Where Should Climate Activist Investors Focus: ExxonMobil or Coca Cola?
by Zach Stein
The Short Version
Historically, climate activist investors have focused on pressuring fossil fuel companies (ex: Engine No. 1). Despite their efforts, they have little to show for it.
Why? In a stock market driven by quarterly returns, it’s really hard to force a publicly traded company to voluntarily shut down its top driver of profits. So, instead of focusing on decreasing supply, this decade’s climate activist investors should focus on decreasing demand by pressuring big oil’s customers to ditch fossil fuels and run their businesses without carbon emissions.
The Long Version
Engine No. 1, a tiny hedge fund out of San Francisco, made headlines in early 2021 with a coup for climate activist investors. Despite only owning 0.02% of ExxonMobil’s shares, they were able to lead a coalition of investors to vote against management and install three climate-forward directors onto Exxon’s board.
Huge win, right? Well... not really. At least, not yet. In the first investor call after the board shakeup, Exxon CEO Darren Woods told investors they: “wouldn’t see huge shifts in the strategy.” Exxon then soon announced a new significant discovery of oil off the coast of Guyana, which they plan to expand at “a record pace” to be their largest single source of fossil fuel production in the world. Exxon is investing the necessary infrastructure to extract oil from the region for the next “20 to 25 years…”
It’s pretty unclear to us whether Engine No. 1’s efforts will result in any meaningful climate impact. And while it’s important that we not shoot down one climate solution over another, at some point, we only have so much time, money, or energy to spend. We have to choose which strategy we think will be the most likely to work. For example: should we focus on building hydrogen refueling stations or high voltage EV charging stations across the US in the 2020s?
The importance of choosing the right strategy is particularly true when it comes to activism. The pie of climate activist attention and moral indignation is limited. The more it gets divided, the less will be put into each campaign. While the more we focus, the greater likelihood our efforts end in success.
So how can we get the best return on climate investment activism? Should we try to limit supply and get fossil fuel companies to go green? Or try to shrink demand and get their customers to use alternative energy sources?
To us it’s pretty straightforward: we should focus on demand. Not only is it far easier for these companies to decarbonize than fossil fuel companies, but these types of companies generally care a lot about what people think about them.
Let’s look at Coca Cola. Coke is far from an environmentally friendly company, but is their core business incompatible with a zero-emissions world? No. They can still sell brown, sugary, bubbly beverages that just happen to get produced with 100% renewable energy, transported on a 100% EV/green hydrogen fleet, and even carbonated with captured CO2.
And unlike fossil fuel companies, Coke is very sensitive to investor/consumer sentiment. Look at how much they spend on advertising. Look at how they and other prominent brands reacted to BLM’s demands following Floyd’s murder in 2020. They were willing to take short-term financial losses for long-term brand protection.
At Carbon Collective we apply this approach to our portfolios. We replace the companies that are dependent on the long-term use of fossil fuels (~20% of the market) with the companies making climate solutions. And we reserve our climate activism for the remaining ~80% of the market because they could operate emissions-free without changing their core businesses. And as climate investment activism won’t scale if it’s more expensive, we charge the same fees as a generic Betterment/Wealthfront account.
This September we’re focused on 401ks and IRAs because your retirement fund should be invested in building the world you actually want to retire into. We’re making the transfer process easy: all you have to do is set up a call with us and we’ll handle the rest. Plus we’re sending transfer bonuses to everyone who initiates before September 30th — check it out on our website.
This week, Jason caught up with Patricia Bubner, Co-Founder & CEO of Orbillion Bio. The company is on a mission to accelerate the broad availability of a variety of healthy, nutritious, and flavorful cultivated meat products. Orbillion recently graduated from Y Combinator's Winter 21 batch.
Community news and announcements
MCJ brand and identity — seeking community input and help! As our little community continues to grow, we’ve realized it’s time for our outward identity to evolve. We’d love for the community to help us navigate this. If you work in brand, identity, design, web development, or marketing and would like to contribute to our efforts, let us know.
Support those affected by Hurricane Ida. The storm has knocked down nearly every major power line in the city, leaving this disaster and pandemic-struck community in the dark. Best estimates from the local utility suggest the power won't be restored for a month, making emergency power access absolutely critical. DER Task Force put together a GoFundMe raising money for Footprint Project, which brings mobile microgrids to disaster-hit areas. They're heading down to NOLA to help out the city after its transmission tower got knocked out, which could leave people without power for up to a month.
Charm Industrial, an MCJ Collective portfolio company, just completed delivery of 1,000 tons CO₂e removal for Shopify You can read more here. Charm believes this is the largest engineered carbon removal contract ever delivered (e.g. DAC is about 200 tons all-time).
For more open positions, check out the #climatejobs channel in MCJ Slack.
Third Derivative is hiring across 8 roles including Head of Ecosystems Success, Biz Dev Manager, and Electricity Sector Lead
Novata is looking for someone to help with ESG research on a short-term basis
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