
Fossil fuel divestment has ‘zero’ climate impact, says Bill Gates - melling
https://www.ft.com/content/21009e1c-d8c9-11e9-8f9b-77216ebe1f17
======
emckay
Divestment also results in less shareholder oversight of emission heavy
companies because environmentally conscious investors are selling their shares
to investors with less scruples.

This isn't just theoretical.

According to Fossil Free, asset managers with about 10 trillion under
management have committed to divesting.

If you assume 10% of that is tracking something like the S&P 500, then these
investors have sold about 80 million shares of Chevron.

In 2018, shareholders introduced a proposal asking Chevron to limit its
methane emissions. That proposal failed with 46% of the vote.

80 million shares would have been enough to swing the vote to 54% in favor.

I quit my job a couple of months ago to fix this problem. You can learn more
at greengovernance.org or by emailing me at (hn username)@greengovernance.org

(typed this from my phone on a plane but I will add citations later when I get
to my computer)

~~~
NeedMoreTea
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
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
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.

------
kerkeslager
I'm pretty unclear on how anyone even thinks divestment works, actually.

When a company sells stock in an IPO, buying stock from them allows them to
raise capital, so it seems clear to me that you shouldn't buy stock from a
fossil fuel company.

But that's non-investment, not divestment. Divestment is about selling
existing stock.

It's true that divestment drives down the stock price. This could mean that if
a company has retained stock, it would limit their ability to sell that stock
to raise capital in the future. However, if you drive down the stock price,
it's just as likely that you'd be allowing the company to buy back its own
stock at a bargain price, which could help the company by allowing them to
retain greater control. It's not guaranteed that you're hurting the company by
driving down the price of their stock--in fact, you may be helping them.

It might be possible to look at the needs of individual companies and divest
from those companies to drive down the stock price _if and only if_ you think
they will be attempting to sell stock in order to raise capital in the future.
But this strategy has risks, and I've also never heard anyone talk about this
strategy when talking about divestment.

~~~
hinkley
If I own shares in a retailer and I decide that, say, soda is bad, I can try
to use my shareholder rights to talk to them about how prominently they
display soda and possibly reducing their shelf real estate for soda.

But what if I own shares of a soda company? What exactly should I do in that
case? Try to convince them to exit their primary market and become an entirely
different company? Why would I waste my time and energy that way?

It makes absolutely no sense to invest in one kind of company and then insist
they become something else. Find another company that is conceptually similar
to what you had in mind and invest your time and money in them instead.

Get energy companies to invest in not-coal and not-natural gas, sure, but
investing in a petroleum or coal company so you can vote? What exactly do you
think you are going to vote for? Suicide?

~~~
fkdo
Theoretically if 51% of ownership of an oil company wants to seal all oil
wells isn't that what the company should do?

~~~
sigstoat
certainly they could elect board members who'll hire CEOs to execute that
plan.

~~~
simonh
Then minority’s shareholders will sue because their share value declined and
the board’s legal obligation is to pursue shareholder value, not do what the
majority owners of company want them to do.

I’m torn on that, but minority’s shareholders have a legitimate expectation
their rights should be protected.

~~~
dragonwriter
> the board’s legal obligation is to pursue shareholder value

No, its not.

> not do what the majority owners of company want them to do.

Actually, the purpose laid out in most corporate charters is, within the law,
to do exactly that.

> I’m torn on that, but minority’s shareholders have a legitimate expectation
> their rights should be protected.

They have a legitimate expectation that their rights should be protected, but
the right you are basing this argument on does not exist.

~~~
MertsA
I agree that it's not quite as simple as what he was suggesting but it's also
not just majority rule, even if the majority want to screw over the rest of
the shareholders. That's old established case law, at least in the US. See
Dodge v. Ford Motor Co.

[https://en.wikipedia.org/wiki/Dodge_v._Ford_Motor_Co](https://en.wikipedia.org/wiki/Dodge_v._Ford_Motor_Co).

They can largely do whatever they want, so long as there is some rational
argument that it's for the benefit of the company. If 51% of shareholders in
some fossil fuel giant publicly stated that their only goals were to drive the
company out of business and screw over the other 49% of shareholders, that
wouldn't fly. However it's totally fine for them to push a radical new
investment strategy of "buy high, sell low" and drive the business into the
ground that way.

------
ggm
Value of shares is based both on revenues from holding the share and increase
in value as growth. If the superannuation and sovereign wealth and trust funds
worldwide (Trillion-dollar investment vehicles) stop investing in something it
functionally loses 'gold plated' status and cannot be held to be less-
speculative (in reality all shares are speculative but there are differences
of degree and the holdings in the long term funds indicate "safer" bets in
many cases) and so their inherent value becomes more open to question. I
believe this would represent a real decline in value, as their risk changed.
It would have to be declared on many people's books. It would remove some
liquidity from markets, it would represent the kind of alienation of value
which happens when a large thing is held for reasons disconnected from its
actual profit. Enron.

Has the value of owning tobacco shares not changed, as a result of
divestiture? It is possible the dividend payment had to rise, to offset
declines in base share value (for instance)

Gates is making a reductionist statement, I think he has possibly forgotten
what people do in the face of changes in perception of value. His friend "the
sage of Omaha" very much prefers shares which pay dividends and this may be
reflected in what he is saying, since he is not by nature a highly speculative
investor.

