by the Stanford Graduate School of Business found the impact of ESG divestment on the cost of capital was too small to affect real investment decisions meaningfully in the US: to affect the cost of capital by at least 1 per cent, it found, at least 86 per cent of investors need to choose to hold only clean stocks.
The problem for retail investors and asset owners is that this is hard to measure. Are institutional investors really achieving anything through these conversations or is it a quick question about how they should probably disclose their CO₂ footprint in their annual report before getting down to the meatier issue of where the next drilling site should be?
For equity investors, one concrete way to measure what steps asset managers are taking to confront fossil fuel companies is through their voting record. Are they voting against board members who aren’t setting tough enough targets on reducing emissions? Are they voting against their remuneration packages? That can focus minds sharply.
This brings us back to Baillie Gifford. Rather than requiring it to sell its fossil fuel holdings altogether — the fund manager has protested that it only has 2 per cent of client money in such companies, compared with a market average of 11 per cent — it would make more sense to get it to vote more often on climate resolutions.