Big Money Starts to Dump Stocks That Pose Climate Risks

Last year I switched from MSCI World Index to MSCI World Custom ESG* Index. With passive investment you want as much companies as possible in your basket so excluding companies is not something to take lightly. But both these indices perform the same so for me it was an easy choice.<p>* Environment Sustainable Governance. 58 out of 1660 companies are excluded, mainly in tobacco, guns and UN global impact.

If you read this carefully it isn&#x27;t that these financiers have grown a conscience, it&#x27;s that public protest and the possibility of government policy changes have made it risky to hold these securities.<p>These analysts wouldn&#x27;t have a rigorous analysis that made sense in financial terms without the force of public pressure. These companies are just machines that respond to stimuli and have no thought of consequences.

This is something which has been trending up for the past 5 to 10 years, and gaining more momentum. Large European fund managers (e.g. pension plans) have been at the forefront of responsible investing and it is developing quickly amongst their peers in North America.<p>Simply put there are 3 dimensions which corporates have to consider:<p>1. Their contribution to greenhouse gas emissions and other environmental pollutants. 2. Their own exposure to physical climate risk (can they quantify it?) 3. Their compliance to reporting standards and regulations regarding climate change and other environmental issues.<p>Large investors increasingly want to know (a) how they contribute to climate change via their investments and (b) their risk exposure to climate change risk, via the businesses they are invested in.<p>Corporations have to realize that their large, institutional, investors are way beyond debating climate change and are taking action. Like it or not.

Unsustainability is unsustainability. At the scale of climate change it&#x27;s no longer &quot;we&#x27;ll prosper at the cost of others&quot;, it&#x27;s &quot;we&#x27;ll prosper in the short term at the cost of everyone - including ourselves - in the long-term&quot;. Finance people are apparently better than executives at thinking long-term (or maybe just have more incentives to care about the long-term, whereas CEOs can generate some quick growth and then peace-out).

This is great! I applaud this effort. Let everyone back their beliefs and principles with their own money.

in 2007 USA there were a half-dozen &quot;major&quot; frameworks for reporting risk and establishing a profile of a company; many professional papers and presentations. This sort of business-press cheer leading is necessary but insufficient.

Ethical considerations aside, one of the other drivers of this is the origin of some of the money involved here. Most of the largest sovereign wealth funds globally are the result of money generated by resource extraction: Norway, Abu Dhabi, Kuwait, Saudi Arabia (directly and via Aramco), Qatar, etc. For these names, holding stocks that pose a climate risk is buying oil with oil dollars. Without intentional divestment of oil, coal, and other climate names, they are essentially levered long. Excluding these from their holdings is just prudent investment.

This has been going on for a few years. The Rockefellers sold theirs in 2014. They tried to make it seem like it was environmentally motivated but really, it was all about the money. [1]<p>[1]<a href="https:&#x2F;&#x2F;www.cbc.ca&#x2F;news&#x2F;business&#x2F;rockefellers-to-sell-oil-assets-as-part-of-50b-global-warming-fight-1.2773771" rel="nofollow">https:&#x2F;&#x2F;www.cbc.ca&#x2F;news&#x2F;business&#x2F;rockefellers-to-sell-oil-as...</a>

Ideally, in time without policy changes or major government intervention, fossil fuels or business practices that willingly pollute and damage the environment will become uncompetitive and too expensive to make money.<p>If only we can find a way to bankrupt the palm oil farmers and loggers who are cutting down the Amazon Rain Forest...

Bloomberg used to me a good publication now its tied to hip to its founder&#x27;s ideology. Him being a politician with Presidential aspirations, Bloomberg has taken a turn for worse. Divestment is not going to &quot;clean-up&quot; the environment. Its a tool of &quot;do something&quot; or virtue signaling crowd. Unfortunately, Mr. Bloomberg has a fortune to make investments in hard-science and safer power generation -- but it won&#x27;t provide bang for the buck for his Political ambitions.<p>All we are getting from this disinvestment crowd is corporate green-washing as if we do not have enough of it.

It might be as an indirect result of climate risks, but the main reason is because they fear government regulation.

Sorry guys, for me this is a solid advice to increase my positions in oil, coal and nuclear ETFs. Especially if their prices drop a little.<p>Not that I don&#x27;t care about the environment, I just don&#x27;t believe that economy works &quot;by design&quot;. We don&#x27;t have better energy sources, and while this lasts, these will be profitable and expensive.

about time