~~~
agar
Gates says divestment will not lower carbon emissions. This is very different
from saying it will not lower valuation.

Has the reduction in tobacco companies' stock prices materially affected
smoking rates? I don't think so.

~~~
triggercut
precursory note: Not an analyst - just read a lot of tobacco industry reports

Over the better part of the last decade, many tobacco stocks are down (BAT,
PMI, RT, JT etc,) however most dividends on their common stock are still
increasing YoY. Not certain if it's generally above the market average but
seems to be more than not.

If you look at long term production rates (sticks shipped) cigarette
manufacturing has been dropping YoY for years. But this is because there is a
general drop in demand from higher socioeconomic countries generally and as
consumers switch to "smokeless" "next-gen" alternatives. My observation is
that single sticks are usually sold at a much higher price in those markets
(sometimes due to tax and regulation, but mostly due to local market value),
whereas they are sold closer to cost of production in lower socioeconomic
countries where they target larger volumes per consumer.

It's difficult to paint a picture from the data released in annual reports and
market updates around what the transition (sticks -> e-cig consumable units)
looks like and is perhaps purposefully obfuscated and will probably remain
that way until forced otherwise. As such, relative points of comparison make
their day to day activities harder to judge over the last few years but what
everyone IS doing is huge amounts of M&A, Research and Capital Expenditure to
meet this strategy whilst not raising capital from equity as their share price
drops yet maintaining higher dividends. Why? Because they are cash rich.

Much more generally, from a business perspective, what's happening in the
tobacco industry is fascinating (and equal parts horrifying depending on your
point of view) as these paragons of global supply chain pivot to become
consumer electronics companies.

~~~
clomond
Note, that as a general rule of thumb - large dividends by companies is
essentially the company saying "we can not make use of this cash better than
you, here - take it". This can be common in "mature" markets where it is hard
to justify returns on additional investments in growth. Better to just return
the cash generated to shareholders.

------
voisin
By divesting, the cost of capital for these firms increases which makes the
marginal projects no longer economically feasible. By then putting money into
cleantech, like Gates suggests, we reduce the cost of capital for these firms
which is obviously a good thing.

His actual quote is that it has probably had zero impact to date which may be
true but is largely irrelevant to the proposition that we should divest and
increase the cost of capital for these firms.

~~~
graeme
If prices are based roughly on economic value, then how would divestment by a
portion of the market affect capital access? You'd need virtually all capital
to have an impact.

Otherwise amoral investors could swoop in and capture the profits.

I could see divestment in early stage funding being more impactful when things
are less liquid.

~~~
rocqua
Prices are set by supply and demand. Divestment reduces demand. Probably, the
falling prices also increase demand, but fundamentally, if fewer people want
something the price should drop.

~~~
graeme
Does this work in liquid markets though? Demand could obviously drive up price
beyond fundamental value in a bubble, or below fundamental value in a panic.

But in the ordinary course of things, we would expect the price of a security
to match its value in the long run.

If you are a rational, amoral investor, and you see a security worth $100, you
would be prepared to pay up to $100 for it, and to buy it in as large a
quantity as you could if it was selling for less. Assuming there is more than
one such investor in the market, we would expect them to bid roughly to the
expected value of the stock.

I suspect this was the reasoning underlying Mr. Gates' comments. As long as
customers _buy_ the oil then the security has value for investors.

~~~
ClumsyPilot
There is no 'Fundamental value'. The price is only determined by supply and
demand.

Companies are traded with wildly different valuation to profit ratios,
perception of stability, speculation of future profit, and even ethics. For
example look at TSLA valuation compared to revenue, and compare it to any
other car company. Stock prices also go up after governments print money,
because banks have spare cash to invest but the economics of an individual
company have not changed.

At the end of the day an investor can't calculate fundamental value, there is
no agreed formula for it.

~~~
coldtea
> _There is no 'Fundamental value'. The price is only determined by supply and
> demand._

That's a "first order" thinking.

The parent posits that there are forces working (eg. use value or prestige
value or fad value) before and beyond "demand" (which is obvious - else what
drives demand itself? It's not some magic entity that emerges out of nowhere).

And hence, demand could be driven up beyond a sustainable level (e.g. in the
case of the "gold rush", or the "tulip bubble" -accurate or not-), and be
corrected when that reaches its breaking point. Or a state or business could
also drive up demand artificially in some cases (e.g. buying its own stock
covertly).

> _At the end of the day an investor can 't calculate fundamental value, there
> is no agreed formula for it._

No, but if they're good, they can and should approximately calculate how
different this "fundamental value" is from the traded value, and how sustained
is the demand, to calculate the trajectory of a stock, and its rick...

------
habosa
I agree with Bill that divestment is probably less impactful than many people
think, and certainly not worth all of the effort people go through protesting
trying to get Fund X to divest from Objectionable Investment Y.

However I think there are two obvious ways it has > zero impact. Let's take an
oil company as an example:

1) If fewer influential investors/funds are invested in oil, there will be
fewer people angry if a third party proposes a law or regulation that will
hurt oil profits. As said in the article, it makes change easier. 2) The money
divested will not go under a mattress. It will be invested in something
slightly better (or less worse). Over time this moves money in the right
direction.

