This is a post about shareholder activism and why we need it.It's easy to forget that we own the companies that we invest in – and by asking questions and making our views known we can have an impact.
Before I get onto that, I want to mention two key facts about climate change. The first is that the mean global surface temperature rise, whether it's 1.5° C, 2° C or 5 to 6° C, is really shorthand for something else. It's shorthand for huge increases in the extremes: floods, droughts, fires and hurricanes. You could think of it as an increase in the volatility of the system. So if a 2° C temperature rise doesn't sound too terrible, then you're perhaps missing the point. The second is that climate change will affect everybody's quality of life, no matter how wealthy you are or where you live. 5 million refugees from the war in Syria nearly broke the EU (most are still outside it), and immigration is obviously a charged topic in the UK today. Try imagining the impact of several hundred million climate refugees from the Indian subcontinent and sub-Saharan Africa. Then there are food price rises, increases in the costs of insurance, fundamental changes to ways of life that have persisted for centuries, coastal communities disappearing, I could go on.
Right, so let's talk about some specifics:
Hsbc Holdings (LON:HSBA) (HSBC) has financed US $110.7 billion to fossil fuels since the Paris climate agreement was signed. This includes finance for companies building tar sands pipelines, and appallingly polluting projects with Saudi Aramco, and Chevron in Kazahkstan.
Barclays (LON:BARC) are lending money to tar sands pipelines in Canada which produce very carbon intensive oil at the additional cost of total landscape destruction.
Standard Chartered (LON:STAN) lends money (April 2021) to the Indonesian coal giant Adaro, one of the world's biggest coal producers, which Standard Chartered's own analysis says is compatible with 6 C of global warming, which is utterly catastrophic (Sea level rise of up to 60m.) This is despite rhetoric from Standard Chartered (LON:STAN) about net zero by 2050.
Legal & General (LON:LGEN), despite generally being one of the more responsible investment managers, still have indirect holdings in coal companies like Adaro through index tracker funds. Every provider of index funds needs…
I agree we should stop using coal but what do you replace it with? You can't just turn coal off without avoiding massive power cuts. China is already suffering power cuts. Nuclear is one option but takes many years to built power stations, also not popular with many people. Renewables are not very consistent in output, lack of sun and/or wind. We need to persuade the large coal consumers to switch to clean energy, that is mainly China, India and USA. As can be seen at Cop26 they were not keen to commit and watered down any agreements.
It looks like South Africa will be switching from coal to renewables.
We can look closer to home by reducing our power consumption, drive less miles, fly less, turn the heating down or off etc.
I only hold Legal & General (LON:LGEN) out of those. Avoiding companies in trackers is difficult but it's a fair point about excluding certain companies but who decides which ones, for example does Bp (LON:BP.) get excluded?
