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Divestment also results in less shareholder oversight of emission heavy companies because environmentally conscious investors are selling their shares to invest

• TheGallopedHigh 7y ago
  Could you talk a bit more about your company?
  • emckay 7y ago
    We're creating an S&P 500 index fund that aggressively uses shareholder engagement to get companies to reduce emissions through their supply chains.
    • veezbo 7y ago
      This seems like a great idea in theory- potentially better than the so-called luxury ETFs that only invest in what the fund manager deems as socially-responsible companies. If your expense ratios are low, and you allow me to have a meaningful say in how I or the fund as a whole votes for better climate outcomes, I would be personally interested. I'd love see how you guys do it, and will be following your progress.
      • emckay 7y ago
        Exactly! Thanks for the kind words.
    • tonfa 7y ago
      I've always wondered, could large ETFs providers propose a few voting profile you could pick from and vote accordingly? Or are they forced to vote the same for all the shares they hold? I'd love to be able to tell eg vanguard how to vote, currently I'm an indirect shareholder with no voice.
• mushufasa 7y ago
  We are also working on this problem. At yourstake.org, we're trying to help anyone create change by making use of your shareholder rights. We're try to simplify the process to be as easy as an online petition. You can sync your portfolio just like with other personal finance sites (e.g. Mint.com) and leverage your rights in whatever funds you already have. If you have a 401k, you have rights. Also happy to talk to you offline about shareholder engagement. There are actually a number of funds that prioritize shareholder engagement -- you can see some rankings at another project I've been involved with: www.realimpacttracker.com. I'm (patrick) @ yourstake.org
  • emckay 7y ago
    Awesome projects! I'd love to hear your thoughts. I'll shoot you an email tomorrow.
• jacquesm 7y ago
  They may have lost that vote, but how did it affect the stockprice?
• mochris 7y ago
  I've divested from oil companies, not because I think it will change corporate governance at XOM or BP, but because I like to buy things that I can hold for a decade or three, without thinking too hard about them. I don't want to spend my time thinking about when, precisely, XOM and BP will have peaked. I'd rather just get rid of them and free up that mental space to concentrate on what's next in the world of energy generation, storage, and transmission.
  • ineedasername 7y ago
    Sure, that makes a lot of sense, but what companies can you invest in that you wouldn't have to worry about for that long?
    • windexh8er 7y ago
      For most people that's the wrong question. If you have capital that can be applied to long term resolute ideals you likely don't have to worry about capital in general. We all know fossil fuels have have an expiration date. We can easily state that money invested in building next generation power acquisition, delivery and storage will displace them. But again, you need a stack of chips to play.
      • coliveira 7y ago
        This is a good idea, unfortunately when it comes to investment it is not enough for a company to be in the right track. It also needs to dominate the market, which is more difficult. For example, lots of companies were created in the Internet bubble, but only a few survived and came to dominate the market.
    • mochris 7y ago
      Venture (and venture-like) investing has a less than 30-year horizon but it's a single investment decision followed by essentially no other decisions, except what to do with the returned capital. A lot of large tech stocks, beloved consumer companies (cost, dis, sbux, mcd, ko, tgt...), a few pharmas, banks have been around for a long time, and will still be around in another decade. I'm happy to keep them in my portfolio for the foreseeable future. Some types of real estate fit the bill (farms and timber. residential and commercial in some locations). There are places where the world changed and I probably should've bailed a little sooner, but I really don't know how anybody can look at the cost curves for renewables or energy storage and walk away thinking that fossil fuels are a solid long-term investment. They don't spark joy. Thank them for their service, and hit the fucking bid.
• jdhn 7y ago
  Let's say that it passed. Is Chevron now legally obliged to actually limit their methane emissions, or can they ignore it if they so choose?
  • rory096 7y ago
    Shareholder resolutions are generally non-binding (precatory) as was the Chevron case, though it's possible to have binding resolutions depending on the state and the company's bylaws. https://www.law.cornell.edu/cfr/text/17/240.14a-8 https://www.law.cornell.edu/cfr/text/17/240.14a-8 https://www.axios.com/climate-methane-votes-fail-at-chevron-shareholder-meeting-9a029c8c-b891-44a6-8de4-003e2f72fdc2.html https://www.axios.com/climate-methane-votes-fail-at-chevron-...
