How Fossil Fuel Divestment Will Hurt Fossil Fuel Stock Prices

By: Carol Pierson Holding

 

If anyone needed more proof that economics trumps sustainability: low gas prices are causing a plunge in electric vehicle and hybrid sales.

Ban Fracking Tax Carbon

 

The same phenomenon is happening in the divestment movement. Moral outrage pushed 83 churches, universities and non-profits to divest $50 billion before the September climate march. This is a blip for an industry valued at $5 trillion, whose top investor Blackrock owns $146 billion in fossil fuel investments and where a single company Exxon Mobil is valued at $425 billion, and Shell and Chevron at $268 billion and $248 billion respectively.

 

These numbers are staggering, and the pace of the divestment movement in relative monetary terms is glacial, despite its many moral and symbolic victories. Even if as Bloomberg’s New Energy Finance says this divestment movement has more rapid growth and quicker scaling than any of its predecessors, does it have a chance of affecting fossil fuel company behavior?

 

Only when it starts to affect the stock price.

 

Tim Dickinson argues eloquently in this issue of Rolling Stone that divesting has become the smart move for the financially savvy, and not because of divestment pressure. Prompted by the recent 50% drop in the price of oil, now hovering below $45 per barrel —

 

“From late June to early January, across the world, the 10 oil firms with the largest proven reserves collectively lost roughly 20 percent of their market value.  …Goldman Sachs warned that nearly $1 trillion in planned oil-field investments would be unprofitable – even if oil were to stabilize at $70 per barrel. The industry is already scaling back the hunt for high-cost sources of new oil. Chevron has shelved drilling in the Canadian Arctic, and Hercules Offshore, a significant driller in the Gulf of Mexico, has idled four rigs and laid off more than 300 workers. Plunging profits are also putting the brakes on fracking.”

 

And that’s only the beginning. Countries around the world are putting limits on carbon emissions, so much so that Governor of the Bank of England Mark Carney warned that “the vast majority of reserves are unburnable.” The argument that fossil fuel companies’ reserves will become “stranded assets” has long been a hopeful prediction from activists, but the message has a different tone when it comes from a powerful central banker whose main concern is not sustainability but stability.

 

Another concerned guardian of the status quo has similar fears. Bevis Longstreth, who served as commissioner of the SEC under Ronald Reagan and later chaired the Finance Committee of the Rockefeller Brothers Foundation, blasts the oil companies: “There is no good reason for this vast expenditure of stockholder wealth. It is wasted capital, an offense against stockholders in terms financial alone.”

 

But my favorite argument for divesting comes from a report generated by Oxford University’s Stranded Assets Programme. The authors bring up the very real reputational risk that a divestment movement creates, which they label “Organisational Stigma,” or “disapproval, even ‘disgust’ at an organisation’s activities, values or behaviour” and tie it directly to stock price: “Even when divestment outflows are small or short term and do not directly affect future cash flows (as is true with fossil fuel divestment), if they trigger a change in market norms that close off channels of previously available money (i.e., the ability to sell stock), then a downward pressure on the stock price of a targeted firm may be large and permanent.”

 

Add to that the growing perception that the fossil fuel companies’ decisions about where to invest are considered irrational, and you’ve created a very serious threat to fossil fuel companies’ stock price and the managers whose pay and bonuses depends on that price. And that’s the most likely route to real change.

 

Photo courtesy of Carol Pierson Holding 

 


 

Carol Pierson HoldingCarol Pierson Holding writes on environmental issues and social responsibility for policy and news publications, including the Carnegie Council’s Policy Innovations, Harvard Business Review, San Francisco Chronicle, India Time, The Huffington Post and many other web sites. Her articles on corporate social responsibility can be found on CSRHub.com, a website that provides sustainability ratings data on 13,000+ companies worldwide. Carol holds degrees from Smith College and Harvard University.

 

CSRHub provides access to corporate social responsibility and sustainability ratings and information on 13,000+ companies from 135 industries in 127 countries. By aggregating and normalizing the information from 370 data sources, CSRHub has created a broad, consistent rating system and a searchable database that links millions of rating elements back to their source. Managers, researchers and activists use CSRHub to benchmark company performance, learn how stakeholders evaluate company CSR practices and seek ways to change the world.