~~~
edanm
I don't get your second point- money "divested" is replaced by different money
invested - there's no overall change.

------
colanderman
Maybe I'm weird. I always thought the purpose of divestment was to stop
profiting off of unethical companies, and to eliminate conflicts of interest
for value-driven entities such as nonprofits. I'm surprised anyone would treat
it as a tool to fight climate change.

~~~
Diggsey
Whose voice carries more weight when campaigning to reduce fossil fuel usage:
the person who profits off fossil fuels and will suffer as a direct result, or
the person who has divested themselves completely?

If you have a moral objection to receiving those funds, then just give them to
a charity that might actually help.

The way economics works, if you choose to divest yourself in this way, you are
betting against the profitable use of fossil fuels, but you are not
influencing it (it will either continue or cease on its own depending on
whether it stays profitable). You are simply encouraging someone else (who
maybe doesn't care so much about the environment) to "take that bet" and
profit off your poor decision.

~~~
dunstad
Choosing not to profit off of fossil fuels may be a 'poor decision' from a
financial perspective, but it's a good moral decision. The fact that our
financial systems incentivize poor moral behavior makes them poor systems.

~~~
Armisael16
Honest question: why is it inherently bad morals to profit from fossil fuels?
If you act the same as you would if you weren’t profiting I don’t seem how it
changes anything at all.

It seems strange to me to cast everyone with an index fund as morally corrupt.

~~~
dunstad
Fossil fuels are a large contributor to climate change, which is forecast to,
and in fact is already causing, great harm.

In order to profit from them you have to have some form of investment in them,
which means in a small way you have contributed to the cause of promoting
fossil fuel usage.

Exactly how morally corrupt people with an index fund are is a question I'll
leave for philosophers.

------
scrooched_moose
> However, Mr Gates questioned the divestment movement’s “theory of change”,
> arguing that investors who want to use their money to promote progress will
> have better results by funding innovative businesses such as Beyond Meat and
> Impossible Foods, two alternative protein companies he has backed.

I must be missing something, but isn't that exactly what "divestment" is? You
sell off shares in fossil fuels and reinvest the money in other industries
which are more climate conscious? It sounds like he's saying people are
getting their money back from fossil fuels and hiding it under the mattress.

~~~
cptskippy
You can both keep existing investments in fossil fuels and invest new funds
innovative companies. It isn't any either or proposition.

~~~
pavon
Moreso, if the fossil fuel investments are profitable, you can use the returns
to fund more progressive companies than you would have been able to otherwise.

------
ahupp
There's an efficient markets reason to believe this. Say you have some
estimate of the value of all future earnings of some business, and then a
group of people divests and pushes down the share price. The future earnings
haven't changed, so this pushes down the P/E ratio and makes the stock that
much more attractive to buyers who aren't divesting. It's just not possible
for it to have that much price impact.

------
brownkonas
I can't help but remember: past results do not indicate nor guarantee future
returns.

Unless someone can un-convince me of general macro-economics, not investing in
fossil fuel companies will lead to depression of the fossil fuel market and
incentivize more relatively lucrative opportunities. The companies of the past
only had the means of production of the past, the companies of the future have
access to non-fossil fuel dependent energy.

~~~
H8crilA
I imagine there's enough capital to take over the divested amounts. Warren
Buffett has no trouble investing in oil (e.g. the recent Occidental/Andarko
merger, he got some juicy preferred shares out of that). And I'm sure he's not
alone.

Taxes/limits, we need that on carbon. The economic status quo on the subject
is also the most obvious response: pay for the externality you're causing when
burning carbon. EU's limits system (cap-n-trade) is already there and has been
for many years, can be plugged into a global CO2 emissions market. This should
eventually extend to cars, airplanes, ships, steel, concrete, home heating,
whatever - even the farting cows.

Either that or solar geoengineering.

------
scohesc
Wow, that's absolutely insane that I have to go through half an hour of
'opting out' from different ad networks in order to visit the actual website I
was going to in the first place without being tracked.

Thank developers for ad-block technology.

~~~
bcaa7f3a8bbc
BTW, these opt-out options work by adding unique cookie identifiers to your
browser (opt-out tracking is implemented by tracking you?). If you block 3rd-
party cookies or ads, it won't work, and you'll need to redo everything if you
clear cookies or change browser.

I'd say these "opt-out" options are not gonna work in practice.

