Boston Common encourages a support vote on our shareholder resolution with PNC Financial, which asks the firm to assess and report on its exposure to climate change risks. We believe prudent, risk seeking investors should support this course of action. Here’s why:
- The threat of climate change is spurring regulatory change that will impair the value of more carbon-intensive assets, particularly where substitutes are available. Regulatory change may take time in coming, but it’s a risk within the planning horizon of a bank’s lending portfolio, and within the forecasting horizon of long-term investors.
- Certain industries are disproportionately at risk of climate-related regulatory change, for example coal producers and coal-fired power plants, which produce greater emissions per unit of power than competing sources. Lenders to and investors in these industries expose themselves to systematic tail risks of a public policy shift, which may not be properly discounted in historically-based loan loss or valuation models.
- PNC lends to and underwrites coal producers and does significant business in coal-producing regions. We’re concerned that a material portion of PNC’s loan book could be exposed to climate-related risks, unless the bank considers these risks in its lending decisions and provisions accordingly.
- Other banks, including BNP Paribas, Credit Suisse, HSBC and Wells Fargo have indicated active attention to assessing climate change risk or financing of high carbon industries. PNC is lagging other banks in addressing this issue.
More in-depth documentation of our rationale can found in the PNC proxy advisory brief.