Reframing Climate Engagement
From Common Goods to Public Goods
A Conversation with Timothy J. Youmans and Robert G. Eccles
Date: December 5, 2025
Authors’ Note: This post is a follow on to our recent Substack post A Climate Plan Engineered to Actually Pass Congress. The list of companies at the end of this post was the result of an AI audit of initial AI-assisted research on support for a carbon price across the S&P 500. We will be posting this audit report (Independent Verification and Audit Report: Corporate Support for Carbon Pricing Mechanisms within the S&P 500) on Substack as a follow up to this interview.
Climate Engagement is Stalled
Bob: Tim, we were just discussing our recent SSRN paper, Resolving the Carbon Pricing Trilemma … Given your experience leading over 1,200 corporate engagements at EOS at Federated Hermes and Calvert, what do you see as the key climate engagement implications of that paper?
Tim: It’s a great question, Bob. Many institutional investors feel like we’re hitting a wall in our climate engagements. Despite years of dialogue, proxy voting, and shareholder proposals, corporate decarbonization often falls short of the systemic solution universal owners, and like-minded investors, demand. I feel that in the investor community, there is a growing sentiment that lack of system level progress on climate change can be traced back to the challenge of asking companies to act against their short term commercial or competitive interests.
Bob: You mentioned you think the problem runs even deeper than that. Can you elaborate?
Tim: My view, based on leading those 1,200+ engagements, is that the problem runs deeper: in engagement, investors have been treating climate stability as a common good or even a private good, when it’s fundamentally a public good. This misdiagnosis leads to engagement strategies that inevitably falter—at the universal owner / systemic risk level—due to the free-rider problem. The economic reality is that the only solution to a public goods market failure is robust government policy. Therefore, the most effective engagement is to ask the largest companies and biggest emitters to lobby for precisely that policy. The good news is that 28 of the S&P 500 companies already publicly support a carbon price.
An Economics Primer: Public Goods and the Free-Rider Problem
Bob: You’re basing a lot on that distinction. Can you give us a quick economics primer on public goods and the free-rider problem?
Tim: Absolutely. Let’s quickly revisit first principles. In economics jargon, climate stability is a classic public good: it’s non-rivalrous (one person’s use of the climate doesn’t diminish another’s) and non-excludable (no one can be prevented from experiencing the climate). This creates a market failure. Why should one company bear the high cost of decarbonization when the benefits are shared globally, and they risk losing short-term competitiveness to those who don’t act? This is the free-rider problem in action. Markets inherently under-provide public goods because the incentives are misaligned. 🧑🏫
The field of economics has long held that the solution to a public goods market failure isn’t voluntary corporate action alone; it’s collective action through robust government policy. This isn’t opinion; it’s foundational economics.
Connecting Economics to Finance: Systemic Risk & MPT’s Limits
Bob: That makes sense from an economics perspective. How do you connect that economic reality to finance and portfolio theory?
Tim: This economic reality has profound implications for portfolio theory. As Jon Lukomnik and others have powerfully argued, systemic risks like climate change mean, among other impacts, there is no truly risk-free asset. The elegant architecture of Modern Portfolio Theory—the tangency portfolio, the Capital Market Line—gets wobbly when faced with risks that cannot be diversified away. This means that the risk-free asset, that MPT requires, is non-existent. You can’t diversify any asset - even a government security - away from the long-term effects of climate change.
In this way, a “failure of Modern Portfolio Theory” in the face of systemic climate risk can be viewed as the portfolio manager’s term for a “public goods market failure.” They are two different languages describing the exact same economic reality. Whether you approach this as an economist concerned with market failures or as a fiduciary concerned with un-diversifiable portfolio risk, the problem definition is essentially the same. Thus, the solution must be the same: the system itself must be addressed.
The Prescription: A New Climate Engagement Strategy
Bob: So, if both disciplines point to the same diagnosis, what’s the prescription? What’s the new engagement strategy you’re proposing?
Tim: The diagnosis from both disciplines points to the same prescription: robust government policy is required.
As I reflect on my over 1,200 corporate engagements, with a significant plurality being climate engagements, there have been many wins - some large (the Chevron board supporting a methane measurement shareholder proposal) and some small (60% of non-insider shareholders supporting a climate reporting shareholder at Berkshire Hathaway two years in a row). And there have been many more climate engagement wins by other engagers. However, I now feel that the way investors have been engaging on climate will not produce results anywhere close to what universal owners and system-level investors are looking for.
I think we need a fundamental reframing of effective climate engagement. With the benefit of hindsight and experience, and refreshing my memories of my semester as a teaching assistant for the Harvard Kennedy School graduate economics course “Markets and Market Failure”, the most impactful engagement “ask” institutional investors can make is not to pressure individual companies to make unilateral sacrifices. Rather, I now feel the most effective climate engagement strategy is to ask the largest companies and biggest emitters to radically boost their efforts to lobby for a carbon price.