 

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Part 2 of Do Data Management Tools Improve Perceived Sustainability Performance?

By: Bahar Gidwani

Part 2 of a 2-part series.

 

In our last post, we set the stage describing a new study conducted by CSRHub and Tennaxia investigating the correlation between a company’s sustainability performance and its use of specialized data management software. To continue, the results from our study are outlined below.

 

Hypothesis A Confirmed:  Strong Overlap

 

Tennaxia supplied CSRHub with the names of fourteen of its customers.  We can assume then that the companies we were given are ones who have used Tennaxia software for a while and who are satisfied with its performance.  We found that CSRHub had data on thirteen and enough data to rate ten of these fourteen companies.

 

CSRHub analysis

 

(Note: CSRHub had full ratings on Emerson, but no separate ratings on its Moteurs Leroy Somer subsidiary.)

 

CSRHub has at least some data on 140,000 companies and other entities, but has only so far been able to rate about 10,000 of these.  As we can rate only about 7% of our universe, the 10/14 coverage for Tennaxia’s customer set is a higher than average proportion.  About 70% of CSRHub’s ratings are complete.  For these companies we can rate social performance in all four major sustainability areas:  Community, Employees, Environment, and Governance.  We had full ratings on eight of the ten Tennaxia companies we rated—80%.

 

Hypothesis B Confirmed:  Good Overall Ratings

 

As we expected, the average percentile rank of the six Tennaxia companies that CSRHub fully rates was well above average.

 

CSRHub overall and industry performance

 

 

The percentile rank compared to all CSRHub rated companies ranged from 74% to 99%–with an average of 88%.  These high relative scores were not due just to a focus on certain high-sustainability industries.  The average rank for Tennaxia’s customers versus other companies in their industry was 85th percentile.  While the eight companies involved are larger-than average, we have found that company size by itself has little effect on CSRHub’s ratings.

 

 

 

 

Hypothesis C Confirmed:  Special Strength In Software-Related Areas

 

CSRHub tracks sustainability performance in twelve different areas.  The average ratings across these areas were strong for the ten Tennaxia clients for whom we had multiple rated areas.

 

CSRHub - Tennaxia comparison

 

 

Note that all three employee subcategories had above average scores—one of the areas we expected to see strength.  The Tennaxia-using companies also did well in our three Environment subcategories—an area where software tools should be helpful.  The two weakest areas were places where EHS and CSR Data tools would not be expected to play a role.  Community development and philanthropy are functions that may be managed by groups outside of the corporate social responsibility (CSR) function in many companies.  Board quality and procedures are also outside the scope of most sustainability software tools.

 

Summary

 

This study used a small group of companies.  We had the support of only one software vendor.  We did not conduct supporting interviews or study outliers to look for specific examples of best or worst practice.  However, the general tone of our results is consistent with our hypotheses and is consistent with the feedback we’ve received from working with the more than 14,000 corporate sustainability professionals who use CSRHub.  We believe that commercial software tools will become an increasingly important part of managing CSR and sustainability programs and that they can help companies improve their social and business performance.  We thank Tennaxia and Rescore for their support of this study and hope that other software firms will step forward to do similar work to help substantiate the value they claim for their products.

 

 

 

About CSRHub and Tennaxia

 

CSRHub provides access to corporate social responsibility and sustainability ratings and information on 13,700+ companies from 135 industries in 104 countries. By aggregating and normalizing the information from 360 data sources, CSRHub has created a broad, consistent rating system and a searchable database that links millions of rating elements back to their source. Managers, researchers and activists use CSRHub to benchmark company performance, learn how stakeholders evaluate company CSR practices and seek ways to change the world.

