And Everyone Must!

In our earlier series on using financial leverage in the fight for a livable planet, I present the case for using financial investment in fossil fuel companies to exert pressure from the inside and force movement to a decarbonized feature. There is growing awareness of the need for this strategy.

A recent academic paper out of The National Bureau of Economic Research titled “Counterproductive Sustainable Investing”  says:

“…sustainable investing that directs capital away from brown firms and
toward green firms may be counterproductive, in that it makes brown firms more brown without making green firms more green.”

Activists are starting to use their shareholder position to force conversations with corporate management and in the courts.

This series epilogue provides a straightforward road map so every climate stakeholder, of any means, can be involved in this crucial movement.

What’s driving this push is simple: People are dying because of global heating. Fossil fuel emissions continue to increase. Ecosystem destruction bulldozes peoples’ lives. For thirty years, climate activists have been trying to stop the devastation. It’s not working.

Roughly $100 billion dollars has been poured into “climate philanthropy” over the last 30 years [note 1] and we’re not getting our money’s worth. The reason is simple: money, the most powerful energy source on the planet, has not been used to take control of how energy companies are run.

By taking more ownership and control of the fossil fuel industry we will structurally address how Big Oil does business. We need to charge straight into the heart of battle and buy shares of oil company stock, putting financial resources into direct laser-focused engagement with climate-destroying companies.

This idea is shocking to a generation of activists who grew up with calls to divest from fossil fuel and think that buying oil companies’ stock supports or enables them [note 2.] But influence over corporate behavior is achieved using financial muscle and divestment alone isn’t getting the job done.

If we had bought $100 billion dollars’ worth of shares in fossil fuels companies to acquire 5% ownership stakes, we would wield massive influence over $2 trillion worth of all oil and gas companies, controlling roughly 30% of annual emissions.  We’d be within shouting distance of the Paris Agreement goals: “Emissions need to be reduced by 45% by 2030.”

Consider:

Five percent ownership in a company influences corporate board elections, mobilizes other shareholders, and creates an enormous amount of awareness.

Five percent ownership by pro-climate activist investors is five percent not controlled by regressive, uncaring, or ignorant investors.

Five percent ownership in a company means the CEO answers the phone personally when investors call.

This is the power of shareholder activism.

The potential to exert this much influence can’t be ignored. Anyone can, and everyone must become an activist investor and add a crucial tool to their climate action toolbox.

Here are some paths to investor action, for anyone, at any level of commitment and capability.

Spread the Word, Become Informed

As You Sow is arguably the most prominent and powerful organization advocating for pro-social change through shareholder engagement and has a long list of needle-moving successes to show for it.

Their page on shareholder advocacy talks about why it is so effective compared to other types of action. Armed with this information, you’re better able to talk about this approach with others, especially people who are skeptical and are only used to hearing about divesting.

Hands-Off, Simplest Action: Buy a Single Share through Follow This

For about $11 (10 euros) you can cast a vote at Shell’s shareholder meetings.

Follow This lets you buy a share in Shell, British Petroleum, Total Energies, Exxon, or Chevron. With the shares you and others have purchased, they vote on or submit shareholder proposals, influencing companies to decarbonize and mitigate climate damage.

Follow This’ Buy-A-Share page has a description of how the shareholder voting process works and links to buy your share. Get 10 friends to follow your lead and you have made a significant step in building a mass movement.

Nothing else is required on your part if you choose this path.

New to Investing? Open a Basic Investment Account

To directly vote in corporate elections you must own stock. Thanks to mobile stock trading platforms, social media investment groups, and programs connecting shareholders to corporate voting ballots, this is easier than ever.

Robinhood may be the most well-known, and easiest, reputable stock investment platform for the starting investor. There are others if you want to research various features, as you would when picking any financial services provider such as your bank.

An account can be opened with any amount of money, and the sign-up process takes perhaps half an hour. It takes a couple of days after that to confirm a connection to a bank account.

Then you’re ready to be an activist investor.

Vote the Shares You Own

As an activist investor, choose which companies require your attention. Weigh how much money you want to dedicate and how much shares cost, then buy your shares. With shares in your account, it’s time to engage.

Put corporate voting on autopilot with As You Sow’s Vote Your Values. That page directs you to the Iconikplatform where you create a login to get started.

Once you are connected to Iconik, their system will automatically vote your shares at your companies’ annual meetings in accordance with the pro-social and decarbonization-focused As You Sow ESG-aligned proxy voting guidelines.