This approach transforms climate engagement. It’s no longer about asking companies to potentially act against their short-term interests in a broken market. It’s about persuading them to support the systemic solution that creates a level playing field for all and corrects the market failure for everyone - a carbon price.
Why This New Engagement ‘Ask’ is Pragmatic
Bob: But is that new ‘ask’ truly pragmatic? Won’t companies just resist lobbying for their own regulation?
Tim: This ask isn’t wishful thinking. It’s pragmatic for several reasons:
1. Stated Support: Most major energy companies are already on record supporting a carbon price in principle.
2. Need for Certainty: Our Resolving the Carbon Pricing Trilemma paper’s framework provides long-term regulatory certainty, which is crucial for capital-intensive industries with long-term capex horizons.
3. Valuable Incentives: Our framework’s Performance-Based Safe Harbor offers companies a clear, statutory path to de-risk their transition in an era of increasing climate litigation.
Many of the Largest S&P 500 Companies Already Support a Carbon Price
Bob: You mentioned that many of the largest S&P 500 companies already support a carbon price. That seems to cut against the conventional wisdom.
Tim: The conventional wisdom often paints a simple picture: large corporations universally oppose climate regulations, viewing them as a threat to the bottom line. A carbon tax, in particular, is frequently framed as the ultimate antagonist to big business. This narrative, however, misses a crucial and evolving reality.
A closer look reveals a surprising and powerful coalition forming within the S&P 500. Skilled climate engagement professionals already know that many of the most influential companies in the world are actively supporting the idea of putting a price on carbon. Their reasons are not rooted in altruism but in pragmatism, long-term strategy, and a clear-eyed assessment of future markets.
And the good news is that this knowledge is not confined to the realm of engagement professionals. 28 of the largest S&P 500 companies have also publicly stated directly that they support a carbon price [The full list of carbon price supporters, with sources, is at the end of this article].
Oil & Gas Giants Aren’t Fighting It—They’re Demanding It
Bob: That’s a high number. But what about the most critical sector, the oil and gas giants? Surely, they aren’t demanding this.
Tim: Actually, they are. Perhaps the most counter-intuitive finding is that major oil and gas companies are among the most vocal advocates for carbon pricing. Industry titans like Exxon Mobil Corporation, Chevron Corporation, and ConocoPhillips have all publicly endorsed the policy, demanding a specific, market-based approach to regulation.
This isn’t a defensive acceptance of the inevitable; it’s an offensive strategy. Chevron, for instance, is unequivocal, calling carbon pricing the “primary policy tool” for addressing climate change. This sentiment is echoed across the industry. Exxon Mobil believes a price on carbon is “essential” for a sensible climate policy, while ConocoPhillips advocates for a “well-designed pricing regime on carbon.” For these energy giants, a clear, predictable, and economy-wide carbon price is vastly preferable to a complex patchwork of sector-specific regulations. It provides the certainty they need for long-term capital planning and allows them to leverage their massive engineering expertise to win in a decarbonizing world, potentially squeezing out less-prepared competitors.
Wall Street Sees Carbon as a Financial Risk to Be Priced
Bob: What about Wall Street? Where do the big financial firms stand on pricing carbon?
Tim: The call for carbon pricing extends beyond the energy sector and into the heart of the global financial system. Wall Street leaders, including BlackRock, Inc., Goldman Sachs Group, Inc., and JPMorgan Chase & Co., are treating carbon emissions as a material financial risk that must be accounted for.
Both Goldman Sachs and JPMorgan Chase have endorsed the Climate Leadership Council’s (CLC) carbon tax proposal, a plan with bipartisan appeal. Meanwhile, BlackRock, the world’s largest asset manager, has joined a coalition to enable “accurate carbon risk pricing.” This push from Wall Street is the other side of the coin to the internal carbon fees seen at companies like Microsoft. Finance is demanding that carbon risk be priced externally because leading companies are already proving it’s an effective management tool internally. When the firms that allocate global capital advocate for pricing carbon, it fundamentally reframes the conversation from a purely environmental issue to one of market stability, risk management, and economic efficiency.
It’s Not Just Talk—Some Are Already Taxing Themselves
Bob: Is this just talk, or are some companies already taxing themselves internally?
Tim: For some corporations, support for carbon pricing has moved beyond advocacy and into direct internal action. By implementing their own internal carbon fees, these companies are demonstrating the policy’s value as a powerful management tool to gain a competitive edge.
