[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.

[patrickthebold]

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.

[dragonwriter]

> I think it's important to note that when you buy shares on the secondary market the company doesn't get any capital.

Companies are artificial abstractions. The people who invested in the company before you get money. If you consistently engage in a policy of engagement to deal with bad corporate citizens, you increase the positive financial rewards for earlier investors to use their governance influence to direct firms to bad corporate citizenship. Conversely, divestment does the opposite.

The magnitude of the effect of any one investor doing that is small, but that's the situation with all economic boycotts.

[scoot_718]

Divestment makes the shares cheaper for less responsible investors, who thank you for the value you let them have for less money.

[strainer]

It might be rather intangible, but I expect there must be a strong tendency for businesses to benefit overall when their shares are bought or kept rather than sold.

[akiselev]

It's not as intangible as most people think. Executive compensation very often has bonuses and incentives tied to share price so the incentives don't even have to be business wide, they just have to be set up for the people ultimately in charge.

[DuskStar]

> 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.

I think a slight modification holds, though:

"all owners will seek only to maximize returns across all of their holdings, to themselves"

Chevron causing environmental damage costing me $100 personally outweighs the extra $50 those shortcuts added to my fraction of the company, etc.

And if you include moral/social costs on top of that, then IMO there really isn't anything that the expanded "maximize returns" statement doesn't cover.

[scoot_718]

Other than actual share rounds and shareholder meetings, the company doesn't actually see any result from investments.

[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.

[Gibbon1]

The way I figure if someone buys a gasoline powered car, they've just committed us to 50-100 tons of CO2 emissions. Seems like that is what you want to stop not playing games with fuel taxes.

[orbifold]

That seems incredibly low. 1kg of Beef produces ~1ton CO2 equivalent emissions

[MertsA]

This is incorrect. Beef takes a ton of food and releases a good bit of greenhouse gases but nowhere near a ton per kg of meat. Here's a study looking at multiple other studies on the CO2 equivalent greenhouse gases per kg of beef. In particular you'll want to look at page 85.

https://web.archive.org/web/20070709233421/http://www.defra....

That gives a range from 32.3kg per kg of beef to 15kg per kg of beef.

[donkeyd]

According to EPA [0]:

> A typical passenger vehicle emits about 4.6 metric tons of carbon dioxide per year.

I guess that's why so many people are urging to buy less beef. [1]

0: https://www.epa.gov/greenvehicles/greenhouse-gas-emissions-t...

1: https://www.theguardian.com/environment/2014/jul/21/giving-u...

[Luuseens]

Can you provide some sources for this number? Seems high, and first results from a cursory Google search suggest it's between 14 to 60 kg CO2 per 1 kg of beef.

[QuantumAphid]

Although beef and other animal ruminants have always been part of the planet's carbon cycle where carbon sources are kept in balance by carbon sinks. What knocks us out of balance is extracting carbon sources (ancient forests) from underground and burning them rapidly within a century-- much faster than any natural carbon sink can absorb.

[Gibbon1]

Yeah our problem isn't just cars, it's basically everything.

[NeedMoreTea]

Much of the developed world already has deregulating populists - that's half the damn problem. Except populism never lasts, and populist regimes are always incredibly divisive and usually end discredited.

It's what comes next that matters.

[parasubvert]

It can last over a decade, that’s plenty of time to wreak havoc.

[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.

[coliveira]

Correct, we need to largely regulate these companies out of existence.

[parasubvert]

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]

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.

[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?

[throwaway_oil]

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.

[ZeroGravitas]

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]

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.

[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...

[momokoko]

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

[JohnJamesRambo]

I like most of your message but how do I get to work if I don’t drive and don’t have public transit and live 30 minutes away?

[toomuchtodo]

Walk, ride a bike/e-bike/electric scooter, or drive an electric vehicle (to not include the last option is unreasonable IMHO). A Nissan Leaf or Chevy Bolt are options, or a Tesla if you want to splurge.

[JohnJamesRambo]

Walk 20 miles twice a day? Is buying a Tesla for $50,000 really better for the environment than driving my old Volvo that gets 30 mpg? After you take into account all the environmental costs associated with constructing a new vehicle?

[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.

[veezbo]

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]

Exactly! Thanks for the kind words.

[tonfa]

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.

[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?

[windexh8er]

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]

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.