[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)

[emckay]

Here are the promised citations:

1. $10 trillion divested: https://gofossilfree.org/divestment/commitments/

2. Chevron's shareholder proposal: 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

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-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-...

[strainer]

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.

[mushufasa]

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]

Awesome projects! I'd love to hear your thoughts. I'll shoot you an email tomorrow.

[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.

[parasubvert]

Cutting off the supply without shifting demand doesn’t solve the problem though, it aggravates people to vote in populists who will deregulate.

[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.

[runarberg]

It seems like regulating emissions should be the job of a government but not shareholders.

[throwaway_oil]

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]

Do you know why Bill Gates would go out and tell it is ineffective?

[jdhn]

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?

[emckay]

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/Ce...

[rory096]

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.axios.com/climate-methane-votes-fail-at-chevron-...

[snowwrestler]

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]

Management in this society needs to be brought to heel

[hannob]

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.

[maest]

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.

[TheGallopedHigh]

Could you talk a bit more about your company?

[emckay]

We're creating an S&P 500 index fund that aggressively uses shareholder engagement to get companies to reduce emissions through their supply chains.

[ctdonath]

"typed this from my phone on a plane"

Irony.

[jacquesm]

They may have lost that vote, but how did it affect the stockprice?

[shinryuu]

How succesful is the track record of shareholder proposals in general?

[mochris]

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]

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?