Shareholders can profit from climate action


October 26, 2015

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We heard lots of interesting views about wind energy investment on Thursday, but there is one comment that stuck with us.

“Our corporate leaders would rather cave in to political pressure that is based on pop science and emotion than focus on creating shareholder value? How sad,” said David Herro, partner at US-based fund manager Harris Associates.

Herro manages the $29bn Oakmark International Fund. He went on to say that “shareholders should seriously question executives who appease such environmental extremism and zealotry”.

Unsurprisingly, this criticism of eco-conscious companies was not made at our Financing Wind 2015 conference, but in the Financial Times. Herro was criticising the 81 US firms that have backed the US government’s American Business Act on Climate Pledge, in support of a deal at United Nations climate talks next month.

This is in stark contrast to the views expressed at our conference, which is understandable given that our attendees are fully-paid-up members of the wind sector. Importantly, though, it shows that we cannot rest when it comes to convincing companies and their shareholders of the benefits of wind, and other renewables. We cannot let up when it comes to shouting about the benefits of wind.

That is not to say we need to accept Herro’s view. Far from it. The “pop science” he refers to is the climate science, even though 97% of scientific papers that state a position on the issue of humans on climate change back the idea that people are responsible.

He also dismissively talks about emotion. You would likely feel sad and angry if your much-loved family home was being destroyed, so why is the planet different? The science shows what is happening and so getting emotional is one entirely appropriate reaction.

And there is his focus on creating shareholder value. Of course it is vital for firms to create value for their shareholders, but that does not mean it has to be to the exclusion of moral obligations such as protecting the planet. There must be a balance.

In any case, the companies at the conference on Thursday showed it is possible to operate in the wind sector and also create value for shareholders. We need only look at Allianz Capital Partners, which has invested €600m in the renewable energy sector this year in assets that will deliver stable financial returns to its shareholders.

There is Google, which is entering power purchase agreements with wind farms to protect it from wildly fluctuating energy prices that could be to the detriment of shareholders.

And there are the likes of Augusta & Co., Denham Capital, EKF, Marubeni and MUFG, as well as our sponsors SgurrEnergy, who are all finding different ways to make wind pay. These firms show that supporting renewables can co-exist with delivering returns.

It should go without saying, but we need to keep saying it. If the likes of Herro continue to enjoy a platform in the international media then there will be doubts about climate change within boardrooms and the minds of shareholders; and about the business benefits that can follow on from taking action against it.
If this attitude becomes more pervasive then wind will suffer.

Those in the wind industry must keep talking about how financial returns can co-exist with renewable energy. It is easy for firms to pledge to do something, but more difficult to get them to act.

We may think the argument about renewables and climate change has been won. In fact, it has not and will carry on — whether firms in the wind sector think it is worth arguing or not.

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