Microsoft Corp. stands out as a pioneer, having implemented an internal carbon fee program as early as 2012. This fee holds its business divisions financially accountable for their emissions, creating a direct incentive to innovate and reduce their carbon footprint. Similarly, consumer goods giant PepsiCo, Inc. has put an internal carbon price on its business travel. This is a powerful signal that leading companies are not just waiting for regulation; they are actively using carbon pricing to drive internal efficiency and prepare their businesses for a carbon-constrained future before their rivals are forced to.
The Architects of the Open Road Are on Board
Bob: And what about the auto industry? They’ve historically been central to emissions.
Tim: The automotive industry is also signaling a major strategic pivot. Legacy automakers Ford Motor Co. and General Motors Co. have both come out in support of carbon pricing mechanisms to accelerate their transformation.
Ford has committed that it will “advocate for...carbon pricing systems” as part of its climate strategy. General Motors has gone further, specifically supporting the Climate Leadership Council’s “carbon tax and dividend plan.” This support from the architects of the internal combustion engine is not merely symbolic. A clear price on carbon creates an economic incentive that accelerates the return on their multi-billion-dollar investments in electric vehicles. It helps obsolete the business models of competitors who are slower to transition, turning policy into a competitive advantage.
This Is a Corporate Consensus, Not a Partisan Squabble
Bob: It sounds like this is a broad corporate consensus, not a partisan issue.
Tim: Exactly. The sheer diversity of companies supporting carbon pricing demonstrates that a pragmatic corporate consensus is forming, one that transcends industry lines and partisan politics. This is clearly illustrated by the supporters of the Climate Leadership Council (CLC), whose plan has bipartisan appeal.
The CLC’s Founding Members include household names like Procter & Gamble Co. and insurance giant MetLife, Inc., while other major players like General Motors and Goldman Sachs have also endorsed its plan. But the consensus is even broader. It includes tech giants like IBM supporting “market-driven mechanisms” and renewable energy leaders like First Solar, Inc. calling carbon pricing the “most economically efficient tool.” Others are building the market’s essential plumbing: industrial gas supplier Linde plc and steelmaker Nucor Corporation are part of a coalition to establish a standardized carbon accounting framework. What unites this diverse group—from steel to software to insurance—is a shared desire for a predictable, market-based rulebook over a chaotic, regulation-by-regulation approach.
The Remaining Question
Bob: So, to conclude, what’s the inevitable question this evidence raises?
Tim: The evidence is clear: support for carbon pricing among corporate giants is far more widespread and diverse than is commonly believed. This advocacy is a strategic response driven by a confluence of powerful business imperatives. It stems from the oil giants’ demand for planning certainty in a volatile energy transition, Wall Street’s imperative for transparent risk pricing, and the auto and tech sectors’ strategy of using policy to accelerate innovation and secure future market share.
When the market’s biggest players start asking for new rules, the question is no longer if things will change, but howthey will be reshaped. What happens next?
The Blueprint for Action
Bob: And this is where our paper provides the blueprint for action …
Tim: Precisely. This is why we designed our paper, Resolving the Carbon pricing Trilemma…. It provides the blueprint for a politically durable and fiscally responsible carbon pricing policy—a ‘statutory fortress’—that companies can realistically support. It gives investors a concrete, well-engineered policy solution to rally corporate support behind.
Engaging on climate effectively requires us to diagnose the problem correctly. It’s a public goods failure, and the solution lies in systemic public policy change. Let’s focus our climate engagement efforts where they can have the greatest impact: persuading companies to become advocates for the very regulations that will solve the problem for all of us. And there is good news here, many large carbon emitters already have.
Bob: Thanks, Tim and I look forward to our next paper!
Tim: You’re welcome, and me too!
S&P 500 Companies Supporting a Carbon Price - with Sources and Affiliations
Coalition Membership
These companies’ support is documented through their verified membership in coalitions explicitly dedicated to carbon pricing policies, such as the Climate Leadership Council (CLC) or the Carbon Measures coalition.
Exelon Corporation
“Founding member of the Climate Leadership Council...” - C2ES Member Statement, 2024
https://www.c2es.org/belc/belc-membership/
Johnson & Johnson
Supports a “mandatory, market-driven approach” via USCAP - USCAP Member Statement, 2012
https://www.jnj.com/sites/default/files/pdf/additional-environmental-partnerships.pdf
Linde plc
Member of coalition to establish carbon accounting framework - Carbon Measures Member List, 2025
https://en.antaranews.com/news/387337/leading-global-businesses-unite-to-launch-carbon-measures
MetLife, Inc.
CLC Founding Member, 2025
https://clcouncil.org/about/partners/
Nucor Corporation
Member of coalition to establish carbon accounting framework - Carbon Measures Member List, 2025
https://en.antaranews.com/news/387337/leading-global-businesses-unite-to-launch-carbon-measures
Procter & Gamble Co.