------
Nasrudith
Really divestment is something which seems intuitively to be threshold based
for its impact. If there is a robust investment pool any leaving will just be
auto-filled by those seeking opportunities. However if it gets below a
critical mass from enough divestitures they will find new investments hampered
and those who are "late to the exit" will find it hard to get value out of it.

~~~
gruez
>However if it gets below a critical mass from enough divestitures they will
find new investments hampered and those who are "late to the exit" will find
it hard to get value out of it.

...only if the company actually needs more capital and can't raise it any
other way (eg. bonds). If there's any sort of leak, then you're giving the
holdouts outsized returns.

~~~
ClumsyPilot
What do you mean by the leak? What mechanism would drive outside returns?

~~~
gruez
>What do you mean by the leak?

non-divesters who are willing to invest or extend credit to the company.

>What mechanism would drive outside returns?

It's been explained by other comments in this thread. Basically divesting
worked, it would suppress demand, allowing non-divestors to purchase the
company (and thus the future earnings) at a cheaper price.

------
andrewtbham
Divestment of fossil fuels will probably end up being good financial advice.
German utilities lost value fast when renewables were implemented.

I would put my retirement money in an S&P 500 index fund that excluded fossil
fuels.

~~~
clomond
Well, although this is not financial advice - there does exist an index fund
that does just that (SPYX). It holds the S&P 500 less any company which "holds
fossil fuel reserves". Still some "fossil fuel" companies in there, but for
retail investors with the context of an index fund its probably as close as
you're gonna get at least today.

------
perfunctory
> Those who want to change the world would do better to put their money and
> energy behind the disruptive technologies that slow carbon emissions and
> help people adapt to a warming world, Mr Gates told the Financial Times.

You cannot put your money behind the disruptive technologies if your money is
tied in fossil assets. You'll have to divest first before you can relocate it
elsewhere. You can spend a dollar only once.

~~~
viraptor
The point was that these are separate actions. You can sell the oil shares and
do whatever you want with the money - that doesn't change anything. You can
use that money to invest in green alternatives - that's what matters.

------
noneckbeard
Investors divesting from fossil fuels sounds a lot like sanctions in that they
“don’t work until they work.”[1] It would take an overwhelming number of
investors to make divestment really hurt, which is unlikely. And I definitely
agree that focusing on supporting climate change impact is better than
starving the polluters. But it seems intellectually dishonest to say that
divestors are “wasting their time.” And there’s no reason you can’t do both.

1\. [https://qz.com/1072581/sanctions-dont-work-until-they-do-
the...](https://qz.com/1072581/sanctions-dont-work-until-they-do-the-art-of-
pressuring-north-korea/)

~~~
paulsutter
Wouldn’t it be better to reduce demand? Even just now where supply was
literally taken out with missles (or were they drones?) that doesn’t affect
how much fossil fuel is used. Why would divestment work any better?

To reduce demand you should either create cheaper ways to store alternative
energy or make carbon based fuels more expensive with a carbon tax.

~~~
noneckbeard
Can’t it be both? Those aren’t mutually exclusive, and in fact are hardly even
related in terms of implementation.

And taking out supply to drive up cost of fossil fuel will absolutely have an
impact. At least a few people will opt for the fuel economy version of their
new car in the next few days after seeing the new sticker price of a gallon of
gas.

------
jes5199
Even if this is true, there’s a moral dimension to what you invest in - do you
really feel okay about making money off of fossil fuels?

~~~
colanderman
Indeed I thought this was the entire point of divestment. Not to profit off of
unethical activities. I'm surprised anyone would think this would impact
climate change.

------
MandieD
You divest from something you consider morally problematic so that your other
actions are not influenced by a desire to see your morally-questionable
investment be more profitable.

I own about as much XOM as I pay for heating oil each year. Is that small
enough that I’m not ever so slightly tempted to ask my representative to go
easier on oil drilling restrictions? So far, it’s not tempted me. But if 10%
of my net worth were in fossil fuel stocks? I might be hesitant to ask for
tighter regulation of that industry.

My owning or not owning XOM makes no difference in Exxon’s behavior, but it
might in mine.

------
jchw
> The idea is not to starve companies of capital but to remove their “social
> licence to operate”

Per this description, the basic idea behind divesting seems similar to the
concept of creating social stigmas and perhaps even “cancel” culture. I’d
argue that this isn’t even very effective as a vehicle for positive change
amongst individuals, and seems extremely unlikely to be effective amongst
corporations. Honestly, it doesn’t seem like the idea of corporate social
responsibility has held up well in the modern era, period.

~~~
mxcrossb
Basically, think of divesting as an advertisement. Every time a major player
does it, the public hears a pro environment message, and leaves thinking
climate change is something to act on now, and that green energy is the
future. And public perception does have an impact on the future.

Let me emphasize the cynicism of this point. As you said, no individual
corporation is going to change here (other than running more advertisements to
boost their image), because it’s not like they can stop being a fossil fuel
company. There’s no carrot to match the stick.

------
3131s
Isn't this article presenting a false dichotomy? How is divesting from fossil
fuels mutually exclusive to putting your money behind "tech that helps cut
emissions instead"? In the short term at least, you'll have more money to do
exactly that after divesting.

The only rationale I can see for having this mindset is that 1) it is
imperative to make money in order to reinvest in better causes, and 2)
investing in fossils fuels is the best way to maximize profit.

------
WhatIsDukkha
So where does the dollar to invest in climate innovation come from if you
don't take the dollar out of the fossil fuel stock?

What he said was nonsensical and innumerate. Perhaps its because he has
effectively infinite money?

His comment don't really hold up even under basic charity. The dollar in
fossil fuels is a dollar not in another industry with a better story for the
environment.

The rest of us have a limited pile of dollars to decide with.

