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Ford Motor has released what it says is its first-ever integrated sustainability and financial report of accomplishments and aspirations. It also announced claimed science-based targets toward the company’s ambition to be carbon neutral by 2050, in line with terms of the Paris Climate Agreement.
The problem with all such reports is that saying something doesn’t mean that other areas of the company are actually supporting the stated goals. “Combining sustainability and financial performance in a single report,” Ford said, “is significant.” Well, given this, as I recall Ford has actively opposed attempts by stockholders at the last few annual meetings to reveal its PAC contributions. “Is this still the case? If so, what assurances can employees, stockholders and people have that you are not pursuing different anti-environmental policies out of public view under the Capital Dome by the politicians you are supporting?” is how I put it yesterday as a stockholder to T.R. Reid Director, Corporate and Public Policy Communications. Thus far no response. (Ford Proxy – Shareholders Want Political Spending Info)
The new Ford targets – to reduce Scope 1 and 2 greenhouse gas emissions from operations 76% from 2017, and Scope 3 GHGs from use of the company’s products 50% from 2019, both by 2035 – apparently come from so-called stakeholders who think that reducing emissions has favorable implications for a range of sustainability issues “that matter most.” Other items in the integrated report include Ford’s large-scale social response to the COVID-19 pandemic; investment in and initial launches of high-volume, zero-emission electric vehicles; and actions to protect human rights and create greater diversity(Ford was silent last week As Georgia passed a white suprmecy anti-diversity voting act), equity and inclusion within the company.
“Success in sustainability requires a financially healthy business, and financial health depends on effectiveness in sustainability areas,” said John Lawler, the company’s chief financial officer, who no doubt is aware of the SEC pushing for more disclosure of the risks imposed by Climate Change or other urgent 21st century environmental matters. (SEC Starts Task Force on Climate Change Investment Risks) “Combining those topics in a single report reflects that, more than ever, investors and other stakeholders want to know not only what you plan to do, but what you’re accomplishing and how you’re managing risks along the way.”
What the SEC is warning in my view is that things are getting tougher for companies that are part of the global warming crisis or want to profit from investors who wish to support firms that are run on an environmentally friendly basis. Environmental, social, and governance (ESG) criteria are an “increasingly popular way for investors to evaluate companies in which they might want to invest,” said the SEC. In the financial markets, mutual funds, brokerage firms, and robo-advisors now offer products that employ ESG criteria. ESG criteria can also help investors avoid companies that might pose a greater financial risk due to their environmental or other practices. (AutoInformed on BorgWarner Cops SEC Plea for Materially Misstating Financial Statements Concerning Asbestos Litigation)
The initial SEC focus will be to identify any material gaps or misstatements in issuers’ disclosure of climate risks under existing rules. The task force will also analyze disclosure and compliance issues relating to investment advisers’ and funds’ ESG strategies. Its work will complement the agency’s other initiatives in this area, including the recent appointment of Satyam Khanna as a Senior Policy Advisor for Climate and ESG. As an integral component of the agency’s efforts to address these risks to investors, the task force will work closely with other SEC Divisions and Offices, including the Divisions of Corporation Finance, Investment Management, and Examinations.
Ford’s future direction on Climate Change is at least partially known. Ford plans to invest more than $22 billion to engineer and introduce connected, electric vehicles – including EV versions of some its most popular nameplates, in categories where millions of customers already make the company profitable: pickup trucks, commercial vehicles and SUVs. Shipments of the Mustang Mach-E in North America began in 2020, followed by Europe in early 2021 and, later this year, in China. All-electric Transit commercial vans will be introduced toward the end of 2021; a battery-electric F-150 is scheduled for launch in 2022. (All-Electric Ford Mustang Mach-E ‘SUV’ Debuts in 2020, Ford Europe is Planning on Shifting Passenger Cars to All EVs by 2030, Commercial Vehicles Will Eventually Follow)
Ford last month announced that its entire commercial vehicle lineup in Europe will be zero-emissions capable by 2024. One-hundred percent of the company’s passenger vehicles in the region will be zero-emissions capable – all-electric or plug-in hybrid – by mid-2026, and entirely battery-electric by 2030.
To expand production capacity for EVs, Ford in 2020 started construction of the new Rouge Electric Vehicle Center in Dearborn, where the all-electric F-150 will be built. In February 2021, the company announced a $1 billion investment to create the Ford Cologne Electrification Center in Germany.
Investments in Dearborn and Cologne manufacturing – together with another $1 billion announced in February to transform operations in Pretoria, South Africa – will further help reduce Ford’s overall carbon footprint. Through improved energy efficiency and conservation initiatives, Ford today generates 40% less carbon from its facilities and manufacturing processes around the globe. An additional goal is to use 100% locally sourced, renewable electricity at all Ford plants by 2035.
“We will lead in achieving carbon neutrality because it’s the right thing for customers, the planet and Ford,” said Bob Holycross, vice president, Sustainability, Environment and Safety Engineering. “Ninety-five percent of our carbon emissions today come from our vehicles, operations and suppliers, and we’re tackling all three of those sources with urgency and optimism.”
A little more sunlight – it’s the best disinfectant – would be helpful starting with the PAC. “We Are Committed to Protecting Human Rights and the Environment Policy” is at shareholder.ford.com.
This from the Brookings Institute Hutchins Center: Promoting the use of electric vehicles and carbon pricing are both policies aimed at curbing greenhouse gas emissions—but under some circumstances may actually increase coal-fueled generation of electricity, find Kenneth Gillingham and Stephanie M. Weber of Yale and Marten Ovaere of Ghent University. To meet demand for electricity, suppliers first turn to the most efficient sources—renewables and high efficiency natural gas—then to coal, and finally to the most expensive option, natural gas peaking plants.
When carbon is taxed at the moderate levels seen in pricing policies like those in cap-and-trade systems in California and the Northeast and those implicit in the Obama Administration’s Clean Power Plan, suppliers are likely to turn to coal instead of natural gas to meet additional demand for electricity. A higher carbon price (which would discourage use of coal altogether) or no carbon price (which would prompt generators to turn to coal long before an e-vehicle-related surge in demand) would allow promotion of electric vehicles to be much more effective at reducing emissions than the carbon prices observed in the recent past in the United States, they say. “Our findings reinforce the simple point that the benefits of electric vehicles will be much greater if they are sequenced after coal plants are retired,” they conclude.