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They will divest. This depends on the PR situation where the company is. But if I was sitting on the board of an energy producer that was under real pressure (a
by hogFeast 5y ago
They will divest. This depends on the PR situation where the company is. But if I was sitting on the board of an energy producer that was under real pressure (an example of this is Shell), my thought would be: right, am I going to have sell up in five years? If so, I am going to deal now because I can probably get a better price today, and I can realise pretty full value either returning all the capital or investing in clean energy.
As you say though, the problem with this logic is that divesting does not change the demand for oil. By definition, anyone who divests cares about the issue. Which begs the question: if these companies are divesting then who are they selling to?
Unfortunately, there is not a lot of careful thought going on here. Fund managers have been invaded, somehow, by people who believe that corporations are responsible for polluting...and if we somehow just punish/shame them enough, then pollution will stop (and I would say this is driven almost entirely by the psychology of individual managers and how they want other people to perceive them). This is not the case. And there is a real risk of things going very, very wrong.
Btw, I don't think the question of virtue signalling is very relevant either. Societies operate through shame. Whether that is shaming someone for being a homosexual or shaming them for polluting. It is effective, and it is a huge incentive (bigger than profit). But the point is not to get confused between the joy that humans get from shaming others/elevating themselves, and actual progress. Climate change is the issue, demand for oil is the cause.
- relax88 5y agoAbsolutely agree on your last point. I’m very concerned that most of the discussion on climate these days is driven by the joy of shaming others/elevating ourselves as opposed to actual progress.
- hogFeast 5y agoI agree. Imo, 99.99% of public discussion is driven by this motive...but that is probably because 99.99% of public discussion is always driven by that motive. This is how people be. On this issue specifically though, I would say that it makes no sense to engage with oil companies. They aren't big polluters (even companies with large downstream chemical operations aren't particularly big polluters, not zero but not huge either). I understand why investors aren't engaging with China or Iran but one of the biggest coal-fired power plants in the world is owned by a publicly-listed Polish company. South Korea, India, Germany, Indonesia, even Russia...very little engagement. What about airlines? Fund managers, and the executives that are ferried in for meetings, are voracious users of intercontinental air travel...nothing? What about the pollution in electric battery production? What about US coal miners? It just seems, so far, that fund managers are going straight for the least important part of the system. I believe that investors should engage with these issues but there is relatively little careful thought (there are exceptions, Chris Hohn is one).
- ErikVandeWater 5y agoThey will divest when they already think a company is a bad investment but use climate change as the justification.