Study: Climate Disclosure Shareholder Resolutions Have No Impact on Company Profits

Oil Derrick
“West Texas Pumpjack” by Eric Kounce TexasRaiser – Located south of Midland, Texas.

Guest essay by Eric Worrall

A study conducted by Joseph P. Kalt, Ford Foundation Professor (Emeritus) of International Political Economy at the John F. Kennedy School of Government, Harvard University suggests that activists who successfully force companies to disclose their “climate risk”, and other activist resolutions, have no impact on the profit or share price of the companies targeted by their campaigns.

New Study Finds Climate Change Shareholder Resolutions Have No Impact

David Blackmon
JUN 24, 2018

A new study finds that the climate-based shareholder resolutions being so actively pushed by proxy advisory firms and their Environmental, Social and Governance (ESG)-based institutional investors have “no statistically significant impact” on a company’s bottom line, either positive or negative. The study, funded by the National Association of Manufacturers (NAM), was led by the highly-respected PHD economist Joseph Kalt, Senior Economist at Compass Lexecon and is the Ford Foundation Professor (Emeritus) of International Political Economy at the John F. Kennedy School of Government at Harvard University.

This was an interesting finding given the elevation of the demands from this kind of investor activism in the past several years, especially against fossil fuel companies, and the recent decision by several big institutional investor firms to use their market position in an attempt to frighten major oil and gas companies away from attempting to explore for oil in the always-controversial Arctic National Wildlife Reserve (ANWR). The study’s lead finding will no doubt not sit well with the proxy advisory firms who place such high priority on having their clients push climate change-related shareholder resolutions, or with the companies for whom such resolutions can create onerous new administrative burdens.

Kalt and his team state in the executive summary that claims by institutional investors that such resolutions actually benefit shareholders provided the main direction for their study:

“We focus on climate change resolutions both because of the growing activism on the part of certain large institutional investors around climate change disclosure and because of the argument upon which that activism is predicated, i.e., that such additional disclosure provides meaningful information to the marketplace and therefore serves to benefit shareholders. Our analysis fails to find support for such assertions.

The ability – or even the necessity – of a company to respond to a constantly shifting and evolving issue such as “climate change” depends to a very high degree on the whims of voters and the politicians they elect. Nowhere has this fundamental reality played out with greater impact over the past decade than in the United States of America.

Read more:

From the study;

Executive Summary

The increased use of politically-charged shareholder resolutions has garnered considerable attention in recent years, as shareholder meetings have become venues for discussion and debate regarding corporate positions and actions on issues of the day. Recent proxy seasons have seen corporate management being asked to address issues as diverse as deforestation, corporate clean energy goals, climate change, the uses of antibiotics and pesticides, political contributions, human rights risks through the supply chain, indigenous rights and human trafficking, cybersecurity, the development and reporting of sustainability metrics, and tax fairness. As we show, this change has both expanded the number of resolutions to which a given company may be required to respond and broadened the range of issues that boards and senior managers are being asked to address.

This study explores the impact of social and environmental shareholder proposals on shareholder returns. Specifically, using the case of climate-change- related proposals to test the economics, we examine statistically the reaction of companies’ stock prices to both increased disclosure of climate-change-related information and shareholder proposals calling for such disclosure. We focus on climate change resolutions both because of the growing activism on the part of certain large institutional investors around climate change disclosure and because of the argument upon which that activism is predicated, i.e., that such additional disclosure provides meaningful information to the marketplace and therefore serves to benefit shareholders. Our analysis fails to find support for such assertions. Rather, we find that the evidence demonstrates that the adoption of such shareholder resolutions has no statistically significant impact on company returns one way or the other.

Notwithstanding the stridency of arguments surrounding politically charged shareholder proposals, our finding that such proposals do not enhance shareholder value is not surprising. The fundamental drivers of risk and the impact of an issue like climate change on the ability of management’s decisions to enhance or detract from shareholder value are political. Specifically, whether a company should be doing more or different in responding to an issue like climate change turns overwhelmingly on political actors and factors: Will nation A adopt certain kinds of policies to deal with climate change? If so, when? Will adopted policies “stick”, or will new political forces come along and change the direction of policy? How will other nations respond? And so forth…

Read more (p3): nam_shareholder_resolutions_survey.pdf

The study was commissioned by the National Association of Manufacturers.

I’ve got to admit I’m surprised – I thought activist campaigns to force oil companies to state that their business might evaporate if governments ban fossil fuels might have caused at least a small wobble in their share price.