~~~
comicjk
Imagine a climate innovator that is selling stock worth $1 billion based on
expected returns. That stock can be expected to sell for $1 billion, and no
more, even if $0.5 billion of that comes from altruistic investors. The
altruistic investors can't drive up the price - as long as money from amoral
investors is needed, the amoral investors are the price setters, because they
won't pay more than what they think the expected returns are worth. They will
step aside as the altruistic investors move in. The altruistic investors would
do better to just invest for maximum returns and donate money.

Note, I don't act according to this advice: I'm invested in sustainable funds
despite my own arguments. But I don't expect this to go very far, so I'm also
donating to appropriate causes.

~~~
ClumsyPilot
Your argument works well if we are talking about easily quantifiable assets
like a wind farm where you can estimate annual returns for the next 20 years.

It falls flat when we are talking about genuine inventions and new
technologies, where the greater the investment, the faster it can scaled and
the more it can be developed/refined. It is not possible, in such case, to say
that a specific opportunity is worth $1 billion, just like, as the point of
raising the seed round you can't know what will be the valuation at IPO

------
Udik
For a start, I can't even understand what is exactly the point of advocating
any action against fossil fuel companies. After all, those companies only
exist because _we_ , directly or indirectly, buy their products. And we buy
their products because they're cheaper than the alternatives, or even
irreplaceable.

It's as if everybody were asking the government to take action against the
supermarket where we all do our grocery shopping. We could ask the government
to impose a heavy tax on our shopping (which we'd have to pay dearly, of
course) but no, we want some action to be taken against the company that owns
it. What is the purpose?

Another commenter links an article on the Guardian that claims that only 100
companies are responsible for 70% of the global greenhouse gasses emissions.
It's as if those companies were producing _and consuming_ the fuel themselves.
No, those companies sell fossil fuels to us, _we_ are buying and consuming it.

Am I being extraordinarily naive? Or this thing just doesn't make sense?

~~~
ClumsyPilot
The problem is dominated by structural issues and non-market forces. You can
live the exact same lifestyle in France and US, and your carbon footprint will
be almost 3 times higher in the US.

Your personal buying habits cannot address the fact that energy grid is more
carbon intensive from US, I cannot but electricity directly from a nuclear
powerplant, UK government gives subsidies to fossil fuel companies, energy
policy is politically decided, most of energy market is B2B, meaning you are
not even a buyer there, the list goes on and on.

~~~
Udik
> Your personal buying habits cannot address...

No, of course not. But the end result of _any_ policy to curb fossil fuels
consumption will be an increase in their price to the consumers and a shift of
the demand to other sources. So why don't activist simply demand more taxes on
those fuels, instead of blaming the companies that produce them?

> most of energy market is B2B, meaning you are not even a buyer there

You're a buyer of the products made by companies that use fossil fuels; so
yes, in the end you're a buyer too.

~~~
ClumsyPilot
Many products could be produced without fossil fuels, but aren't. Like
delivery company could get an electric truck. A consumer is powerless

~~~
Udik
> Many products could be produced without fossil fuels

Sure. But at the same price, at least initially? A delivery company will
change its fleet to electric trucks if it costs less. Otherwise, it means that
the consumer has to pay the price difference.

~~~
ClumsyPilot
For the most part ui ou are right, and that's fine. Boneheaded examples exist,
like energy inefficient building in Uk

------
beatpanda
Divestment also means asking banks and institutions to commit to not investing
in new fossil fuel infrastructure, not just selling stock in existing oil and
gas companies. Making it more difficult for new fossil fuel infrastructure
projects to access capital absolutely has an impact.

------
sarah180
He's probably right that there are much more effective ways to focus resources
& energy, but you'd have to believe that markets and elasticity don't exist to
believe the impact is zero.

If you reduce the pool of investors, the cost of access capital goes up. This
means companies that would start a new fossil fuel project will have to give
up more money to get investment or loans. Most projects will be unaffected,
but this will be the difference between some marginal projects happening and
not happening.

This is pretty basic economics, though perhaps Gates has a reason in mind not
to believe this will apply.

------
myspy
"put their money and energy behind the disruptive technologies that slow
carbon emissions and help people adapt to a warming world?"

Example here is Beyond Meat.

