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Fossil fuel divestment has ‘zero’ climate impact, says Bill Gates

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Re: Fossil fuel divestment has ‘zero’ climate impact, says Bill Gates

#81

Post by golemiprague »

andrewtbham wrote: post #4

Divestment of fossil fuels will probably end up being good financial advice. German utilities lost value fast when renewables were implemented. I would put my retirement money in an S&P 500 index fund that excluded fossil fuels.

If German utilities lost value it means that moving to renewables didn't work, isn't it? Not that the fossil fuel companies lost value. Which I think indeed what happened there, they had to go back and use coal because the whole renewable thing didn't work so well for them and just made everything more expensive without really providing enough energy.

Re: Fossil fuel divestment has ‘zero’ climate impact, says Bill Gates

#82

Post by nradov »

voisin wrote: post #3

By divesting, the cost of capital for these firms increases which makes the marginal projects no longer economically feasible. By then putting money into cleantech, like Gates suggests, we reduce the cost of capital for these firms which is obviously a good thing. His actual quote is that it has probably had zero impact to date which may be true but is largely irrelevant to the proposition that we should divest and i…

Divesting only (marginally) increases the cost of capital for firms which seek additional financing through secondary stock offerings. That doesn't apply to most oil companies.

Re: Fossil fuel divestment has ‘zero’ climate impact, says Bill Gates

#83

Post by shkkmo »

gowld wrote: post #52
shkkmo wrote: post #13

Earlier quoted context omitted.

It's a bit wordy, but the relevant argument is here: > everything still gets owned by someone. So, clearly the group without such qualms, call them the sinners, have to own more than they otherwise would of the sin stocks. How does a market get anyone, perhaps particularly a sinner, to own more of something? Well it pays them! In this case through a higher expected return on the segment in question.

The article's loose language is confusing. The full analysis has 3 parties: virtuous boycottor investors, vicious (as in vice) investors, which the article incorrectly calls "sinner", and the evil corporation. The conclusion is that the virtuous boycottor investors' weapon is forcing the evil company to pay the vicious investors a premium return, until the corporation is bankrupt, and the vicious investors laugh all…

The specific question being answered was:

> how will that give the non-morally-driven investors higher returns?

Which is why I only quoted the section that applied directly.

The argument doesn't say that "sinful" companies will be forced into bankruptcy, it goes more like this:

1) virtuous boycotting of a company means the stock has to offer higher returns to "sinful" investors so they buy more shares.

2) Higher returns mean that the bar for the expected return of "sinful" capital expenditures by companies will be higher and thus there were be fewer choices by companies to expend capital in "sinful" ways.

I think the second stage of this argument is... weak and conditional. For a company like BP that offers significant dividends, a lower stock price directly correlates to a higher return without costing the company anything. There is only a downside if that company is selling stock to raise capital. Since BP has been buying back stock for years, it seems like this is actually a benefit to BP as well.

Re: Fossil fuel divestment has ‘zero’ climate impact, says Bill Gates

#84

Post by Diggsey »

colanderman wrote: post #77

Maybe I'm weird. I always thought the purpose of divestment was to stop profiting off of unethical companies, and to eliminate conflicts of interest for value-driven entities such as nonprofits. I'm surprised anyone would treat it as a tool to fight climate change.

Whose voice carries more weight when campaigning to reduce fossil fuel usage: the person who profits off fossil fuels and will suffer as a direct result, or the person who has divested themselves completely?

If you have a moral objection to receiving those funds, then just give them to a charity that might actually help.

The way economics works, if you choose to divest yourself in this way, you are betting against the profitable use of fossil fuels, but you are not influencing it (it will either continue or cease on its own depending on whether it stays profitable). You are simply encouraging someone else (who maybe doesn't care so much about the environment) to "take that bet" and profit off your poor decision.

Re: Fossil fuel divestment has ‘zero’ climate impact, says Bill Gates

#85

Post by pavon »

cptskippy wrote: post #55
scrooched_moose wrote: post #54

> However, Mr Gates questioned the divestment movement’s “theory of change”, arguing that investors who want to use their money to promote progress will have better results by funding innovative businesses such as Beyond Meat and Impossible Foods, two alternative protein companies he has backed. I must be missing something, but isn't that exactly what "divestment" is? You sell off shares in fossil fuels and reinvest…

You can both keep existing investments in fossil fuels and invest new funds innovative companies. It isn't any either or proposition.

Moreso, if the fossil fuel investments are profitable, you can use the returns to fund more progressive companies than you would have been able to otherwise.

Re: Fossil fuel divestment has ‘zero’ climate impact, says Bill Gates

#86

Post by Nicholas_C »

voisin wrote: post #3

By divesting, the cost of capital for these firms increases which makes the marginal projects no longer economically feasible. By then putting money into cleantech, like Gates suggests, we reduce the cost of capital for these firms which is obviously a good thing. His actual quote is that it has probably had zero impact to date which may be true but is largely irrelevant to the proposition that we should divest and i…

It’s a bit more complicated though as oil prices will rise if firms don’t take on projects. This in turn would cause those marginal projects to look a lot better down the road and oil prices for consumers will be a lot higher (which might be a good thing if it lowers fuel usage).

I think this might be happening right now. There isn’t a lot of reserve replacement going on as everyone is focused on cash flow and the capital markets for energy remain closed due to ESG concerns from investors. If so, the prices will rise eventually and new projects will start.

Re: Fossil fuel divestment has ‘zero’ climate impact, says Bill Gates

#88

Post by ggm »

Value of shares is based both on revenues from holding the share and increase in value as growth. If the superannuation and sovereign wealth and trust funds worldwide (Trillion-dollar investment vehicles) stop investing in something it functionally loses 'gold plated' status and cannot be held to be less-speculative (in reality all shares are speculative but there are differences of degree and the holdings in the long term funds indicate "safer" bets in many cases) and so their inherent value becomes more open to question. I believe this would represent a real decline in value, as their risk changed. It would have to be declared on many people's books. It would remove some liquidity from markets, it would represent the kind of alienation of value which happens when a large thing is held for reasons disconnected from its actual profit. Enron.

Has the value of owning tobacco shares not changed, as a result of divestiture? It is possible the dividend payment had to rise, to offset declines in base share value (for instance)

Gates is making a reductionist statement, I think he has possibly forgotten what people do in the face of changes in perception of value. His friend "the sage of Omaha" very much prefers shares which pay dividends and this may be reflected in what he is saying, since he is not by nature a highly speculative investor.

Re: Fossil fuel divestment has ‘zero’ climate impact, says Bill Gates

#89

Post by randogogogo »

cwkoss wrote: post #87

Bill Gates rarely makes controversial statements like this. I wonder if his PR team specifically contrived this statement to distract from allegations re: Jeffrey Epstein.

I have not gotten the impression anything Jeffrey Epstein related was "sticking" to Bill Gates.

Re: Fossil fuel divestment has ‘zero’ climate impact, says Bill Gates

#90

Post by rory096 »

jdhn wrote: post #71
emckay wrote: post #20

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…

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?

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-...

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