Terence Corcoran explains at the Financial Post: The world needs more of what Exxon is selling (and will for decades). Excerpts in italics with my bolds.
World demand for Exxon’s products, fossil fuels, is expected to increase and remain steady over the coming decade
It’s the kind of story that lights up headlines: one of Britain’s biggest fund managers started selling shares in Exxon Mobil Corp. because the global oil giant wasn’t doing enough to address climate change.
The investment fund manager, Legal & General Investment Management (LGIM), oversees $1.3 trillion, making it the 11th largest money manager in the world. Legal and General (as it is called) is also one of scores of investment management firms, activists and hand-wringing organizations that are part of the burgeoning global sustainable and environmental social finance and governance effort to promote collaborative engagement and foster responsible investment and divestment. The goal is to enhance disclosure target-setting within corporations so that they can become leaders and builders of business models that will help the planet achieve a prosperous and sustainable future and overcome the climate emergency/crisis/disaster now faced by humanity if fossil fuels are not reduced to near-zero in the not-too-distant future.
As part of this movement, LGIM is a member of an organization called Climate Action 100+: Global Investors Driving Business Decisions, a collection of meddling institutional investors around the world, mostly government-run pension plans — although Quebec’s state pension fund, the Caisse de dépôt et placement du Québec, is the only obvious Canadian member of Climate Action 100+.
Exxon was one of five companies LGIM said it had placed on the divestment list as it steps up pressure on companies to address climate change: ExxonMobil Corporation, Hormel Foods, Korean Electric Power Corporation, Kroger and Metlife. “These names,” said LGIM, “are in addition to China Construction Bank, Rosneft Oil, Japan Post Holdings, Subaru, Loblaw and Sysco Corporation, all of whom remain engaged but who have yet to take the substantive actions to warrant re-instatement.”
Meryam OImi, head of Sustainability and Responsible Investment Strategy at LGIM, said the investment firm “will continue to push companies to build business models fit for a prosperous, sustainable future.” LGIM’s name-and-shame strategy was enthusiastically endorsed last week in Forbes magazine for maintaining “a sophisticated approach to climate change.”
One has to wonder, however, about the wisdom of divesting Exxon Mobil, one of the world’s most successful fossil-fuel producers, at a time when world energy forecasters project continuing expansion of fossil fuel demand well into …
Whoa. Hold on a second. Let me go back a few paragraphs. Loblaw? Is that our Canadian Loblaw, national champion virtue-signalling food industry giant, master of green product marketing, installer of solar panels on supermarket roofs, and most recently recipient of government funding to help upgrade the company’s refrigeration units to make them more green?
By gosh, it is our Loblaw. In a release, LGIM said “Loblaw, the Canadian grocery chain,” will continue as an “exclusion candidate.” According to Angeli Behham, a corporate governance manger who leads LGIM’s “pledge engagements with the food sector,” Canada’s leading food company “has made improvements in its governance, appointing a Lead Independent Director to ensure a counter-balancing voice to the Chair/CEO role. But we believe there are still a number of necessary steps for companies of such scale, and look forward to continuing engagement and support for substantive changes in the future.” Only then, it seems, will Loblaw be removed from the “divested” list and “reinstated.”
A colleague here at FP Comment, Peter Foster, sent an email to a public affairs person at Loblaw’s head office in Toronto about LGIM’s listing of Loblaw as a climate laggard. “Did they tell you where you are falling short? Are you taking steps to regain their approval? Does this mean they don’t invest in you at all, or just in one of their funds?” There has been no reply as of deadline.
Meanwhile, back to Exxon Mobil, from which LGIM has commenced divesting. Presumably the objective is to use slow trickle-down divestiture as a form of blackmail: change your ways, Exxon, or we will take away our investment, publicly announce our intent and drive your share price down.
This may be terrific green headline-grabbing investment politics, but in the stock market world the plan seems a little naive. According to the latest forecasts — from the International Energy Agency, BP’s Energy Outlook, and McKinsey — world demand for Exxon’s products, fossil fuels, is expected to increase and remain steady over the coming decades.
Natural gas demand, for example, surged last year, and McKinsey reports that gas demand will continue to increase from about 3,500 billion cubic feet (bcf) today to a peak of about 4,200 bcf in 2035 before declining slightly back to today’s level by 2050. Over the next 30 years, oil will also gain from 100 million barrels a day (MMBD) a year today to 108 MMBD a year in 2033 before falling back down to 100 MMBD by 2050.
That means that Exxon and other fossil-fuel companies are forecast to produce a total of 3,000 MMBD of oil over the next 30 years and 120,000 billion cubic feet of gas.
By most investment standards, this is no time to be divesting fossil-fuel stocks. If LGIM and other dumb fund management clucks agitating for sustainable investment and divestment want no part of it, then let them have their political fun. Sell, baby, sell. As they do their bit to keep the fossil-fuel stocks low, they are creating buying opportunities for smarter investors. In future, it seems, the world will need more Exxon.
Comment: How is it that so-called professional wealth managers can be so crippled with wish dreams and political correctness? Do they think that everyone with disposable income lives in their progressive, post-modern bubble? I hope they lose their shirts. (Except for Quebec pension fund who need to send me a check every month.)