CLC Founding Member, 2025
https://clcouncil.org/about/partners/
Vistra Corp.
Supports a “price on carbon” via EPSA membership - EPSA Member Statement, 2020
https://hub.vistracorp.com/epsa-supports-carbon-price/
Corporate Report
These companies’ support is documented within their official corporate publications, such as sustainability or climate reports, or verified via direct discussion in the research dialogue regarding their internal strategic planning.
Bank of America Corp.
“Continuously stated support for a price on carbon” - 2024 Sustainability Report
CF Industries Holdings, Inc.
General Member of the Climate Leadership Council - Sustainability Report, 2021
Chevron Corporation
States carbon pricing should be the “primary policy tool” - Climate Policy Document, 2023
https://www.chevron.com/-/media/chevron/sustainability/documents/2023CCRR-ClimatePolicy.pdf
Ford Motor Co.
Will “advocate for...carbon pricing systems” - Climate Change Scenario Report, 2020
Honeywell International, Inc.
States a “price on carbon” is needed for carbon capture projects - Carbon Capture Brochure, 2024
Microsoft Corp.
Implemented internal carbon fee since 2012 - Internal Carbon Fee Program, 2023
NextEra Energy, Inc.
Assumes “carbon penalty costs” in modeling - Zero Carbon Blueprint, 2025
https://www.nexteraenergy.com/content/dam/nee/us/en/pdf/NextEra-Energy-Zero-Carbon-Blueprint.pdf
PepsiCo, Inc.
Implemented an internal carbon price for business travel - ESG Topics A-Z (Climate Change), 2025
https://www.pepsico.com/our-impact/esg-topics-a-z/climate-change
Southern Company
Advocates for “Effective Carbon Policy” which “could include a carbon pricing mechanism” - Trade Association and Climate Engagement Report, 2024
Steel Dynamics, Inc.
General Member of the Climate Leadership Council - CDP Response, 2023
News / 3rd Party
The support for these companies is documented through news articles or other third-party reports, and heavily corroborated by the research dialogue, illustrating how these companies communicate their stance to the broader market.
BlackRock, Inc.
Member of coalition to enable accurate carbon risk pricing - News Article (POLITICO Pro), 2025
EQT Corporation
Uses “social cost of carbon” to inform carbon credit budget - Case Study (Patch.io), 2025
https://www.patch.io/case-studies/eqt
First Solar, Inc.
Calls carbon pricing the “most economically efficient tool” - News Article (PV Magazine), 2020
https://pv-magazine-usa.com/2020/06/08/first-solar-backs-carbon-pricing-for-wholesale-electricity/
General Motors Co.
Supports CLC’s “carbon tax and dividend plan” - News Article (AFCD), 2019
https://afcd.org/gm-and-ford-joining-push-for-gop-backed-carbon-tax/
Goldman Sachs Group, Inc.
Endorses the CLC’s carbon tax proposal - News Article (CLC), 2020
JPMorgan Chase & Co.
Endorses the CLC’s carbon tax proposal - News Article (CLC), 2020
Nike, Inc.
Called on Congress to pass “a price on carbon” - LEAD on Carbon Pricing Event, 2019
Public Policy Statement
These companies’ support is stated in their formal, public-facing policy documents, representing the highest level of “statutory fortress” advocacy and the clearest demand for a new regulatory regime.
ConocoPhillips
Advocates for a “well-designed pricing regime on carbon” - Public Policy Statement, 2025
ExxonMobil Corporation
Believes a price on carbon is “essential” - Public Policy Statement, 2021
https://corporate.exxonmobil.com/news/viewpoints/our-position-on-climate-policy
IBM
Supports “market-driven mechanisms” - Corporate Policy Statement, 2025
https://www.ibm.com/solutions/sustainability/environmental/energy-climate
Intel Corporation
Advocates for “market-based approaches” including “direct or indirect carbon taxes” - Public Policy Statement, 2025
https://www.intel.com/content/www/us/en/policy/policy-environment-energy.html
A Note on Collaboration:Bob and I are thankful for the significant contributions of a team of different, commercially available, frontier-class large language models. Under our strategic direction, this AI team undertook all of the foundational drafting, strategic enhancement, critical review, and final synthesis that resulted in our working paper published on SSRN, as well as this conversation.
The reframing from "common good" to "public good" actually explains why so many corporate climate pledges fall flat. Companies know they can't solve a public goods problem alone, so they end up doing minimal voluntary actions while waiting for competitors to move first. The clever part is getting companies to lobby for carbon pricing instead of just making them cut emissions unilaterally, which totally flips the free-rider problem on its head.