Investment Firms Pursue Two Paths to Corporate Climate Responsibility
A report last week in the Globe and Mail dug into the two divergent strategies for influencing corporate behaviour on issues like climate and energy—buying stock in offending companies and becoming an activist investor to influence their policies, or setting up fossil-free funds to begin starving them of cash and undermining their social licence.
“Both want the same thing, such as not turning a blind eye to polluting companies when choosing stocks,” the Globe notes. “But one strategy addresses it one way, the other goes about it completely differently. And both think they’re right.”
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The story cites Genus Capital Management of Vancouver as an example of a company that manages a suite of fossil-free investment funds. “You’ve got to draw the line somewhere, and our clients draw it at companies that produce, refine, and transport” fossil fuels, said CEO Wayne Wachell.
“Oil executives see the writing on the wall. They want to clean up their portfolios, and they’re all moving…toward cleaner forms of energy,” Wachell explained. For institutional investors that are “involved in sustainability, if that’s part of your brand,” he added, “you’re taking some brand risk if you have a dirty portfolio. Your portfolio should be aligned with your brand.”
Michelle De Cordova, director of corporate engagement and public policy at NEI Investments, stressed the value of activist investing as a strategy to promote change within fossil businesses. “We’re not activist for the sake of being activist,” she said. “We are activist because we are institutional shareholders, because we are running mutual funds, and we take action because we see issues that we feel need to be addressed.”
NEI avoids investing in companies that don’t want to change, and aims for a lot of “hands-on involvement” with the companies it buys into, the Globe notes. “From our perspective, the outcome needs to be that somehow we transition the economy to a more sustainable footing,” De Cordova said. “And ultimately, that has to be a low-emissions, low-carbon strategy.”
She described the approach as “a kind of selective divestment approach, where we avoided investing in some of the companies that have been particularly outspoken against the climate issue, and investing in the ones that have had a more progressive position on climate change.” But ultimately, she said, “you can’t change a company you don’t have a stake in.”