outright obstruc- a lack of leadership from the U.S. has
Layout: Dorset Norby Star tionist strategy led by Majority Leader Mitch undoubtedly slowed progress.
General Fund Information: McConnell, with the Senate staying in Repub-
On the domestic front, the measures spelled
( 800.767.1729 lican hands it is likely that appropriations will
Shareholder Account Information:
out in 2015 by the Obama administration to
nevertheless remain an ongoing constraint.
( 800.372.7827 meet its Paris goal — a 26-28% reduction in
However, given that the U.S. is facing greenhouse gas emissions by 2025, compared
www.impaxam.com significant ongoing economic disruption with 2005 levels — were designed to be
caused by the COVID-19 pandemic, there achievable through executive action alone.
is a serious prospect of some of the Biden
The Biden White House will likely restore some
climate plan passing the Senate in the form
version of Obama’s Clean Power Plan, which
of elements embedded in an early COVID
attempted to reduce power sector emissions
This newsletter is printed by an relief and recovery effort.
FSC and SFI certified printer on and promote renewables. It could also take
FSC and SFI certified, and 30%
post-consumer waste paper. A COVID recovery bill under a Biden additional emissions reducing executive
Printed using soy and vegetable presidency will likely look very different actions, such as improved vehicle energy
based inks.
from recent stimulus proposals and will efficiency standards and reductions in methane
PAX009595 4/21 almost certainly include environmental C O N T I N U E D o n B AC K PAG E
The Physical Risks of Climate Change: Building a
Resilient Response
By Ian Simm, Founder and CEO of Impax Asset Management
Reflecting on Climate Week 2020, I’m Key barriers to the development
struck by what a crucial period we of actionable decisions include the
are entering for our global response availability of suitable models and
to climate change. In advance of the comprehensive data sources and the
COP26 conference in November 2021, need for disclosure by companies of the
efforts to tackle this critical problem physical location of key assets. Impax is
are intensifying, and if the outcomes are working with our peers in the financial
to be deemed a success, it’s essential sector to improve the dialogue with
that action is targeted, well-resourced, environmental scientists in this area; I’m
coordinated and timely. hopeful that investors will be able to
access better analytical tools in the
Against the backdrop of repeated
near future.
extreme weather events around the
world, the year since Climate Week 2019 As more investors become aware of
has seen school children on strike, an the potential impacts of physical risks,
unprecedented wave of public climate there is likely to be greater pressure on
demonstrations around the world and companies to disclose these risks and
sustained media coverage of climate their approach to managing them. In
issues. It’s clear: Climate change is many countries, and in part as an effort to
already here and intensifying, and so are implement the recommendations of the
the risks. Everyone is affected — either Task Force on Climate-related Financial
firsthand, through floods, hurricanes, Disclosures (TCFD), regulators are already
drought or extreme temperatures, or actively encouraging the development
through interconnections in global "It’s clear: Climate of consensus around relevant metrics.
financial, economic and social systems. An important recent example of this is
change is already here the UK’s Climate Financial Risk Forum,
There is a growing consensus that the
and intensifying, and which made its initial recommendations in
physical risks of climate change can no
June and is now embarking on its second
longer be viewed as a distant problem. so are the risks." phase of work.
As Impax outlines in a new report, they
pose material and immediate risks to The next decade will be decisive. We
investors. One study from the Grantham believe that as a changing climate
resilient. Yet, despite rapidly mounting
Research Institute of Climate Change continues to alter the very fabric of
evidence of the need to act, many
and the Environment at the London economies, societies and environments
investors are only now beginning to
School of Economics and Political across the world, the investors that
consider physical climate risks and the
Science estimates that the “climate can act now to both manage physical
potential impact on their portfolios.
value at risk” of global financial assets climate risks and understand the
For physical climate risk to be assessed opportunities to invest in resilience
could reach up to a staggering US$24.2
and quantified using financial metrics, stand to be in the most secure position
trillion by 2100. Additionally, the Carbon
1
investors need to understand the degree over the long term.
Disclosure Project recently reported that
of uncertainty of model projections and
215 of the world’s largest companies Read the full report here: impaxam.com/
be prepared to alter investment choices
expected almost US$1 trillion of value at climate-risk.
as our understanding of future risks
risk from climate change within the next
improves. Financial decision-making
five years.
always relies on the forecasting of future
Early action to assess, manage and events and trends, and while climate risk
price the risk transparently and presents some additional forecasting
comprehensively will most likely be difficulty, we do know enough to make
justified if investments are to remain a start. Based on 2016 USD values
1
2 | CONNECTION – Winter 2021
Pinpointing risks Conversation
As the physical risks of changing climate continue to increase, we have
expanded our engagements on the topic. In October, we teamed up with
the New York State Common Retirement Fund to encourage S&P 500
companies to disclose the locations of their physical assets, such as facilities
Pieces
The Impax Invest in Women
Symposium was a smashing success
reserves, buildings and installations, whose loss or impairment would impact thanks to a fantastic agenda and
financial results. thought-provoking insight from world-
class panelists. Here are some snippets.
“
“Flooding, droughts, rising sea levels and other extreme weather events are posing
increased risks not only for companies, but their investors, financial markets and the
Embrace the (diversity)
global economy,” says Impax Senior Vice President for Sustainable Investing Julie
data. We have years and years
Gorte. “Investors need to understand the nature of companies’ physical risks so they
can take steps to manage them, or adapt to them, and to price the risks properly in of research, and the data
investment portfolios.” doesn’t lie. This is not about
In July, we filed a petition for rulemaking with the U.S. Securities and Exchange
Commission requesting the agency require companies to disclose precise location competitiveness.