I hear the recommendation a lot to put a high price on CO2, i.e., what creates
a lot of CO2 during production gets more expensive. The idea is demanded by
the Friday for future movement, or better said by the experts they asked how
to solve our climate change problem. I think it would be the right direction.

------
nabla9
Fossil fuel divestment is basically subsidy for those who don't care.
Divestment causes stock price drop and it increases ROI for those who invest
into the company.

~~~
dannypgh
It's really "threat that more people will want to divest or remain divested
when they would have otherwise invested" that can cause change.

The board answers to the shareholders, and shareholders generally want to be
able to sell their shares at a profit. If shareholders start to believe that
the market for the shares is going to continuously decline because of some
activity the company engages in, that creates an incentive to pressure the
company to change behavior.

~~~
shkkmo
Rising stock prices is not the only way or even the primary way that companies
generate returns for their investors. Many oil companies pay dividends to
their stockholders and these can outweigh the gain from increasing stock
prices. BP, for example, uses a significant amount of their cashflow to pay
dividends and buy back stock. Their current dividend return is ~6% and has
varied between ~2% and ~8% over the last 10 years meanwhile their stock price
has fluctuated (by a significant amount) in the 30s and hasn't produced any
meaningful gains in value for the average "Buy and hold" investor.

Long term holders of BP stock make their money from dividends, not from
increases in value in the BP stock. Making that stock cheaper just means that
the dividend rate of return goes UP.

~~~
dannypgh
It is true that stocks are assigned some value based on expected future
dividends, but this only one component of the value of a share, and for any
company undergoing a divestment campaign, this will shift.

A publicly traded Ponzi scheme can maintain a 10% yield for 10 years with only
an IPO.

~~~
shkkmo
I don't think I understand your point. Did I ever claim that expected dividend
returns are the only factor in stock price?

> for any company undergoing a divestment campaign, this will shift.

Since you don't specify, I will presume that you are implying that the "shift"
would be an decrease in the portion of the value of the stock that is derived
from expectations of future resale value. High dividend companies will thus be
less susceptible to divestment campaigns as their stock's value is less
dependent on that future resale value.

If divestment happens gradually enough, it is potentially feasible for stock
buybacks to somewhat compensate. With companies (such as BP) that do both
buybacks and dividends (and aren't thus aren't raising capital by selling
stocks), the lower stock price directly helps the company buy back more stocks
which then reduces the costs of dividends and makes the company financially
stronger. As long as enough of their remaining shareholders don't make waves
(because they like the idea of a stronger company that will be more likely to
continue paying dividends) divestment is actually beneficial to that company.

As I mentioned elsewhere, I think coordinated, contingent and relatively quick
divestment has the greatest potential for motivating share holders to demand
changes from the company to protect stock price. This sort of control is ONLY
possible if you haven't already gradually divested your stock. This sort of
shareholder activism does have great potential, but it is rarely done out of
concern for morality or society rather than profit.

So it seems to me that if environmental activists want to influence the
behavior of oil companies, they would be better served by buying and holding
oil company stock and becoming activist investors. (I agree with Bill Gates
the best result for the planet is served by taking that money and investing it
into green tech companies.)

Note that companies (such as BP) are only as invulnerable to divestment as
they are because of they don't need to raise money by selling stocks. In a
situation such as South Africa in the 1980s, their need to raise money by
selling stocks made the country much more vulnerable to a divestment campaign.
(It also helped that South Africa in the 1980 had a GDP of ~250MM after
inflation and that is ~1/1000th of BP's current gross revenue)

------
coldtea
So, how about the concern that if we cut fossil fuel to 0% tomorrow (or even
in a year or decade), we would have absolutely no way (for decades) to replace
it.

We don't have enough alternative (renewable or nuclear or whatever) energy
power, we need to build billions of electric cars (if we are to replace the
current fleet), thousands of wind/solar/etc installations, ways to regulate
fluctuations and store the energy that don't involve fossil fuel grid, as well
as tons of factories, machinery, etc currently operating on fossil fuel,
including our entire airplane fleets, plus all the armies in the world... Oh,
and find the money to do all that...

So there's that... Some people seem to believe that if we turned a switch, we
could turn to 100% renewables tomorrow...

------
crankylinuxuser
This, I would believe is a false hit piece that is trying to protect coal,
oil, and gas.

[https://www.newyorker.com/news/daily-comment/money-is-the-
ox...](https://www.newyorker.com/news/daily-comment/money-is-the-oxygen-on-
which-the-fire-of-global-warming-burns)

"It has become the largest such campaign in history: funds worth more than
eleven trillion dollars have divested some or all of their fossil-fuel
holdings. And it has been effective: when Peabody Energy, the largest American
coal company, filed for bankruptcy, in 2016, it cited divestment as one of the
pressures weighing on its business, and, this year, Shell called divestment a
“material adverse effect” on its performance."

------
nullc
For a while I've wondered if the math might work out such that the most cost
effective way to fight greenhouse gas emissions is simply to buy up and horde
oil on the open market.