Perhaps “green risk” has already been priced in. Owners of fossil fuel related stocks know that renewables are in no position to displace use of their product anytime soon – they are already aware of the issues activists hope to force companies to disclose. Nuclear fusion, which might displace fossil fuel usage in a big way, is still 20 years away™.

Green politicians and hostile government policies can damage a company’s fortunes, green activists not so much.

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June 24, 2018 6:36 pm

“Economic growth is an indispensable ingredient for any scheme, Germany or the Eurozone, to avert economic disaster.”

Joseph Sternberg

Tom Halla
June 24, 2018 6:40 pm

How does one account for political risk? It seems about as difficult as picking the winners of some elections, as the legacy media had a notable failure with Trump v. Clinton. As the two candidates environmental policies were quite different, the outcome would definitely affect any company producing nearly anything.

Reply to  Tom Halla
June 24, 2018 6:46 pm

“What was true at one moment may become untrue, or at least irrelevant, in the next.”

Lance Morrow

Reply to  Eric Worrall
June 24, 2018 7:49 pm

Earl, The descent of climate-change activism into identity politics is a sign that it has lost vitality, writes @stevenfhayward

While I have been a Clean Energy and Energy Efficiency advocate for the last 18 years, I have been worried about the stranded costs of much of the previous tranches of renewable technology? Going forward, there remains huge technology risk for renewables, both future product failure and future obsolescence of current technology. Just saying.

By politicizing renewables, the renewable community will now have to figure out a way to survive without government largesse. Even in European Union, the trend is toward less government money for renewables as their economies adjust to a low growth and crumbling infrastructure future.

“Causes that live by politics, die by politics.”

Steven Hayward.

Reply to  Eric Worrall
June 25, 2018 7:25 am

The early post about Podesta’s organization and actions give you a hint of where the radical greens are going next which is local government regulations. Since they are finding it difficult to sway public opinion they are going to try and “sneak” up on the general public. Oddly many in the public pay less attention to local government than they do to state and federal governments in spite of the fact local government has more of an effect on their daily lives. This all has become analogous to the radical Islamists movement. They declared war on the West in the mid-1990s we ignored them until 9-11-2001. The radical left has declared war on Western Democracies and especially capitalism and most folks either are naive, don’t believe it is really happening or believe they can do nothing about it.

michael hart
Reply to  Edwin
June 25, 2018 4:43 pm

They declared war on the West in the mid-1990s we ignored them until 9-11-2001.

Edwin, it happened before that in the UK. In fact, the British establishment surrendered and ran up the white flag in 1989.

In that year, Salman Rushdie, a British citizen, was condemned to death by Ayatollah Khomeini for publishing the Satanic Verses. The British establishment stood back as bookshops in the UK were the targets of political-religious arsonists for openly selling the book. At the time I lived on a street where Muslim school girls would wolf-whistle at men, but now the local bookshop had to be worried about being fire-bombed by people of the same religion.

Analogously to the activities of animal-rights extremists, the British government needed to make it clear that religious tolerance in the UK did not extend to tolerating violence against those attempting to exercise free speech. It needed to be done sensitively, but firmly, and above all else, clearly. Clearly such that the underlying values of ‘Western’ culture should be properly understood. But they didn’t. They failed. Sure, they offered Rushdie police protection, but they completely ignored the elephant in the room. Since then it has been further exploited by radical activists, but I’ll stop this thread before I wander even further off topic.

While the greens have also been at this game for a long time, the rise of the nouveau riche billionaires who fund many of the extra-governmental enviro activities should also be traced back to the 1980’s. Perhaps it was the fall of the Berlin Wall, and the implied blow to big-government schemes, which spurred alliance between UN-type bureaucrats needing to find another raison d’être, and a new generation of the super-rich who benefited from the Reagan/Thatcher years. These are people looking for a political outlet for their fabulous wealth but who also understand that traditional government is both painfully slow, and no guarantee of success. They have money, and they want real power (or influence, for the polite). And they’d rather not be impeded by things like elections or the wishes of grockles like us. Saving the planet always seems to be a good excuse for both a) doing something immediately, now, there’s no time to wait and see, and b) ignoring the potential objections of a lot of the populace because they might give the wrong answer if you ask them question.