  • emckay 7y ago
    Resolutions like this one are non-binding. The real power held by shareholders is to fire directors, so if a company's board doesn't comply with the shareholder resolution the shareholders can vote against the directors at the next annual meeting. In practice, companies "mostly meet" or "completely met" their commitments in response to shareholder engagement 89% of the time according to a 2015 report by Ceres [0]. [0] https://www.ceres.org/sites/default/files/reports/2017-03/Ceres_CoCommitTracker_100615.pdf https://www.ceres.org/sites/default/files/reports/2017-03/Ce...
    • momokoko 7y ago
      Just be honest. It's bullshit. That vote and any vote like it means absolutely nothing. You know it, and anyone with any knowledge of this knows it. We really really need to stop these fake feel good energy sinks. What you said was at best disingenuous, and at worst just lying. I want to remove fossil fuels as much as anyone, but I will not do it by tricking people. You should try and work on some ethics. There are two insanely simple things to end global warming if you live in the US. Stop driving to work and stop eating meat. If only a 30% of the population does that, all this is solved immediately. Pretending resolutions matter simply helps people pretend they can't solve the entire problem with two simple actions
• emckay 7y ago
  Here are the promised citations: 1. $10 trillion divested: https://gofossilfree.org/divestment/commitments/ https://gofossilfree.org/divestment/commitments/ 2. Chevron's shareholder proposal: https://www.asyousow.org/resolutions/2017/12/31/chevron-corporation-request-for-report-on-methane-leaks https://www.asyousow.org/resolutions/2017/12/31/chevron-corp... 3. Chevron makes up about 1% of the S&P 500. 1% * 10% * $10 trillion = $100 million = 78 million shares of CVX at price during 2018 shareholder meeting 4. If 78 million shares voted YES on proposal instead of NO, vote would have passed with 52% in favor (as opposed to 54% in original post) --- Also, for those interested in other arguments against divestment: 1. Economics Nobel Laureate Oliver Hart wrote a paper calling on companies to maximize shareholder "welfare" (including environmental concerns) not just financial value. In this paper he explicitly calls for a fund that uses engagement rather than divestment. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3004794 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3004794 2. Luigi Zingales (co-author of above paper) calls on UChicago graduates not to divest, but to engage in his 2019 convocation address: https://promarket.org/dear-graduates-heres-what-you-can-do-to-change-capitalism-for-the-better/ https://promarket.org/dear-graduates-heres-what-you-can-do-t... 3. In the New Yorker, philosopher William MacAskill goes into more detail than Bill Gates on why divestment is ineffective: https://www.newyorker.com/business/currency/does-divestment-work https://www.newyorker.com/business/currency/does-divestment-...
  • strainer 7y ago
    Does this case extend to general advice though - that people should stay invested in fossil fuel companies in order to regulate them a bit? It should follow that if we invest more in fossil fuel extraction we can regulate them more. It seems to confound reasonable expectations of what results from investment.
    • patrickthebold 7y ago
      I think it's important to note that when you buy shares on the secondary market the company doesn't get any capital. You are just trading ownership for cash with the current owners. There's a somewhat subtle and pervasive assumption that all owners will seek only to maximize returns (or similar) but that notion really needs to go. Even with that assumption, it doesn't matter if you own shares in fossil fuel companies since all investors are equivalent.
• throwaway_oil 7y ago
  Divestment or investment due to ESG score goals is effective. Internal decisions at F500 oil & gas companies are being made with ESG in mind due to the amount of capital increased scores open up. Source: work for an oil & gas company
  • shinryuu 7y ago
    Do you know why Bill Gates would go out and tell it is ineffective?
    • ZeroGravitas 7y ago
      It's basically a sales pitch for his own investments. He regularly says things that are questionable in this topic and ends with "and the company I'm investing in is the answer". E.g. his pitch for modular nuclear is basically to talk down renewables.
      • jfnixon 7y ago
        Username checks out. I'd definitely believe Bill Gates over J Random Ycombinator any day of the week. And he's right, nuclear is the road to go on if you want reduced emissions.
    • throwaway_oil 7y ago
      He simply may not know. If the oil industry shows a willingness to increase these scores, investors could continue to set them higher, causing a death spiral of capital availability. The ESG-centric investor pitch is a private, C-suite affair.
• runarberg 7y ago
  It seems like regulating emissions should be the job of a government but not shareholders.
