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Retailers could face more investor scrutiny amid Biden climate policy agenda

Investors emboldened by President Joe Biden's environmental agenda may soon push Amazon.com Inc., Walmart Inc. and other major retailers for more detail on their long-term climate goals, shareholder advocates say.

The pressure is likely to show up at company meetings in the form of increased shareholder resolutions, though some companies may act preemptively to stay ahead of potential regulatory changes as federal agencies place a renewed emphasis on environmental matters.

Even at companies that have already made significant environmental commitments, investors will be pushing for near-term evidence of progress in areas such as decarbonizing supply chains and transitioning away from natural gas and other fossil fuels, said Andrea Ranger, shareholder advocate with Green Century Capital Management Inc.

Green Century Capital pushes companies such as Amazon, The Procter & Gamble Co. and Tyson Foods Inc. to reduce their environmental risks.

Biden's executive actions in recent weeks include recommitting the U.S. to the Paris Agreement on climate change, pausing oil drilling on public land, and prioritizing science-based policies. Biden has also pledged for the U.S to achieve a pollution-free power sector by 2035. The new administration's attention to environmental matters comes as the COVID-19 pandemic has disrupted supply chains globally and placed a spotlight on climate change and social justice issues.

"We think this adds to ammunition that we have as investors," Ranger said in an interview.

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SNL Image

Solar panels on the roofs of Amazon facilities. Experts believe Biden's pro-environment agenda will
embolden investors to further push Amazon and Walmart on reaching climate goals.
Source: Amazon

Fueling change

Amazon and Walmart officials said in emailed statements to S&P Global Market Intelligence that they welcomed the Biden administration's return to the Paris climate accord and its renewed emphasis on international cooperation.

Both companies have already taken steps to reduce greenhouse gas emissions. Amazon in 2019 pledged to become carbon neutral by 2040, while Walmart in 2020 announced plans to achieve zero global emissions across the company's operations by 2040.

"We look forward to working in partnership with the Biden administration to pursue policies that are going to help us go faster to address the urgency of the climate crisis," an Amazon spokesperson said.

A Walmart spokesperson said Walmart will continue to encourage science-based national and international policies to address climate change. "We believe business is an essential part of addressing the climate crisis, and we also recognize that policy action is essential," the spokesperson said.

Biden's policy actions will further incentivize retailers working to meet climate targets, said Lila Holzman, senior energy program manager for As You Sow, an advocacy group for shareholders of companies including Amazon, in an interview.

The rejoining of the climate accord is of particular importance as it signals "global recognition that the U.S. is again at the table and that more policy can come internally from the U.S," she said. As part of the climate pact, the U.S. agreed to cut its economywide greenhouse gas emissions by 26% to 28% from 2005 levels by 2025.

"They still have a lot of work to do, but the fact that this administration is making climate a priority will make it easier for [the companies] to pursue climate-related plans," Holzman said.

Under pressure

With the new administration's emphasis on climate, companies will be under pressure to demonstrate how they plan to cut emissions and address their preparedness for transitioning to a lower carbon-intensive world, said Fiona Reynolds, CEO of Principles for Responsible Investment, in an emailed statement. Principles for Responsible Investment is a global network that helps investors understand the group working to support investors in studying and implementing sound investment practices on environmental, social and governance matters.

Retailers also will be under pressure to provide insights on how they will reach goals within a shorter period as opposed to 10- or 20-year outlooks, said Ranger of Green Century.

Amazon, whose emissions increased 15% in 2019 compared with 2018, is working on efforts in areas such as electric delivery vehicles, renewable energy and sustainable aviation to become carbon neutral by 2040. Walmart in 2020 announced progress on its Project Gigaton project, which urges suppliers to decarbonize their supply chains and aims to reduce 1 gigaton of greenhouse gas emissions from the company's supply chain by 2030.

But Ranger would like to learn how the companies are making progress in the next three to five years. "OK, you've got a science-based target, now we need to understand how you're going to roll it out," Ranger said. "We want to see the evidence as we go along."

Investors may also push the companies to become more transparent about environmental impacts from their direct operations, said Jamie Salo, head of data strategy and operations for Trucost, a subsidiary of S&P Global Market Intelligence.

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Trucost gave Amazon a weighted disclosure score of 72.1 for fiscal 2019, putting it ahead of competitors such as Walmart (65.6) and eBay Inc. (30.8) on disclosures for "Scope 1" data related to the company's direct operations, such as the fuel burned by company trucks.

Disclosing environmental data is voluntary in the U.S., but that could change under the Biden administration, said Paula DiPerna, special adviser for CDP, formerly the Carbon Disclosure Project, in an interview. About 70% of S&P 500 companies already report disclosures to CDP, including Walmart, she said.

"The reason it's important is it makes otherwise invisible problems visible," DiPerna said of the disclosures.