The voting profile defines two principles, which guide how your vote is cast:

  • Shareholders should have a say on climate change issues
  • Companies should make all possible efforts to limit their negative impacts on climate change

Profits made from your investments can be used to increase your ownership stake and voting power or can be donated to an organization like As You Sow. Use any profits a company generates to fund efforts to mitigate the damage they do.

You can also sign up to Troop and join other activists in voting campaigns.

If You Own ETF’s and Mutual Funds

As You Sow and other groups are fighting complex and expensive battles for your rights to exercise control over the companies in your ETF and mutual funds’ holdings. Because this type of shareholder “pass-through” voting threatens the status quo, it is being resisted.

Investors should contact their ETF and mutual fund management and insist they pay attention to how you want them to vote. Blackrock and Vanguard are both experimenting with how to operationalize some pass-through voting so fund holders can exert their influence. Stay informed. This will happen but outreach is critical.

Another alternative is to move your fund positions to Engine No. 1, which runs two ETF’s that directly engage with corporate management, pushing them to change from within.

Resist the temptation to ignore your funds or just select funds that call themselves “sustainable” or “ESG-focused.” This is giving up voting power where it’s needed the most, and leaves incumbents in place to continue climate destruction.

Activist Investing with Your Retirement Plan

Retirement plans hold trillions of dollars of individuals’ investments, and therefore potentially wield a tremendous amount of economic power. Urge your workplace plan to support shareholder voting – become an activist by engaging your employer and making administrators aware of your position on sustainability and shareholder democracy.

As You Sow’s “Invest Your Values” page lets you research funds that may already be in your employer’s plan. From there, the “Get Started” button takes you to a page with five concise action items to start influencing your company’s plan options.

Your company’s plan defaults may already be scored for how they align with pro-social and low-carbon goals. For example, Whole Foods, Inc. default “Target Date” retirement fund scores only “fair” or “poor” across all categories of As You Sow’s profile. Until the large funds like Blackrock and Vanguard connect fund owners to votes, the focus remains on selecting funds that avoid polluting companies.

Tell administrators where they can directly learn more and take action, and claim the right to vote your ownership stakes.

Working with an Investment Advisor

If you work with an investment advisor, make them aware of your preferences to become actively involved with voting your shares and direct them to As You Sow’s “Institutional Investor” page.

Also tell your manager about Iconik, which provides a service to connect the manager’s clients (you) to the Iconik voting technology.

As a fund manager’s client, you are in control. If your fund manager is not responsive to your preference to vote your shares in alignment with your values, find another advisor who is.

Conclusions

The “climate movement” has invested $100 billion plus on stopping climate destruction and it hasn’t worked – most industry response to political and social pressure has been window-dressing to create an impression of climate action, while emissions and damage continue to grow.

But:

Every share of oil company stock is a vote on how it is run, who runs it, and how its mission will benefit its shareholders.  Stock ownership doesn’t enable or enrich a company – it entitles the stockholder to have a voice. We need to be that voice.

Every share of oil company stock that’s divested, or passively ignored while people are busy elsewhere, is a vote for status-quo climate destruction.

Every climate advocate can help control the behavior of the companies that are destroying our planet by stepping up and stepping in, showing up in the boardroom with dollars and votes.

There is an action roadmap for anyone, at any level of involvement, to follow. All you need to do now is choose your path and take that first step to exercise your power.

Strength is in numbers. As with any mobilization, the network effect is needed to scale up activist investing and every conversation is an opportunity to create awareness of the potential of investment power.   Climate Action Now will soon be hosting actions that will allow everyone to send a message to employers, fund managers, and company management: “as financial stakeholders in these companies we insist on a voice and demand action.” Stay tuned!

 

Footnotes: 

Note 1: According to Inside Philanthropy, “climate change giving [in 2021 reached] between $7.5 billion to $12.5 billion” not counting contributions from millions of individuals. My estimate is based on these numbers, estimating 2022 at $10B and 2021 at $7.5B, and assuming the overall philanthropic giving growth rate of 8% annually back to 1990.

Note 2: A company sells (“issues”) stock shares and gets paid for them only once. After that, stock price changes affect the investors who own the shares – not the company directly. Companies are indirectly affected because executive compensation is tied to stock prices. But this is very uncertain and inefficient – firing executives for stock underperformance rarely happens. The real control over company behavior is held by the Board of Directors, and investors directly vote the Board members in or out. That’s where power must be focused.