Lewis, who earlier in his career was a utilities analyst at
Deutsche Bank AG and deputy head of investor relations for German
power company EON SE, had formed close business relationships,
even friendships, with coal executives. He says the decision to cut
coal was painful, but ultimately he had to face the economics.
Demand for thermal coal, the kind used to generate electricity,
is declining in much of the world as governments seek to cut carbon
dioxide emissions. Some asset managers are deciding it’s risky—for
their clients and the planet—to keep shoveling capital into compa-
nies with environmentally unsustainable business strategies. This
year almost every major public oil company faced at least one share-
holder resolution about climate change. Those proposals won record
support. (Michael R. Bloomberg, founder and majority owner of
Bloomberg LP, in June launched an effort to phase out every U.S.
coal-fired power plant by 2030.)
Most money managers prefer engagement to divestment, and
funds designed to track indexes have no choice. Climate Action 100+,
a group of money managers overseeing more than $33 trillion, works
to influence the largest corporate emitters of greenhouse gases. So
far the organization has persuaded Royal Dutch Shell Plc to set short-
term climate targets and publish a report on its lobbying of govern-
ments. Members backed a shareholder resolution that asked BP Plc
to detail how each new capital investment aligns with the Paris Agree-
ment adopted at the United Nations Framework Convention on
Climate Change in 2015. That resolution, supported by BP’s manage-
ment, won the approval of 99% of shareholders in May. Mining
company Glencore Plc has agreed to limit coal production.
Climate Action 100+ members “use this engagement, both
the process and the outcomes, to inform their own voting and invest-
ment decisions,” says Stephanie Maier, the director of responsible
investment at HSBC Global Asset Management, who also serves
as chairman of Climate Action 100+’s steering committee. “For
certain investors this may ultimately include divestment, but that
would only be when all other options have failed.”
Climate activists say the awakening of the world’s money to
the perils of global warming is too little, too late. But for some people
inside money management, the speed of change is hard to believe.Divestment
Big Money Takes a New Approach to
Climate C hange Activism
By KELLY GILBLOM
PHOTOGRAPH BY FELICITY MCCABE
EARLIER THIS YEAR, one of Meryam Omi’s deputies at Legal &
General Investment Management sat down with board members
and managers from Exxon Mobil Corp. to discuss how the oil giant
could address climate change. LGIM, which manages about $1.3 tril-
lion, is one of Exxon’s top 20 shareholders.
The Exxon delegation listened, but it didn’t accept the sugges-
tions, says Omi, LGIM’s head of sustainability and responsible invest-
ment strategy. Around the same time, Exxon persuaded the U.S.
Securities and Exchange Commission to block a shareholder reso-
lution that pushed the oil giant to do more to address climate risks.
So, in June, London-based LGIM announced that it had
dumped about $300 million worth of its Exxon shares and would
use its remaining stake to vote against the reappointment of Exxon
Chairman and Chief Executive Officer Darren Woods. “There’s got
to be an escalation,” Omi says.
As the risks of climate change have become more pronounced,
so have efforts by major investment firms to push companies in
greener directions. They tried talking. Then they started backing
shareholder resolutions. Now, LGIM is at the forefront of a more
aggressive, and controversial, tactic: divesting. “You cannot have the
same conversation for 15 years with no results,” Omi explains. (Exxon
responded to LGIM’s announcement by saying that it publishes an
annual tally of emissions from its operations and is on track to meet
targets for reducing methane emissions.)
Momentum is gathering, says Mark Lewis, who leads climate
change investment research for Paris-based BNP Paribas Asset
Management. He likens it to the divestment campaign that forced
companies participating in apartheid-era South Africa to change
course, and he invokes the spirit of Gandhi: “They’ve ignored us and
laughed at us. I think now they’re fighting us. So next we win.”
But he knows it won’t be easy. In March, as he helped the BNP
Paribas press team put the finishing touches on an announcement
that its actively managed funds would exit almost €1 billion
($1.1 billion) of coal stocks as early as next year, he thought the news
might cause a few “ripples” and not much more. In fact, Lewis was
bombarded with emails and calls, not all of them polite. “It surprised
me how big the reaction was,” he says.
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