 

Tennaxia provides customized cloud-based software and services to help companies manage EHS Compliance and Sustainability Data.  Over 5,000 locations, in 70 countries across multiple languages, rely on Tennaxia to streamline business processes, reducing costs and risks. Configurable to any framework or KPI, Tennaxia’s turnkey solution achieves nearly 100% client retention. With 13 years track record advancing European corporations, Tennaxia is now pleased to offer its customizable solutions to U.S. customers.  For more information including case studies:

 

http://www.trianagroup.com/tennaxia/

http://www.sustainablebrands.com/news_and_views/ict_big_data/millie_lapidario/us_companies_can_do_more_excel_csr_data

 

CSRHub and Tennaxia white paper

 

 


 

Bahar GidwaniBahar Gidwani is CEO and Co-founder of CSRHub.  He has built and run large technology-based businesses for many years. Bahar holds a CFA, worked on Wall Street with Kidder, Peabody, and with McKinsey & Co. Bahar has consulted to a number of major companies and currently serves on the board of several software and Web companies. He has an MBA from Harvard Business School and an undergraduate degree in physics and astronomy. Bahar is a member of the SASB Advisory Board.  He plays bridge, races sailboats, and is based in New York City.

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Do Data Management Tools Improve Perceived Sustainability Performance?

By: Bahar Gidwani

Part 1 of a 2-part series.

 

Many companies use manual systems to collect data on and manage their sustainability programs.  However, a growing number are using software tools that were professionally-developed for this purpose.  In this study, CSRHub partnered with French software company Tennaxia, to study the perceived sustainability performance for fourteen of its customers.

 

Tennaxia offers a wide range of employee health and safety (EHS), environmental tracking and reporting (ETR), and corporate social responsibility (CSR) reporting solutions to hundreds of corporations.  Its clients operate in 70 countries.  CSRHub provides sustainability information on more than 13,000 companies in 104 countries.  CSRHub’s ratings and metrics are drawn from more than 360 sustainability data sources.

 

We believed there could be a correlation between a company’s sustainability performance and its use of specialized data management software.  We hypothesized that:

 

A. CSRHub should be able to rate the sustainability performance of most of Tennaxia’s customers.  CSRHub includes data from sources such as Wall Street analyst firms, non-governmental organizations, government agencies, and crowd-driven ratings groups.  It seemed reasonable that companies who were willing to invest in installing and operating Tennaxia software would share the data they gathered with our sources—who in turn would share their views of the data with us.

 

B. Tennaxia’s customers would have generally high sustainability ratings.  Again, it seemed reasonable to assume that companies who are interested in collecting and analyzing their sustainability information would also take steps to improve their social performance.  We have no way of knowing which companies use external tools to help manage their sustainability data.  If a company does buy external tools, we don’t know which vendor they buy from.  This data is normally not disclosed by vendors or by their customers.  However, we do believe that a large majority of the 10,000 companies we currently track in CSRHub’s system do not have formal software tools in place.

 

C. The strongest ratings areas for Tennaxia’s customers would be those where its software collects and manages data.  Tennaxia’s product suite includes programs for managing suppliers, tracking employee issues such as health, safety, and diversity, and reporting on environment, social, and governance-related metrics.  These are areas that are often reported, externally through government filings, CSR reports, or frameworks such as CDP, GRI, and the UN Global Compact.

 

Background

 

A recent survey by Rescore (Effective CSR Data Management) found that 78% of major organizations currently have or plan to add EHS and CSR-tracking software.


 

Organizations Currently or

Planning to Track CSR/EHS Data

 

 

 

 

Source: ReScore Surveys & Interviews

 

Despite this intention to use software, a majority of the 50 companies Rescore surveyed use Excel spreadsheets to track their data.  This situation has not changed much, over the past three years.

 

CSR Data Management Tools

Used: 2011, 2014

 

 

 

Source: Accenture (2011) and ReScore Surveys &

Interviews (2014)

 

It seems likely either that:

  • Corporate sustainability managers are not convinced about the value of EHS and CSR Data management systems; or
  • Sustainability managers have not been able to convince senior management of theircompanies of this software’s value.

 

While more than 20 software companies produce EHS and CSR Data systems, none of them dominate these markets.  Only about half of the installed systems have been integrated with overall corporate management systems.