Reply to  michael hart
June 26, 2018 8:54 am

Michael, It is all about power. Everyone in their lives have dreamed about getting power somewhere a long the line and many dreamed about being ultra wealthy. Having dine with the ultra wealthy more than a few times, those that understood how they got rich do not seek power or in many cases even more wealth, contrary to what the media tells us. However, there are those that are not quite sure how they got rich, generally believing it was their brilliance and great thinking. Some of those have doubts and are even embarrassed about their wealth. Of course while they may donate to all sorts of groups they never give away all their money. Then we have a select few. They have money beyond their dreams, are still making it with seemingly little effort and now they want something more. Since they perceive themselves as being the smarter person in the room they now seek power. You are correct, gaining normal political power, is too slow a process for them. While some love to be the wizard behind the curtain, some want absolute power and they want it as soon as possible.

Pop Piasa
June 24, 2018 6:50 pm

Eric, I can’t help but look at that picture of the pumpjack and think that it is beautiful in its singularly providing the energy of many wind turbines with a lower environmental impact.
Does anybody have the figures on how many wind generators would be needed to replace the energy this well provides?

Reply to  Pop Piasa
June 24, 2018 7:00 pm

One day, the well that is supplying the oil that that pumpjack is pumping will run dry. On that day, the wind(s) supplying the energy for the turbine will continue to blow. A hundred years later, those same winds will continue blowing.

Reply to  Remy Mermelstein
June 24, 2018 7:08 pm

And in 100 years, wind will still be unusable as a power source.

Patrick MJD
Reply to  Remy Mermelstein
June 24, 2018 7:14 pm

And the turbine will be long gone as well as the technology to repair them.

Reply to  Fraizer
June 25, 2018 2:02 pm

That is one massive engineering failure. The vertical shaft should be the last thing to break. We used to have sailing ships with wooden masts that were more serviceable.

Reply to  Remy Mermelstein
June 24, 2018 7:24 pm

Land-based wind turbines will need major overhauls and refits every 25 years in favorably mild climates.
Ocean-based wind turbines will likely need complete refits in < 15 years or so.

No economy there when total life cycle costs are factored in. That is the true measure of how useless these things are for a nation's future.

Reply to  Remy Mermelstein
June 24, 2018 9:16 pm

And the wind will be blowing past abandoned, useless junk pile remains of the windmills that never even paid for themselves, much less produced meaningful amounts of energy.

Reply to  hunter
June 24, 2018 11:20 pm

Funny you should mention “useless junk pile remains” as I drove past dozens today in California on I-580 east of Altamont Pass. Many new models turning, but dozens of what looked like two or three generation old windmills, perhaps only a third as tall, standing in straight lines doing nothing. Who owns them? Will they be removed or just eventually fall over?

Reply to  Remy Mermelstein
June 24, 2018 9:50 pm

What is the expected life of an oil well? Yes, I know the answer really is, “It depends…” but let’s make some assumptions, just like Phil Rae did below, let’s say it’s in West Texas expected to produce about 100 BOPD, what’s a go/no go breakpoint for the life of that well, in order to go ahead with drilling?

Reply to  Remy Mermelstein
June 25, 2018 6:02 am

And for a hundred years extra work and taxation will be required to maintain the uncompetitive solutions. The emissions from this induced work requirements will be greater than the politically driven market concoctions to solve the contrived need.

Phil Rae
Reply to  Pop Piasa
June 24, 2018 7:51 pm

Pop Piasa

If the well is in West Texas, it may be producing (say) 100 BOPD although it could be significantly more or less than that figure. On an energy equivalence basis, 1 BOE = 1628 kWh so a well making 100 BOPD would yield 162,800 kWh of energy. If we burned it to produce electricity with a conversion efficiency of (say) 40% that would yield ~65,000 kWh/per day EVERY DAY to the grid (=65 MWh). Please remember that oil is only very rarely burned to produce electricity at commercial scale and only in very few place worldwide…….70-80% of oil production actually goes to produce gasoline, diesel, jet A-1, fuels – so this is just a theoretical comparison. Most grid electricity comes from burning coal and gas, nuclear, hydro, etc. as I’m sure you know.

A 2MW wind turbine operating under perfect conditions with steady wind in the optimum range should theoretically produce 48MWh of electricity but under typical conditions a turbine only produces ~25% of its nameplate capacity and so would generate 6MWh of electricity in the course of a day – only 10% of what a small pumpjack well can produce so you need 10 large 2MW wind turbines to equal the output of that small well. Note that most older windmills are only rated at ~1MW so you’d need 20 of those but the newer bigger models are closer to 2MW so I used this for a fairer comparison.

Of course, many wells produce much more oil than the rather feeble number I stated above. There are many wells around the world producing 10,000-20,000 BOPD and in the deepwater plays, rates as high as 100,000 BOPD are possible. So, in such circumstances, it could take anything from 1000 to 10,000 large 2MW wind turbines to replace just a single well.