• NeedMoreTea 7y ago
  Doesn't this avoid the core point of decarbonising the economy? Rather than getting Chevron to limit emissions, we need them to cease emissions. Which for an oil company means find an entirely new line of business - hopefully something like renewables - or cease to exist. Allow a tiny few to continue for the purposes of creating plastics we can't easily substitute by something else. Yes, that expects and requires far-reaching regulation. Continuing to exist, and emit, just a bit slower is only delaying climate impact, and by a tiny amount.
  • nickserv 7y ago
    Agreed. At this point I'm more inclined to follow the "seize their assets and jail their leaders" doctrine rather than a "let them continue to profit" one.
    • PeterStuer 7y ago
      I'd suggest, if you go that route, just revoking their drilling licence. I find it highly unlikely as current governments, with few exceptions, seem hell bent on extracting even more, even if that means using grotesqly environmental destructive practices such as fracking.
    • coliveira 7y ago
      Correct, we need to largely regulate these companies out of existence.
    • parasubvert 7y ago
      What country would ever vote for such a policy? It is immensely impractical. This level of radicalism is how you get right wing populists who will rather happily jail the environmental radicals. Most of the world continues to rely on fossil fuel for the essentials of life. Change that before throwing execs in jail.
    • thrower123 7y ago
      This is moronic. Unless we are going to massively step up building of nuclear plants, you cannot eliminate fossil fuel usage, for transport, for heat, and most of all electricity. Renewables don't cut it. That would just be suicidal.
• shinryuu 7y ago
  How succesful is the track record of shareholder proposals in general?
• yes-except-no 7y ago
  >typed this from my phone on a plane This kinda defeats the whole "environmentally conscious" point.
• hannob 7y ago
  This comes down to the question whether you should do change "from within". There are probably cases where there's a reasonable case to do such a thing, e.g. if you have an electricity company that has a somewhat balanced mixture of fossil and renewable energy. However I don't think this is a sensible approach if we talk about pure or almost pure fossil companies. There's no way Chevron can be "part of the solution". It's either these companies disappear or the planet will become uninhabitable, there's no middle ground on that. The idea that they can reform themselve has been a lie the oil industry has been peddling for a while. More than a decade ago BP said that now stands for "Beyond Petroleum". We can see how well that went.
• ctdonath 7y ago
  "typed this from my phone on a plane" Irony.
• snowwrestler 7y ago
  Shareholder activism rests on shaky legal ground, which is actively being eroded by the current administration. Generally speaking, shareholders are not considered legal owners of the companies in which they invest and they have little legal right to influence those companies. Shareholder powers, as enshrined in court decisions, basically come down to the decision to buy/sell the security, and voting for directors. But even directors have little legal authority to direct the operations of a corporation--that's the job of management. The job of directors is to hire the CEO and provide oversight, which is itself a limited role. Fundamentally, securitization of the public corporation is not constructed to enable democratic control of corporate operations. Corporations are set up to respond to democratic action (i.e. the collective will of the populace) in two ways: purchase decisions from their customers, and the legal duties placed upon them by governments. Therefore, IMO public activism is best pointed at boycotts and government policy, to affect the decisions of corporations. EDIT to add: divestment is a form of boycott. If human society is going to reduce its production of greenhouse gases, clean technologies will have to displace greenhouse-gas-producing technologies in the economy. That takes innovation and investment. I slightly disagree with Gates in that every dollar that is divested from fossil fuel companies has to go somewhere else. Even if it is not specifically redirected at cleaner technologies, money is fungible and it will result in the relative growth of the overall pool of investment that is available for cleaner technologies.
  • MiroF 7y ago
    Management in this society needs to be brought to heel
• maest 7y ago
  This is a really intresting idea and definitely a big, worthwhile problem. One thing I'm curious about is how do you expect the economics of a green-fund to work? There's a handful of issues I see with this model: 1. ETFs/trackers are commoditized at the moment and, in a lot of cases, the broad, market-tracking funds are subsidised by more niche products offered by the same provider. 2. From a voting perspective, this only really makes sense at a truly massive scale. Even to get something like 0.1% of each company in S&P500, you need 24 billion AUM - and I doubt a 10bps shareholder can hold much sway, even when actively campaining around AUMs. So, you need to be really big to have impact (assuming you follow S&P weightings), but you're competing in a highly comoditized space. I'm sorry if I sound negative, I do hope this works out! I'm really curious to see how you plan on working around the issues I see in the space.