The oil has carbon already trapped in an efficiently storable form, it's
absurdly dense, it's quite inexpensive... and buying it up would have a
secondary effect of driving up the price, which would incentivize efficiencies
and alternatives.

Bonus, as a government program it would be more appealing to climate change
deniers than alternatives because at the end of the day you'd have oil, which
could later be used if we figure out some better solution (or that the problem
didn't exist in the first place).

~~~
omegaworks
Artificially propping up the price of oil won't have the intended effect:

It would incentivize the extraction of oil, which at present requires
infrastructure that damages the surrounding environment. A lot of the oil is
in the ground now because it doesn't make financial sense to extract it; the
cost of extraction is less than the revenue generated from its sale on the
market.

There's plenty of oil hoarded in the ground now in private wells. People
sitting on land rights waiting for the right time to sell that oil on the open
market. A massive government program that artificially props the price of oil
up is the perfect setup for a massive wealth transfer to people that do
nothing but hold title. That extracted oil would need to be transported or
piped away from the extraction site and stored in perpetuity, all of which the
land was already doing for free!

Techniques for extraction like fracking destroy the quality of adjacent
groundwater and externalizes that cost onto the surrounding community. We
don't want a government program that incentivizes poisoning groundwater on a
hotter planet with diminishing glacial melt surface water.

Planet Money did an excellent series on the crude economy:
[https://www.npr.org/sections/money/2016/08/26/491342091/plan...](https://www.npr.org/sections/money/2016/08/26/491342091/planet-
money-buys-oil)

------
tomtomtom777
It's an interesting perspective and one pursued by the initiative:

[https://follow-this.org/en/](https://follow-this.org/en/)

They offer shares of Shell in an attempt to transition the company to green
energy.

------
ineedasername
Sure, unless everyone divests, a few people selling will drive down the share
price only until those not selling realize the asset is undervalued and buy
the price back up. All that, without actually changing the production and
consumption model.

------
manfredo
It artificially deflates the demand for equity in fossil fuel companies. Which
theoretically would result in lower willingness to invest in fossil fuel
ventures. But these companies already exist, and artificial deflation of their
stock price won't keep people from fueling up their cars.

I think a better strategy would be conditional investment tied to reduction in
emissions. Have a mechanism to buy $X stock at a higher price in exchange for
a power company to replace a coal plant with a gas one, or replace a gas plant
with a solar farm.

------
avmich
[https://johncarlosbaez.wordpress.com/2019/09/18/divesting/](https://johncarlosbaez.wordpress.com/2019/09/18/divesting/)

Today it is large corporations which have the greatest power over daily life,
and they are far more susceptible to pressure and change then the insulated
bureaucracies of governments.

Thankfully Bill and many others knew this years ago, and started a divestment
campaign of breathtaking magnitude...

------
Beltiras
Neccesary but not sufficient. Divestment in dinofuel should be closely
followed by investment in clean energy tech, sequestration or other carbon-
saving or net-negative industry.

------
omegaworks
Fossil fuel divestment has zero climate impact, says a billionaire with
capital invested in the fossil fuel economy.

>Those who want to change the world would do better to put their money and
energy behind the disruptive technologies that slow carbon emissions and help
people adapt to a warming world, Mr Gates told the Financial Times.

Divesting from the fossil fuel industry doesn't prevent people from investing
in alternative, disruptive technologies.

In fact, it frees up more money to be invested in those technologies!

------
cwkoss
Bill Gates rarely makes controversial statements like this. I wonder if his PR
team specifically contrived this statement to distract from allegations re:
Jeffrey Epstein.

~~~
randogogogo
I have not gotten the impression anything Jeffrey Epstein related was
"sticking" to Bill Gates.

~~~
cwkoss
[https://twitter.com/search?q=bill%20gates%20epstein&src=type...](https://twitter.com/search?q=bill%20gates%20epstein&src=typed_query&f=live)

~400 tweets containing "bill gates" and "epstein" in the past day

It seems the allegations are not very credible, but PR team may still want to
spin story away from it.

------
lgessler
This analysis ignores the social significance of divestment (i.e., which might
somehow contribute to other actions which are more impactful), though it might
still be that even after accounting for this divestment isn't what
environmentally-conscious people and organizations should prioritize.

------
JulianMorrison
Really the problem here is taking the rules of a free market economy as
immutable and not seeking a _political_ solution that could outright ban
misbehaviour, rather than trying to defund it piecemeal.

The correct solution to ecocide is a criminal charge and seizure of assets.

------
jsingleton
This is the report mentioned in the article:
[https://www.gatesfoundation.org/goalkeepers/report/2019-repo...](https://www.gatesfoundation.org/goalkeepers/report/2019-report/)

------
Synaesthesia
Eliminating or reducing government subsidies for oil and coal companies
probably would have a climate impact.

Even if divestment has “zero impact” as Gates suggests (which I doubt, but
ok), it would have a symbolic importance and possibly spur others on to change
their approach.

~~~
DennisP
And to that point, it reduces the number of influential rich people with an
incentive to lobby against climate action.