One additional thing worth pointing out, too. A pumpjack/nodding donkey well has a relatively large footprint. A natural gas well, or an oil well on natural flow tied into a pipeline, has nothing but the wellhead visible at surface rather than an army of 200ft+ towers arrayed across a vast area. Anybody who thinks the oil and gas industry has a bigger impact on the landscape and environment that those infernal windmills is dreaming.

I’m sure others will also have responded to your query and, hopefully, they’ll confirm my back-of-the-envelope numbers.

Phil Rae
Reply to  Phil Rae
June 24, 2018 8:32 pm

Oops! The turbine should produce 12MWh…..not 6MWh as stated above. I originally started the calculation with 1MW wind turbines and then switched to the more recent 2MW models but forgot to adjust the figure. So, my mistake, and divide my turbine numbers by 2….but you still need 5 turbines to replace the small pumpjack well and 500 – 5000 large 2MW turbines to replace those big producers.

Reply to  Phil Rae
June 24, 2018 11:14 pm

“A 2MW wind turbine operating under perfect conditions”…. so what are perfect conditions? Can you define that in something simple to test, as in RPM? It’s easy to watch and calculate how many seconds it takes for a full revolution… it appears to me that 3-5 seconds per rev (or 20rpm to 12 rpm) is what I see happening most often… what does that actually mean in terms of production?

Reply to  BobM
June 25, 2018 7:16 am

The turbines are designed to operate at a constant speed, so they feather the blades to maintain that speed in varying wind conditions.

Reply to  Phil Rae
June 25, 2018 11:36 am

Those kind of numbers are typical of what utilities look at to decide what is needed to produce grid power.

A common coal or nuclear base load station might have a nameplate rating of 1GWe (one gigawatt-electric) output. Multiply that by 0.9 for a 90 percent capacity factor. Your example 2 MWe wind farm will need 500 units to match the nameplate rating of the nuc plant, but even with a 30 percent capacity factor, you now need 1500 wind units to match the nuclear plant in yearly capacity.

Going to lifetime costs, add the fact that the wind units have an engineering design life of 20 years, with a coal plant at 40 years and a nuc plant of 40 to 80 years with modern designs. The utility will have to replace those 1500 turbines once or twice to match the lifetime of the nuclear plant. At 4 megadollars per unit, those 3000 turbines will cost 12 gigadollars, about the same as the nuclear plant. That might seem good, but those are optimistic numbers for the wind turbines, and a modern coal or gas plant will not cost as much as the nuclear plant.

A few years ago I saw a published article stating the lifetime capital costs of a projected coal plant in Nebraska was about 3.9 cents per kilowatthour, I don’t remember the projection was for the wind turbines, but it was at least 5 times more expensive than the coal plant. That includes final disposal costs.
If the odious safety regulations on nuclear plants were removed, the nuclear plants would not cost any more than a coal fired plant, and would have better operating costs. Operating and fuel costs are not negligible, but there is a good reason why large utilities don’t want to build wind turbines unless they are subsidized.

Reply to  Phil Rae
June 25, 2018 7:14 am

Barrels of Oil Per Day?

Phil Rae
Reply to  MarkW
June 25, 2018 7:28 pm

My point, in the above post, was that a single well can do the job of anything from 5 -5000 2MW wind turbines, depending on that specific well’s productivity. That same well, typically will produce day & night for many years with minimal intervention and with a negligible surface footprint or environmental impact.

That’s a far cry from the vast arrays of wind turbines required to barely come close to what even a moderate producing well can achieve. Plus, of course, those windmills need to be backed up by fossil fuel power due to intermittency of their output which is hostage to the vagaries of the wind.

MarkW…..Yes BOPD = Barrels of Oil per Day…..that’s standard nomenclature in the oil & gas sector.

June 24, 2018 7:07 pm

The only climate risk that any company faces, is the risk of stupid government climate policies.

Reply to  MarkW
June 24, 2018 9:52 pm

You were redundant.

June 24, 2018 7:16 pm

These greenies are really arrogant. They think investors are so stupid that they need to be led by the nose to realize the vicissitudes of the changing political situation.

Tom in Florida
Reply to  commieBob
June 25, 2018 4:37 am

But then greenies think everyone but themselves are so stupid that they need to be led by the nose about everything.

June 24, 2018 7:31 pm

Market analysts are aware of the climate scam. They realize there is no forseeable way to replace oil and nat gas. And those renewable targets above 15% are so catastrophic to an industrialized country’s output, that as they are approached, the negative social and economic feedbacks will amplify to snuff them out.

