From divestment to engagement

Business School panel explores strategies to press companies, institutions to act against climate change

November 7, 2014 | Editor’s Pick Popular

By Alvin Powell, Harvard Staff Writer

Ours is the only generation that will have a chance to take meaningful action on climate change, a Harvard Business School (HBS) panelist said yesterday. The question is: What action will we take?

The panelists at HBS’ Hawes Hall examined strategies for investors concerned about climate change and seeking to influence corporate behavior on the issue. Options ranged from outright divestment of stock in fossil-fuel companies, to major investors pushing to to put climate change on company agendas, to blocking corporate action such as supporting climate-change denial, and even to replacing board members who are recalcitrant on the issue.

Several panelists agreed that the real arena in which action on climate change must occur is the halls of government. Rebecca Henderson, the John and Natty McArthur University Professor and the event’s host, said the issue could be addressed relatively easily with government-instituted global prices on carbon, but there are massive hurdles to getting agreement on that.

“It is in everyone[’s] … interest to have everyone else do something,” Henderson said. “It’s a massive social-action problem.”

Absent government action, Henderson said, some critics seek divestment of stocks in fossil-fuel companies as a way to pressure them into action, while others argue that by divesting, investors lose their leverage as stockholders to influence corporate behavior.

“This debate seems to me to be very topical, and one of the things that Harvard can do is to have a conversation on this,” Henderson said.

The panel included Joshua Coval, the Jay O. Light Professor of Business Administration; Chris Davis, director of investor programs at CERES and chief of staff of the Investor Network on Climate Risk; Bob Massie, co-founder of the Global Reporting Initiative and a divestment activist; Timothy Smith, director of ESG shareholder engagement at Walden Asset Management, and Robert Zevin, founder of Zevin Asset Management. The event was sponsored by the HBS Business & Environment Initiative, the HBS Finance Club, and the HBS Energy and Environment Club.

Kicking off the discussion, Coval said the evidence is pretty clear that divestment of stock exerts little, if any, economic pressure on a company to change its behavior. Even a spectacularly successful divestment campaign would involve only a fraction of a company’s shareholders, and there would likely be many other companies and individuals willing to buy the divested shares, he said. A study of the divestment campaign aimed at companies doing business in South Africa during apartheid found that the companies themselves were not hurt.

It “found no impact whatsoever. Surprising, but ultimately a pretty convincing study to me,” Coval said.

…(read more).

Global Climate Change
Environment Ethics
Environment Justice

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