 

Share of Specialized Systems

that have the Ability to Integrate with

Other Corporate Systems

 

 

 

Source: ReScore Benchmarking Research

 

One argument for investing in EHS and CSR Data software, and for integrating it into overall corporate management systems, would be that doing so would improve a company’s perceived sustainability performance.  Our study is a first step towards demonstrating this connection.

 

The results from our study will continue in our next post.

 

 

About CSRHub and Tennaxia

 

CSRHub provides access to corporate social responsibility and sustainability ratings and information on 13,700+ companies from 135 industries in 104 countries. By aggregating and normalizing the information from 360 data sources, CSRHub has created a broad, consistent rating system and a searchable database that links millions of rating elements back to their source. Managers, researchers and activists use CSRHub to benchmark company performance, learn how stakeholders evaluate company CSR practices and seek ways to change the world.

 

Tennaxia provides customized cloud-based software and services to help companies manage EHS Compliance and Sustainability Data.  Over 5,000 locations, in 70 countries across multiple languages, rely on Tennaxia to streamline business processes, reducing costs and risks. Configurable to any framework or KPI, Tennaxia’s turnkey solution achieves nearly 100% client retention. With 13 years track record advancing European corporations, Tennaxia is now pleased to offer its customizable solutions to U.S. customers.  For more information including case studies:

http://www.trianagroup.com/tennaxia/

http://www.sustainablebrands.com/news_and_views/ict_big_data/millie_lapidario/us_companies_can_do_more_excel_csr_data

 

 


 

Bahar GidwaniBahar Gidwani is CEO and Co-founder of CSRHub.  He has built and run large technology-based businesses for many years. Bahar holds a CFA, worked on Wall Street with Kidder, Peabody, and with McKinsey & Co. Bahar has consulted to a number of major companies and currently serves on the board of several software and Web companies. He has an MBA from Harvard Business School and an undergraduate degree in physics and astronomy. Bahar is a member of the SASB Advisory Board.  He plays bridge, races sailboats, and is based in New York City.

 

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CSRHub CEO Bahar Gidwani Speaking at Sustainable Brands Smarter Metrics Webinar

CSRHub CEO and Co-founder Bahar Gidwani will be speaking at Sustainable Brands Sustainable BrandsSmarter Metrics Webinar, How to Collect, Manage and Report on Sustainability Date More Effectively on January 20, 2015 at 10-11 am Pacific Time.

 

Speakers include:

Bernard Fort, CEO, Tennaxia
Bahar Gidwani, Co-founder & CEO, CSRHub
Eli Reisman, Product Manager, SASB
Deborah Stern, Founder & CEO, 2020 Strategies [Moderator]

 

 What You Will Learn

  • Market trends and benchmarking regarding various CSR data management tools
  • What SASB, GRI and other experts recommend
  • The ROI for utilizing data management systems for improving CSR performance
  • Best practices for considering a CSR/Sustainability data management system

 

Tennaxia

 

Learn more and register here today:

Register

 

 

 

 

 


 

Bahar GidwaniBahar Gidwani is CEO and Co-founder of CSRHub.  He has built and run large technology-based businesses for many years. Bahar holds a CFA, worked on Wall Street with Kidder, Peabody, and with McKinsey & Co. Bahar has consulted to a number of major companies and currently serves on the board of several software and Web companies. He has an MBA from Harvard Business School and an undergraduate degree in physics and astronomy. Bahar is a member of the SASB Advisory Board.  He plays bridge, races sailboats, and is based in New York City.

 
CSRHub provides access to the world’s largest corporate social responsibility and sustainability ratings and information, covering over 13,000 companies from 135 industries in 104 countries. By aggregating and normalizing the information from 370 data sources, CSRHub has created a broad, consistent rating system and a searchable database that links millions of rating elements back to their source. Managers, researchers and activists use CSRHub to benchmark company performance, learn how stakeholders evaluate company CSR practices, and seek ways to improve corporate sustainability performance.

 

CSRHub is a B Corporation, an Organizational Stakeholder (OS) with the Global Reporting Initiative (GRI), a silver partner with CDP (Carbon Disclosure Project), and an Advisory Council Member of Sustainability Accounting Standards Board (SASB).