------
Angostura
So divest from fossil fuels and reinvest in disruptive technologies that slow
carbon emissions.

Got it.

------
bayareabronco
Divest from fossil fuels and invest the funds in clean energy. What am I
missing?

~~~
loeg
The other investors will sell the now marginally overpriced clean energy funds
and buy the now marginally underpriced fossil fuel funds. Stock prices and
capital available remain the same.

------
scottlocklin
I love this sorts of moralistic windmill tiltings; they make for wonderful
buys.

------
triceratops
You can't fix a tragedy of the commons with individual action.

~~~
zackmorris
Also I would argue that the smug truisms that people spout such as "divestment
won't solve climate change" have a very damaging effect on causes that require
concerted action by the public.

For example the "Penn & Teller Bull$#!@: Recycling" episode left many viewers
under the impression that recycling is a waste of time because it's not mature
yet and is sometimes mismanaged. That probably lowered global recycling by
some small percentage over several years. A tremendous negative impact in the
scheme of things, for a couple guys trying to be funny.

It's generally bad form to undermine causes via pedantry, for example:

* Nobody should listen to Al Gore about global warming because he flies a private jet!

* We can't raise taxes on cigarettes because people will just buy them anyway no matter how much they cost!

* Why bother preventing deforestation when nature does what it wants with forest fires anyway!

Yet we hear these sorts of arguments right here on HN on practically every
submission.

Better to at least try to be part of the solution than use criticism as an
excuse to do nothing, IMHO.

~~~
triceratops
I'm not saying "do nothing". I think legislation is a better tool to fix this
problem and everyone's time would be best spent on working on that.

> Nobody should listen to Al Gore about global warming because he flies a
> private jet!

Well, I think we should still listen to him. He could also fly first-class and
set a better example. But average Joe passenger won't fly less just because
"it's good for the planet". He will fly less if it starts to cost more because
of a carbon tax.

> We can't raise taxes on cigarettes because people will just buy them anyway
> no matter how much they cost!

That's not true in the slightest; cigarette consumption is inversely
correlated to taxes. A cigarette tax is the opposite of individual action. I'm
strongly in support of a carbon tax.

> Why bother preventing deforestation when nature does what it wants with
> forest fires anyway!

That's...a super-weird statement to make in the context of what I said.
Preventing deforestation can't be accomplished with individual action e.g. by
boycotting Amazon-grown soy or something. You need laws and tariffs.

FWIW I also recycle and try to keep up with the latest and greatest on plastic
sorting. But I also know it doesn't do anything in the big picture. Add a $10
fine for badly sorted recycling and the problem will fix itself.

~~~
zackmorris
Ya I'm right there with you. Good points!

------
biehl
Divestment is a practical prerequisite for effective regulation of fossil fuel
companies.

Right now tough regulations will directly hurt pensioners with pensions
invested in fossil fuel companies. After divestment will not hurt those people
in the same direct way.

So:

Step 1) - Divest

Step 2) - Regulate to fully compensate for externalities caused by fossil fuel
companies without worry of collateral damage

~~~
anonuser123456
Right and here's the problem. Pension funds are notoriously underfunded and
filled with people that don't give one iota of a rip about where it's
invested. Pension managers will not leave those yields on the table or they'll
fave a revolt.

------
Havoc
I think he underestimates the wrath of a market that has judged a market
sector unpopular

~~~
anonuser123456
One markets unpopularity is anothers arbitrage.

The underlying value is what drives the asset in the long run.

Oil companies play the long game.

~~~
Havoc
> Oil companies play the long game.

Except in the long run these companies are dead unless they pivot.

------
mushufasa
If you agree that the real solution is for investors to engage with your
portfolio -- to own what you own -- we've built www.yourstake.org to help you
do so.

If you take action (or decide not to), I'd love to hear your feedback :
(patrick) @ yourstake.org.

------
bartimus
Why is nobody concerned about the next 100.000 years lasting ice age which is
already overdue by roughly 4000 years?

~~~
input_sh
Maybe because we see 0 evidence of an ice age happening any time soon, while
we see the opposite catastrophe happening in a timespan from yesterday to
within a few decades, depending on where you live?

------
rmrfrmrf
Bill Gates also doesn't support the Green New Deal or government involvement
(god forbid his taxes go up) in mitigating climate change. His public prayers
for a technocratic solution to climate change are ridiculous and embarrassing
for him considering he knows it will never happen.

~~~
loeg
Bill Gates generally supports higher taxes on the very wealthy, like himself.
Not sure why you decided otherwise.

------
antibland
Climate change is solved with neither divestment nor technology, but with
hard-stop policy reforms. Considering just 100 corporations are responsible
for 71% of global emissions [0], we know who's doing the damage and how
they're doing it.

[0] [https://www.theguardian.com/sustainable-
business/2017/jul/10...](https://www.theguardian.com/sustainable-
business/2017/jul/10/100-fossil-fuel-companies-investors-
responsible-71-global-emissions-cdp-study-climate-change)

