Profiting From The Efforts Of Climate Extremists

Last week was hailed as a big victory for climate activists. In a 1-2-3 punch on Wednesday, a Dutch court ordered Royal Dutch Shell (RDS-A) to further reduce emissions from its products; Exxon Mobil (XOM) shareholders elected two new directors proposed by an activist hedge fund against management’s recommendation; Chevron (CVX) shareholders approved a proposal to reduce emissions caused by its customers. 

All three companies will become less invested in future oil and gas production than they were previously. For those who regard energy companies as the cause of global warming, rather than the billions of individuals who buy their products, Wednesday’s three events were a watershed. 

Vanguard, Blackrock and State Street are XOM’s three biggest shareholders and also members of the Net Zero Managers Initiative which is committed to “net zero greenhouse gas emissions by 2050 or sooner.” It’s often believed that you can do well by doing good, and a popular narrative is that ESG funds are delivering good returns because ESG-oriented companies deliver better operating performance.  

The biggest ESG fund (ESGU), run by Blackrock, is imperceptibly different from the S&P500 (see Pipelines Are ESG). ExxonMobil and Chevron (CVX) are both holdings in ESGU. Blackrock’s ESG definition is flexible, like most proponents. Lockheed Martin is a perennial member of the Dow Jones Sustainability Index, so pretty much every company claims ESG-ness. Big natural gas pipeline corporations really are ESG, since they are helping displace coal for power generation in the U.S.  

Engine No 1, the activist shareholder in XOM, argued that the company was risking its very existence by continuing to provide the world with oil and gas. This is a non-ESG view based on an assessment of the company’s business prospects, but conveniently aligned with the climate change goals of its three biggest shareholders. XOM will presumably now chart a course that directs more investment to renewables.  

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Disclosure: We are invested in all the components of the American Energy Independence Index via the ETF that ...

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William K. 2 weeks ago Member's comment

Unfortunately for all of us, the activists are incorrect about the source of climate change. The energy output of the sun has increased just a little, and so, a bit slowly, the temperatures are rising just a little. But since nobody can gain power by controlling the sun, it is not mentioned as the source. But still, all sorts of other agenda items get promoted as solutions, and amazingly enough, nothing is working.