Vive La Révolution

Image source: Valmedia, Christopher Brewer - Shutterstock

What's going on?

The green revolution continued its uprising this week, as three major oil companies were forced to feel the winds of change.

What does this mean?

It’s been a tough few days for oil companies. First up, a Dutch court stepped in and ordered Shell to start accelerating reductions in its carbon emission. Then Chevron’s shareholders followed up with an uppercut of their own, voting in favor of a drastic cut in its emissions.

Still, maybe the most notable was ExxonMobil, which was put under pressure by its investors to start rolling out a greener agenda. Or more specifically, by one activist investor with just 0.02% of its shares. If you think that doesn’t sound like much, you’re not wrong: investors usually need a much bigger stake to throw their weight around. But despite having no history of activism in the oil and gas industry, this one managed to rally ExxonMobil’s second-biggest shareholder – BlackRock – to its cause, and the rest fell like dominoes.

Why should I care?

For markets: Investors just care too much (about money).

Make no mistake, investors’ sudden enthusiasm for energy companies’ transition to cleaner energy isn’t out of the goodness of their hearts. There’s a financial incentive at play (tweet this): oil companies could attract a fresh wave of climate-minded investors if their eco-friendly efforts are successful in the longer term, and that could push their share prices up.

The bigger picture: Making a difference from the inside.

One way for investors to make sure their investments have a positive impact is to avoid those that might have a negative one, but it’s not the only option. Some of the biggest investors in the world use an “engagement” strategy, where they take a big enough stake in dubious companies – poor employers or high polluters, say – to gain a seat at the table. That way, they can use that newfound influence to push them toward positive change.

Originally posted as part of the Finimize daily email.

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