The dilemma of doing the right thing
Of course, we all strive to do the right thing – by ourselves, our loved ones and the world. Sometimes the right path presents itself clearly and other times it can take some deliberation before you see the best way forward.
The same can be said for investing.
Deciding on an investment strategy is a big decision; some choose to manage their money themselves, others take the guidance of a wealth manager. More and more frequently investors are choosing to take an ESG approach. This stands for Environmental, Social and Governance, we’ve blogged about it before if you want to check it out.
But today we’re talking about the dilemmas these decisions can involve.
Let’s look at an example
Fossil fuel – In 2020, Oxford University – under pressure from its student body – voted to divest its endowment entirely of exposure to fossil fuel producers.
Around the same time, students at St John’s College demanded that the bursar make a similar move with the College’s endowment with immediate effect, by selling its shares in BP and Shell.
His response was covered in The Times and wasn’t quite what the students were expecting…
‘I am not able to arrange any divestment at short notice…but I can arrange for the gas central heating in college to be switched off with immediate effect. Please let me know if you support this proposal.’
The students objected, claiming that he was being flippant, provocative and even dangerous, given that it was January in a 15th century college! His response was:
‘You are right that I am being provocative, but I am provoking some clear thinking, I hope. It is all too easy to request others to do things that have no personal cost to yourself. The question is whether you and others are prepared to make personal sacrifices to achieve the goals of environmental improvement (which I support as a goal).’
The point was well made. Should fossil fuel producers really carry all the burden of carbon emissions guilt? After all it is our own, consumer-driven demands for petrol and diesel cars, international air travel, cheap goods, a love of palm-oil filled Nutella, and a western, meat-eating diet, that are really to blame.
So, where does this leave investors who want to make some form of sustainability impact?
There are two options. Divest from companies like BP and Shell or stay the course and use your power as a shareholder to try and bring about change?
For example, Vanguard, SSga and BlackRock own almost 20% of Exxon1 – the US’ largest oil company.
That is a very powerful voting bloc to engage with, and apply pressure to the firm’s management. Each of these fund management firms are signatories to the Principles for Responsible Investment, which is a United Nations supported network that encourages engagement with corporations on ESG issues.
Is it better to engage with firms like Exxon, BP and Shell and encourage them into transitioning to a better place than to simply sell and walk away?
As a result of shareholder pressure BP has recently set out its ambition to become a net zero company by 2050 or sooner2. Demonstrating real change brought about by continuous pressure.
Where does this leave investors?
The reality is that most of us want to take steps in the right direction, particularly around climate change and struggle with the trade-offs we face. One thing’s for sure, it’s better to try rather than to take no action at all.
Ultimately, the decision is yours and as always, there are two sides to the coin.
But one action not to take is to buy a Tesla with Bitcoin, something that the company now offers its customers. Bitcoin ‘mining’ uses up as much electricity as the whole of Sweden does in a year, whilst buying a Tesla with one Bitcoin has the equivalent carbon footprint of sixty petrol or diesel cars3!
We’re here to help and can act as a sounding board as you figure out what’s best for you and your financial future. Get in touch if you’d like to chat.
1. CNN Business
2. BP 2020
3. Yahoo Finance