The uncooperative crusties of capitalism

| 16th October 2019
canary wharf
wikipedia
On the political power of investment.

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A cold October morning and a stage is being built on the Mall for the start of the Extinction Rebellion (XR) protests.

The theme of the talks was ‘the future is here’ and it was inspiring to be invited to share a space for people to talk about positive, practical actions they could take to accelerate our path to a Net Zero world.

Inspiring also to meet so many people prepared to take a stand for a better world. 

Vote for the future

I have written before about how we are all impact investors by default and that our money is often working at odds with our values. That won’t change unless we are proactive and do something about it - rather than leaving it to banks or pension funds to make our decisions for us.  

My message on that Monday to the XR audience was that our money makes a difference in the world and investing is a political act almost as powerful as a vote or a protest. This message prompted lots of questions which I hope will lead to plenty of letters and meetings for pension fund trustees and employers, and perhaps some new investors too. 

The power of investment is that your decisions have an impact that lasts many years into the future; it is not about the coffee cup you just saved from landfill, it is about what companies will be doing decades from now.

An investment is a vote for the future you want to see. Since the launch of auto-enrolment pensions, every month every employee is an investor, whether they realise it or not. 

As investors we are all very likely to be shareholders in oil and gas companies too. By default rather than design, but most of our pensions are oil-fired rather than solar-powered. When you invest in a pension your money goes into shares and the way those shares are chosen tends to reflect the various indices which organise stock exchanges.

The biggest shares get the biggest proportion of our money and that means, because they need a lot of money, carbon-based companies. 

Green finance 

I was asked directly about this on the following Tuesday by MPs on the Treasury Select Committee who are leading an inquiry into decarbonising the economy, in particular the role that green finance can play in delivering that goal. You can watch the video here.

One of the main points we kept returning to was what to do about the companies that are the ‘uncooperative crusties’ of the stock market. Moving money away from them might lower their share prices but is not guaranteed to accelerate the move away from carbon. 

Should these companies (and their employees) be afforded a ‘just transition’ or should the market (and consumer choice) dictate their fate, as they have done for countless companies in the past. Where is the mitigation for Thomas Cook, or Woolworths or Kodak before them?

Investors in companies like IBM and Nokia know the power that markets have to change the value of their investments. Either capitalism works in your favour, or it doesn’t, but you don’t get to choose socialism when it suits you.

Investing 

It is not that the fossil fuel companies (and banks that lend to them) are immune from criticism. 

They care about what others think about them (which is why they sponsor museums and theatres) and perhaps at an individual level their bosses care what their children think about what they do for a living.  

But it is hard to hear them saying ‘change takes time’ when history shows that markets punish those who fail to change with the times. Perhaps an unintended consequence of the XR protests is a crisis of a different sort. A crisis about the sort of economy we choose to have, in the true meaning of the word from the Greek “krisis” or “decision”. 

Money gives you choices, and those choices are much bigger than those we make as consumers. As investors we get to have a say in the way the world works and what sort of world we live in.

This Author 

Bruce Davis is managing director of Abundance Investment, which advertises with The Ecologist.

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