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This is something which has been trending up for the past 5 to 10 years, and gaining more momentum. Large European fund managers (e.g. pension plans) have been

This is something which has been trending up for the past 5 to 10 years, and gaining more momentum. Large European fund managers (e.g. pension plans) have been at the forefront of responsible investing and it is developing quickly amongst their peers in North America. Simply put there are 3 dimensions which corporates have to consider: 1. Their contribution to greenhouse gas emissions and other environmental pollutants. 2. Their own exposure to physical climate risk (can they quantify it?) 3. Their compliance to reporting standards and regulations regarding climate change and other environmental issues. Large investors increasingly want to know (a) how they contribute to climate change via their investments and (b) their risk exposure to climate change risk, via the businesses they are invested in. Corporations have to realize that their large, institutional, investors are way beyond debating climate change and are taking action. Like it or not.

ptah 7y ago
they are a few decades late in taking action, but still welcome. let's hope it's not too late
raverbashing 7y ago
I believe the risk of governmental litigation (with a lot of zeroes in it) seems to have increased lately.
navigatesol 7y ago
>Corporations have to realize that their large, institutional, investors are way beyond debating climate change and are taking action. Like it or not. I'll preface this by stating that I'm no subscriber to "corporations only care about profits" school, but: Do you think this matters to the corporations all that much? You can't "dump" stocks without someone else buying the shares from you. Are these institutional investors going to take a huge hit in the name of climate change? Are the shareholders willing to sacrifice a chunk of their retirement for this cause? I'm skeptical. Where are the alternative investments? The world is awash in capital, with a huge chunk of bonds now paying negative interest rates. The big risk is government regulation, but we haven't seen a whole lot yet.
- loganfrederick 7y ago
  > "You can't dump stocks without someone else buying the shares from you." At what price? That's the impact of moves like this: 1) lowering stock prices for existing companies and 2) allocating money/increasing prices for climate-friendlier companies. It could mean the difference between, say, a large oil company getting $1 billion from a European fund and a battery technology company getting that billion.
  - navigatesol 7y ago
    >At what price? My point exactly. I know that executive pay is most often tied to share price, but who do you think really suffers more: the CEO who gets a slightly smaller bonus, or the fund that has to dump shares for whatever it can get? Look at the example in the article. The fund dumped $300MM of Exxon shares in June, share price mostly unaffected. >It could mean the difference between, say, a large oil company getting $1 billion from a European fund and a battery technology company getting that billion. But unless the company is issuing new shares, it doesn't receive any of the money. It's a transaction between old/new shareholders. I can see the drive to be able to market your investment fund as climate friendly to attract more AUM, but it's unclear to me it makes financial sense as the investor (at least generally).
    - loganfrederick 7y ago
      You're not wrong. I'm interpreting it more from the asset manager's perspective than the company's. You're correct in that they are making a conscious choice to maybe forgo a profit on oil in order to bet on something more speculative. That's just the thesis they are going with and may adversely effect performance.
- floki999 7y ago
  Yes, good point. Large investors (pension funds being the big ones) have, for many years, struggled internally with this. After all, their job is to generate financial returns. Period. However, stakeholders (i.e. their members) have been putting on pressure for the managers to take into account environmental, social and governance impacts. I think there is increased recognition that we are entering a stage where real, physical, climate risks are becoming more obvious and both managers and their constituents are realizing that the long-term cost of inaction will overshadow the short-term pain (if any) of staying out of certain investments. But yes, at the end of the day, large investors do have to prioritize return generation. Luckily, investment opportunities and new sectors evolve and there are ample new areas for investors to look at.
floki999 7y ago
And I’ll add that corporates can take action to tackle all three dimensions: 1. Reduce emissions by adopting new processes and technologies 2. Look at innovative ways to hedge their climate/weather risk exposure (yes, it is possible, just like you can hedge currency or jet-fuel volatility risk) 3. Voluntarily get engaged in reporting to investors and engaging them before they engage you. Even if a corporate is a significant greenhouse gas emitter, being pro-active and taking real action is way better than ignoring the issue. Investors are getting quite sophisticated in their understanding of climate issues and want to see material action.

ptah 7y ago

they are a few decades late in taking action, but still welcome. let's hope it's not too late

raverbashing 7y ago

I believe the risk of governmental litigation (with a lot of zeroes in it) seems to have increased lately.

navigatesol 7y ago

>Corporations have to realize that their large, institutional, investors are way beyond debating climate change and are taking action. Like it or not. I'll preface this by stating that I'm no subscriber to "corporations only care about profits" school, but: Do you think this matters to the corporations all that much? You can't "dump" stocks without someone else buying the shares from you. Are these institutional investors going to take a huge hit in the name of climate change? Are the shareholders willing to sacrifice a chunk of their retirement for this cause? I'm skeptical. Where are the alternative investments? The world is awash in capital, with a huge chunk of bonds now paying negative interest rates. The big risk is government regulation, but we haven't seen a whole lot yet.

loganfrederick 7y ago
> "You can't dump stocks without someone else buying the shares from you." At what price? That's the impact of moves like this: 1) lowering stock prices for existing companies and 2) allocating money/increasing prices for climate-friendlier companies. It could mean the difference between, say, a large oil company getting $1 billion from a European fund and a battery technology company getting that billion.
- navigatesol 7y ago
  >At what price? My point exactly. I know that executive pay is most often tied to share price, but who do you think really suffers more: the CEO who gets a slightly smaller bonus, or the fund that has to dump shares for whatever it can get? Look at the example in the article. The fund dumped $300MM of Exxon shares in June, share price mostly unaffected. >It could mean the difference between, say, a large oil company getting $1 billion from a European fund and a battery technology company getting that billion. But unless the company is issuing new shares, it doesn't receive any of the money. It's a transaction between old/new shareholders. I can see the drive to be able to market your investment fund as climate friendly to attract more AUM, but it's unclear to me it makes financial sense as the investor (at least generally).
  - loganfrederick 7y ago
    You're not wrong. I'm interpreting it more from the asset manager's perspective than the company's. You're correct in that they are making a conscious choice to maybe forgo a profit on oil in order to bet on something more speculative. That's just the thesis they are going with and may adversely effect performance.
floki999 7y ago
Yes, good point. Large investors (pension funds being the big ones) have, for many years, struggled internally with this. After all, their job is to generate financial returns. Period. However, stakeholders (i.e. their members) have been putting on pressure for the managers to take into account environmental, social and governance impacts. I think there is increased recognition that we are entering a stage where real, physical, climate risks are becoming more obvious and both managers and their constituents are realizing that the long-term cost of inaction will overshadow the short-term pain (if any) of staying out of certain investments. But yes, at the end of the day, large investors do have to prioritize return generation. Luckily, investment opportunities and new sectors evolve and there are ample new areas for investors to look at.

floki999 7y ago

And I’ll add that corporates can take action to tackle all three dimensions: 1. Reduce emissions by adopting new processes and technologies 2. Look at innovative ways to hedge their climate/weather risk exposure (yes, it is possible, just like you can hedge currency or jet-fuel volatility risk) 3. Voluntarily get engaged in reporting to investors and engaging them before they engage you. Even if a corporate is a significant greenhouse gas emitter, being pro-active and taking real action is way better than ignoring the issue. Investors are getting quite sophisticated in their understanding of climate issues and want to see material action.