We already see this happening in Germany. They can no longer increase the % of renewable electricity without simultaneously increasing coal/natural gas usage, and doubling power prices that are already 3 times too high is a non-starter.
The back lash in South Australia has just started. The pols there are having to adjust to shifting politics as people realize they’ve been taken in.
California is starting to see the effects of carbon tax policies and higher taxes in general on outflows of people and certainly lost businesses. Things will get real ugly in Cal when the next recession hits. There will be no ARRA-type stimulus free money from Obama to get them by like happened in 2009-2010.

Thus the political costs to politicians will ultimately snuff out the renewable scam, but not before it does major damage to Western economies.

Patrick MJD
Reply to  Joel O'Bryan
June 24, 2018 7:37 pm


The back lash in South Australia has just started.”

It has? I have seen no evidence of that. If it has I suspect it is being suppressed by the media.

Reply to  Patrick MJD
June 24, 2018 9:12 pm

A year old article, but those problems are still there.

“In a controversial move, SA is also planning to build a new government-owned gas-fired power plant to provide up to 250MW of power for emergency use. It’s not certain if private investment will be involved. New legislation will also allow the energy minister to intervene in the national electricity market to instruct operators to switch on when emergency power is needed.

The highly conservative national government has said it is seeking legal advice on whether this decision to intervene in the market constitutes a breach of national electricity market rules.”

Roger Knights
Reply to  Joel O'Bryan
June 24, 2018 10:07 pm

Ontario has had a backlash, although not enough of one. Anyway, the previous hyper-green party is out, and the Conservatives are in, as the plurality winner in a 3-way race.

Reply to  Roger Knights
June 25, 2018 3:20 am

Doug Ford, the premier-elect, has announced that he will cancel cap-and-trade when he takes office. link It will mean a fight with Trudeau Junior (Canada’s Prime Minister) but he’s going for it. Ford has also promised to rip up the really expensive, and stupid, contracts with the windmills. link

The voters have spoken and have been listened to.

June 24, 2018 8:02 pm

“…we find that the evidence demonstrates that the adoption of such shareholder resolutions has no statistically significant impact on company returns one way or the other.”

Because the truth be told, no one who is ultimately responsible for the profit/loss of the company cares about this CAGW nonsense, although they might pretend to. They’ll pay lip service to it to make the problem go away (Exxon), much like the Leftist elite pretends to care for the welfare of the people when in reality they care for their own wallet, and nothing more.

June 24, 2018 8:23 pm

So the eco warriors asked for lip service and received it. What’s the problem?

June 24, 2018 9:14 pm

But agreeing to the premise behind the so-called “risk disclosure” sets a trap for future litigation against the company that falls for the trick.

June 25, 2018 5:10 am

I reflexively disbelieve anything said by someone with a title like ‘Ford Foundation Professor (Emeritus) of International Political Economy at the John F. Kennedy School of Government, Harvard University.’

So much BS in a title presages BS in text.

June 25, 2018 5:33 am

……or the climate.

Bryan A
June 25, 2018 6:15 am

Still, wind, solar, nuclear, and even potential fusion can’t produce plastics or the thousands of other items that require oil

Ben of Houston
June 25, 2018 7:17 am

I think it’s more to the point that the disclosures are so vague as to be useless, and anyone slightly knowledgeable already knows them. It doesn’t take a genius to discern that oil companies will have problems if oil is banned. In fact, the lack of impact or financial benefits from cap-and-trade programs would be the larger surprise.

Add that to the fact that only knowledgeable experts read these disclosures in the first place (be honest, how many of you actually read all the pages of your investment reports and how many skim the first few pages before tossing them?), and you have no effect.

Rob Dawg
June 25, 2018 8:01 am

Total BS. The very fact that companies need to expend shareholer’s money to address the issue means there are resources being expended in a fool’s errand.

Steven Zell
June 25, 2018 10:40 am

Maybe the “shareholder resolutions” have no effect because companies ignore them when there are no greenies in the boardroom. A feel-good resolution is not a binding contract. Besides, how many greenies are shareholders of fossil-fuel companies? Wouldn’t that be hypocritical to profit from what they perceive to be “dirty” energy that’s going to overcook the world?

Reply to  Steven Zell
June 25, 2018 1:17 pm

Many Greenies view themselves as righteous which means that they are immune from charges of hypocrisy.
To them using profits of evil oil to attack big oil is a brilliant strategy.

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