Guest essay by Eric Worrall
Professors trying to explain the facts of life to their green activist students.
Combating climate change – why investors should keep their shares in fossil fuel companies
June 29, 2020 10.22pm AEST
Adrian R. Bell Chair in the History of Finance and Research Dean, Prosperity and Resilience, Henley Business School, University of Reading
Chris Brooks Professor of Finance, Henley Business School, University of Reading
As we begin to engage with the climate emergency and the impact of carbon dioxide emissions, calls have grown to stop investing in companies engaged in fossil fuel production – a practice known as divestment.
The University of Oxford became one of the latest institutional investors to pledge to drop all fossil fuel companies from their £3 billion endowment. Enormous pressure from students and staff alike has been put on other universities to follow suit, creating a culture of shame on those that continue to hold these shares.
If more people want to sell shares than buy them, this will affect the share price – but most oil companies are well beyond the situation where it would cause them significant issues. Neither BP nor Shell, for example, are likely to need to raise new financing in the foreseeable future as they have large cash reserves. Both have share repurchase schemes, where they are able to use dips in their share prices to buy their own shares back, allowing investors to benefit without paying taxable dividends.
Divestment puts shares in big oil into the hands of those who don’t give two hoots about the climate emergency, discourages such companies from taking mitigating steps and does nothing whatsoever to curb fossil fuel usage. If the question is how to tackle climate change, divestment is not even part of the answer.Read more: https://theconversation.com/combating-climate-change-why-investors-should-keep-their-shares-in-fossil-fuel-companies-141476
I have a confession.
I have been aware that divestment puts money into the pockets of fossil fuel investors for years, but I decided not to make a fuss; it didn’t seem right to interrupt all that green sincerity.
Having said that, it is doubtful anything the professors or I say will make any difference to the climate hypocrisy and irrational divestment rhetoric of green activists.