Global Warming, Fossil Fuel Divestment, & the Dividend Crunch
One of my many tragic flaws is that I’m not much of a joiner. Not so big on bowling leagues, book clubs, that sort of thing. Most likely, this trait has also been responsible for the incredible string of petitions I’ve refused to sign. You’d think the kids would have picked up on this somewhere along the way. If so, they neglected to pass the word along to my youngest daughter.
Hey Dad, how about signing my petition.
It’s not one of those tree-hugger ones, is it?
No, nothing like that.
Good. But I’m still not signing.
What do you mean, you’re not signing? You don’t even know what it’s about yet!
Doesn’t matter. I have a long-established anti-petition-signing policy. Ask your sister.
That’s crazy. Besides, this is a great idea.
Uh-huh. And you don’t think any of the other petition bearers thought that?
Just listen, ok? It’s a petition to get people to agree to sell any stock they own in coal, oil or gas companies. And not to buy any in the future.
You’ve got a lot to learn if you think that’s not a tree-hugger petition. Anyway, why would I do that?
To send the companies a message that we want them to reduce their CO2 emissions, to halt global warming.
And you think that if a few of us just sell our energy company stocks, they’ll suddenly see the light – Hallelujah! – and renounce their evil, climate changing ways?
Yeah! I mean, not if just a few people do it. But if a lot of people refuse to buy their stocks, it seems like that could have a big impact.
Not so fast, Doña Quixote. Who do you think owns, let’s say, BP stock?
I don’t know, lots of people, I guess.
Oh, more than lots of people. Practically everybody owns a stock like that. Not just individual investors like you and me.
I know, like mutual funds and stuff like that, right? So we’d have to get them to stop buying it, too.
And not even just mutual funds. What about all the pension funds and other institutional investors? Insurance companies, hedge funds, banks, university endowments, foundations. There are millions of these things out there. And tons of ‘em will own a stock like BP.
But wouldn’t they be willing to divest it from their portfolios to help address the climate change crisis? After all, they don’t have to own BP. They can just invest the money in some other stock, right?
I wouldn’t be so quick to assume that. Do you know why they own BP stock?
I assume because it’s a strong performer. Except maybe when it’s gushing oil into the seas.
Actually, it’s been a strong performer despite gushing oil into the seas. And that’s because it pays a dividend of more than 5% a share. Do you know how hard it is to get 5% earnings on your investments these days? Got any idea how much interest banks are paying on savings accounts?
Well, it happens I received a statement just this morning. My bank, which is pretty comparable to all the others, is paying 0.85% on a savings account. It beats me having to pay money to the bank, but not by much.
Wow. Sucks to be you, Dad.
You’re telling me. Of course, it’s not like if the pension fund sells the BP stock they have to put their money in a bank. As you say, they can always buy another stock. But in today’s market, where are they going to find another stock that earns them more than 5% a year on their money? I suppose they could always buy some tobacco company stocks. I think those might pay about 6%.
Oh, lovely, Dad.
I’m just sayin’. You’ve got a petition here that asks investors to stop buying a stock that gives them very stable, very favorable annual returns. Even if you could get suckers like me to sign your petition, you’re never going to get all those institutional investors to walk away from something that pays them 5% year after year, no matter how bad the market is doing. Not gonna happen, kiddo. And that’s not even the biggest problem with your little petition drive.
Why, what else is wrong with it? Stop being mean to me.
I’m not being mean.
Ok, maybe a little. But there really is another problem, and it’s a very practical one. Here I am today, talking with you, and you’re asking me to be so concerned about global warming that I stop buying certain stocks.
So let’s assume I actually did that. Now tomorrow, your sister comes in and asks me to stop investing in companies that build gasoline-powered cars. So I agree to that. Then some cousin wants me to stop buying stocks of companies that make computers, because their production is depleting the earth’s limited supply of rare earth minerals. Some other bozo doesn’t want me buying Walmart stock because they sell guns, or Home Depot because they supposedly drive small hardware stores out of business, or Sears because some of their clothes were being made in that factory that caught fire and killed all those garment workers in Bangladesh. And the list goes on and on. Where does it ever end? Pretty soon, none of us can find any companies that somebody doesn’t want us to divest. What are we supposed to do – put the money in a sock?
It won’t ever get that bad. I’m sure there will always be plenty of responsible companies out there that you could be investing in. You just have to hunt for them a little harder. But wouldn’t it be worth the extra effort, just to know you aren’t furthering global warming or tobacco use or the sale of automatic rifles?
Not if the “responsible” companies are only paying 2% instead of 5%.
Oh, come on. You’ve got buckets of money, Dad.
Uh-huh. But just to be on the safe side, maybe you should go to community college and live at home a few more years.
Or you could sell that new Beamer.
You mean the one I bought with my BP dividends?
Yeah, that one. Guess this means I can put you down as a “no,” huh?