Bill Gates, Wired, on invest vs divest

Institutions deploying capital – banks and pension funds – are going to be crucial in this process. There's a lot of rhetoric at the moment with businesses claiming to be purpose-driven. How can we best measure the actions large investment funds are making, and keep big organisations honest about their actions?

Most of that’s all bullshit. The return on a bond for a wind farm is no different than the return on a bond from a natural gas plant, so it's nonsense. The people who put money into Breakthrough Energy Ventures [the venture arm of Gates’ organisation Breakthrough Energy that’s working towards net zero], that's real. The governments that raise their energy R&D budget and manage to spend it well, the near-billion dollars put into TerraPower [Gates’ nuclear company] to see if this fourth-generation fission reactor can be part of the solution... Those things are real.

All this other stuff like, we're gonna make companies report their emissions. The idea that some financial metric reporting thing or some degree of divestment – how many tonnes? You’ve got 51 billion tonnes [of CO2 that needs to be removed]: when you divested, how many of those 51 billion tonnes went away?

You’ve got to invest not divest. And the notion that you just happen to own equities or bonds related to the easy things that are already economic, such as solar farms or wind farms... Whenever somebody says there's something called green finance, I say let's be numeric here: is the risk premium for clean investing lower than the risk premium for non-green investing? The answer is: just look at the numbers.

The idea that banks are going to solve this problem or that these metrics are going to solve this problem, I don't get that. Are they going to make the electricity network reliable? Are they gonna come up with sustainable aviation fuel? It's just disconnected from the problem and allows people to go off and blather as though something's happening.

(from Wired)

but also - (from Bloomberg Green)

“In 2019, I divested all my direct holdings in oil and gas companies, as did the trust that manages the Gates Foundation’s endowment,” Gates writes in the book, noting that he hadn’t held coal company shares for “several years.” Public filings of the Gates Foundation’s holdings show that, as of the end of 2019, more than $100 million remained invested in stocks and bonds of oil and gas companies, including Exxon Mobil Corp., Chevron Corp. and BP Plc. The foundation does not specifically disclose its total fossil-fuel investments.

“Bill decided to sell all of his direct holdings in oil and gas companies in 2019,” a Gates family spokesperson said in response to questions about the divestment process. “We do work with third-party investment managers for a very small portion of the stock and bond holdings. They act independently and Bill does not direct those investments.” 

… In his book, he evokes the economic criticism of divestment to explain why he didn’t do so sooner. The theory is that dumping a company’s stock, for whatever reason, isn’t likely to have any real impact on the share’s price because someone else is likely to snap up the cheap shares and take home the gains anyway.

“I didn’t see how divesting alone would stop climate change or help people in poor countries,” Gates writes. “It is one thing to divest from companies to fight apartheid, a political institution that would (and did) respond to economic pressure. It’s another thing to transform the world’s energy system—an industry worth roughly $5 trillion a year and the basis for the modern economy—just by selling the stocks of fossil-fuel companies.”

Activists argue that divestment is needed to send a strong signal. “It’s mainly to take away the social license of fossil-fuel companies,” said Henn. “It is to show that the business models of these companies is in direct contradiction to our efforts to meet the goals of the Paris Agreement.” The accord strives to keep the increase in global temperatures below 1.5 degrees Celsius from pre-industrial levels.

On a large enough scale, divestment can have a real financial impact. Royal Dutch Shell Plc acknowledged in its 2017 annual report that it “could have a material adverse effect on the price of our securities and our ability to access equity capital markets.” Coal companies are already struggling to raise financing for projects around the world.

Gates says that he ultimately made the decision for moral reasons. “I don’t want to profit if their stocks prices go up because we don’t develop zero-carbon alternatives,” he writes. “I’d feel bad if I benefited from a delay in getting to zero [emissions].”