Shareholder Group Fights Fossil-Fuel Divestment

Feb 13th 2015

An organization of faith-based and socially responsible investors is pushing back against the call for divestment from fossil fuel companies. At its Winter Conference Wednesday, the Interfaith Center for Corporate Responsibility, which claims 300 member organizations controlling $100 billion in invested capital, called instead for more shareholder engagement with such companies.

“Divestment is one step but a blunt instrument that leaves investors with no voice at corporate tables,” said Laura Berry, executive director of the ICCR.

The ICCR announced that it will be releasing within two weeks a guide outlining strategies for shareholder activism and recapitulating the history of such engagement to drive social change.  “The planned report will offer shareholders dozens of examples of the impact of long-term engagement and offer guidance on concrete, meaningful actions that investors can implement to accelerate progress toward a fossil fuel free world,” an ICCR spokeswoman said. The guide will discuss not only “exclusionary strategies,” such as divestment, but also such approaches as proxy voting, shareholder resolutions, dialog, impact investing and climate finance.

The spokeswoman noted that two recent examples of the success of such engagement came at BP PLC and Royal Dutch Shell PLC. Both companies have recommended their shareholders vote in favor of shareholder resolutions demanding more disclosure on subjects related to climate change. “The resolution is non-confrontational and gives us the opportunity to demonstrate our current actions and build on our existing disclosures in this area,” BP said in a statement.

Timothy Smith, senior vice president of Walden Asset Management, and former executive director of ICCR, told Risk & Compliance Journal, ““Companies aren’t the enemy here, they are part of the solution often.”

Mr. Smith cited the historic anti-apartheid campaign as a precedent for the range of activist approaches needed to effect action on climate change.  “There were multiple approaches used to put pressure on companies for their ties to apartheid South Africa. While it’s fair to say divestment was one of those, we’d hasten to say there was an equal number of investors using their shares to call on companies,” he said.

By contrast, a spokesman for the activist group, which calls for divestment, told Risk & Compliance Journal, “When the core of a company’s business model is built on exploiting natural resources, pulling more and more carbon out of the ground, and speeding up the rate of climate change, engagement simply won’t solve the problem. ”