 

 

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China’s New Economic Dominance May Offer Silver Lining to Environmentalists

By: Carol Pierson Holding

China pollution

 

The International Monetary Fund declared that the GDP of China has, as expected but ahead of forecasts, surpassed the GDP of the United States. MarketWatch called it a “major economic earthquake” that will “change almost everything in the longer term.”

 

This news has been predicted since last April, and yet it will take a while for reality to sink in. NPR travel commentator Rick Steves wrote an opinion piece in Sunday’s Seattle Times in which he stated an assumption most of us have held our entire lives and take great pride in: “There’s no question that, economically, we are firmly established on top of the world.”

 

But so what if we’re not number one? Nobel Prize winning economist Joseph E. Stiglitz writes in January’s Vanity Fair that economically we might end up better off. And that China probably will not crow about its achievement — “China (does) not want to stick its head above the parapet.” Wanting to be #1 is a distinctly American attitude.

 

Stiglitz says that the real danger is in losing our influence. In his words, “The bedrock strength of the U.S. has always rested less on hard military power than on ‘soft power’; most notably its economic influence.” The U.S. has used this soft power to lead international bodies such as the World Bank and the G20 “to pursue the economic interests of its multinationals, including its big banks.”

 

Those driving our economic interests have not addressed climate change with the urgency it deserves. Stiglitz calls out both American and Chinese roles in increasing carbon emissions and other forms of ecological degradation. Until the recent U.S./China climate deal, the U.S. has repeatedly denied the urgency of climate change, refused to sign treaties and retreated from funding global efforts at remediation.

 

Now that China can claim economic leadership, will it use its influence to lead environmental policy as well?

 

Harvard Business School (HBS) professor William Kirby believes China will step up. In an article for Working Knowledge, HBS staffer Christian Camerota cites Kirby’s staggering statistics for pollution in China: “Between 70 and 90 percent of the country’s flora was endangered by 2008, and by 2013, around 80 percent of its major rivers were so debased that they no longer supported aquatic life. The strain (imposed by economic growth) is manifesting as sinking cities, shrinking reefs, wilting crops, and diminishing water supplies.”

 

As Kirby told Camerota, “Pollution is tolerable when it’s accompanied by economic growth, and that’s why the (Chinese) government has been so successful at doing much of what it wants with the landscape of China to date. But I think between man-made pollution and the degradation of the natural environment, we’ve reached a tipping point, where the government has an obligation to reverse course.”

 

All indications are that Chinese society will not only support the leadership’s environmental efforts but push them to go farther. Across China, in hundreds of protests just in 2014, local residents, including peasants, academics and middle class families have marched against existing polluters and companies that proposed to put human health at risk.

 

Kirby goes on to explain another reason why Chinese society supports environmental remediation: “Nowhere in the world is the concept of family stronger than in China, and I think they will take that heavy responsibility very seriously. … A bettered natural environment would ensure healthier citizens and longer-term prosperity.”

 

China’s new economic leadership may usher in a new era of climate and environmental effort. In fact, China might end up becoming the global leader we’ve been hoping for. China might even use its economic power to force the US to match its environmental progress. And wouldn’t that be ironic!

 

 

Photo courtesy of Leo Fung via Flickr cc.

 


 

Carol Pierson HoldingCarol Pierson Holding writes on environmental issues and social responsibility for policy and news publications, including the Carnegie Council’s Policy Innovations, Harvard Business Review, San Francisco Chronicle, India Time, The Huffington Post and many other web sites. Her articles on corporate social responsibility can be found on CSRHub.com, a website that provides sustainability ratings data on 10,000+ companies worldwide. Carol holds degrees from Smith College and Harvard University.

 

CSRHub provides access to corporate social responsibility and sustainability ratings and information on 10,000+ companies from 135 industries in 104 countries. By aggregating and normalizing the information from 365 data sources, CSRHub has created a broad, consistent rating system and a searchable database that links millions of rating elements back to their source. Managers, researchers and activists use CSRHub to benchmark company performance, learn how stakeholders evaluate company CSR practices and seek ways to change the world.

 

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