„
social impact; this is about
data. See that request at: impaxam.com/sec — Rana Nawas, Founder and host of
“When Women Win”
“ Cognitively diverse
teams fight more, and they
take longer to make decisions,
but they make better decisions
and they make more money.
„
— Daniel Crosby, New York Times
bestselling author
“ Women have been told
our whole lives that we are
risk-averse. We are not. We
New Pax Insights are risk-aware. Women want
to understand risk before they
Recent perspectives from our experts are available at
impaxam.com/insights we will take it.
„
take it. Once we understand it,
— Sallie Krawcheck, Pax Ellevate
The Investment Case for Sustainability: The Rise of Global Women’s Leadership Fund
Resilience Co-founder and Consultant
“
A steady stream of new studies shows evidence of
sustainability’s outperformance in investment. Companies are looking
at ESG metrics not because ESG
Read article here: impaxam.com/resilience
it’s financially relevant.
„
is cute or trendy but because
— Mindy Lubber, CEO of Ceres
“„
The Value of the (Shareholder) Vote: Not Zero
Julie Gorte highlights the principles underpinning a
Over a million people
Department of Labor proposal related to proxy voting. left the workforce in
September; 80% of them were
Read article here: www.impaxam.com/value-vote women.
— Kweilin Ellingrud, Senior partner at
McKinsey & Co.
CONNECTION – Winter 2021 | 3
Shareholder Corner: IRA Contributions
It’s January, you can make a 2021 IRA taxable income. Typically, taxes are Individual Retirement Arrangements,” at
contribution! And, if you haven’t yet, you paid when funds are withdrawn, www.irs.gov, or call the IRS at
can still make a 2020 contribution until presumably in retirement, when you may (800) 829-3676 to order a copy.
April 15, 2021. Contribution limits didn’t be in a lower tax bracket.
You can open a new IRA or Roth IRA or
change this year. If you are under the
Subject to income limits, contributions to you can make a contribution to an existing
age of 50, typically you can contribute
Roth IRAs are not tax deductible. Since account through online account access
the lesser of 100 percent of your earned
these funds were already subject to at impaxam.com/account. For assistance,
income or $6,000. If you are 50 years
income tax, after holding a Roth IRA for or for other options, please call Investor
of age or older, you can contribute the
five years, certain types of withdrawals, Services at (800) 372-7827.
lesser of 100 percent of your earned
including those taken in retirement, can
income or $7,000.
be made on a tax-free basis. Please note that the information above
Subject to deduction limits, Traditional does not constitute tax advice. State
For more information about your
IRA contributions generally are made tax regulations may differ from federal
eligibility or the differences between
on a tax-deferred basis, which means tax regulations. Always consult your tax
Traditional and Roth IRAs, please see
that you may be able to deduct some advisor before making any tax-related
IRS Publication 590A, “Contributions to
or all of your contribution from your investment decision.
THE WHITE HOUSE VERSUS THE SENATE, C O N T I N U E D f r o m F R O N T PA G E
emissions from the oil and gas sector. Biden administration will also likely move accelerant, its absence will merely slow,
The White House could also advance aggressively to reverse the extensive rather than reverse, the sector’s growth.
its climate agenda through the federal rollbacks of environmental regulations
Certainly, the inability of the Democrats
government’s enormous procurement that occurred under Trump appointees.
to gain a majority in the Senate — if that
spend. This could extend to the
It is worth bearing in mind that the is confirmed by one or two Republican
U.S. military, which has increasingly
clean energy sector has managed to victories in the Georgia special elections
expressed concern about the security
thrive despite four years of indifference, — will disappoint advocates for clean
implications of climate change.
at best, and opposition, at worst, from energy and climate action. But there
The president can also wield the Trump administration. Technology is much a Biden administration can do
significant influence through personnel cost reductions, supportive state-level to address climate change and other
appointments, and the appointment policy and strong demand from corpo- sustainability challenges facing the U.S.
of former U.S. Senator John Kerry to rate consumers responding to customer and the world — challenges that a
lead climate change efforts from the pressure have all helped renewables re-elected President Trump would likely
White House is a positive sign that the grow significantly with extremely limited have ignored. Thus, there is reason to
President-elect means business when federal support. While ambitious legisla- be cautiously optimistic but optimistic
it comes to a robust climate agenda. A tive support would provide a significant nevertheless.
You should consider a fund’s investment objectives, risks, and charges and expenses carefully
before investing. For this and other important information, please obtain a fund prospectus by
calling 800.767.1729 or visiting www.impaxam.com. Please read it carefully before investing.
30 Penhallow Street
An investment in Pax World Funds involves risk, including loss of principal. Past performance
Suite 400
does not guarantee future results.
Portsmouth, NH 03801
800.372.7827 RISKS: Equity investments are subject to market fluctuations, the Fund's share price can fall because
of weakness in the broad market, a particular industry, or specific holdings. The Fund does not take
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defensive positions in declining markets. The Fund’s performance would likely be adversely affected
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by a decline in the Index. Investments in emerging markets and non-U.S. securities are generally less
liquid and less efficient than investments in developed markets and are subject to additional risks,
such as risks of adverse governmental regulation, intervention and political developments. There is no guarantee that the objective
will be met and diversification does not eliminate risk. Funds that emphasize investments in smaller companies generally will
experience greater price volatility. Investing in non-diversified funds generally will be more volatile and loss of principal could be
greater than investing in more diversified funds.
Pax World Funds are distributed by ALPS Distributors, Inc. There is no affiliation between Pax World Funds, ALPS Distributors
Inc. and the companies listed within the articles in this newsletter.
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