In the face of climate change, protests are not the only solution

Recent events have shown just how much impact both small and large scale demonstrations can make. A dozen climate change protesters at this week’s annual Mansion House dinner grabbed the next day’s headlines, while two million people lining the streets of Hong Kong have halted the passage of a controversial Chinese extradition law. Power really can belong to the people.  

But while protesting can be effective, it’s certainly not the only way to create the world we want to live in. One of the most powerful – yet underestimated - tools in our armoury is our collective money. Whether we are anxious about the environment, gender or other forms of inequality, vulnerable worker rights or egregious executive pay, we can make an impact through how we spend and invest.

And with social media helping themes and trends to catch on quickly, that impact can be greater and faster than ever before. Take sustainable fashion – a niche area of the giant global fashion industry until very recently. Stella McCartney led the way two decades ago; today, she is joined by many other champions of a more conscious approach to making and buying clothes. Business models are changing too to avoid waste. I was delighted to be on a female empowerment panel at the opening of Misha Nonoo’s ‘pop up’ shop in London earlier this month; her online store carries no stock, instead each purchase of the cult ‘husband shirt’ as worn by Meghan Markle – and every other garment in a capsule range – is quickly made-to-order. And I’ve just been to a school open day where the head talked proudly of a ‘clothes swap’ initiative set up by the girls to recycle clothes with their friends. There are so many ways we can all contribute.  

Investing thoughtfully is another way we can really change the world – even if we only have a small sum, those sums can make a big total if added together. The firm I work for, Legal & General Investment Management, manages over ￡1trn of other people’s money – so if you have a pension or an ISA that might include you. One of our most popular ranges is dubbed ‘Future World’; it includes a climate change fund that tilts investments towards companies doing the most to help transition towards a low carbon world and away from those that are the worst polluters.  

Often, people think that means we don’t invest at all in the traditional oil and gas companies – but that’s not the approach we take. If we kick out all these big energy producers we would lose the power to pressure them to change their business models and drive innovation. These companies can make a really big impact on the development of more sustainable energy supplies and we want to be pushing them – through a mixture of carrot and stick – to do just that. Our dialogue also helps us create a picture of how their supply chain and operations might be contributing to the temperature rise, not just the resources they produce, a layer of transparency we might not have if we embarked upon a blanket divestment programme.

 As part of L&G’s commitments to use the collective power of our investors’ money effectively, we have also developed a Climate Impact Pledge. The Pledge is our promise to use our influence – which we only have thanks to those thousands of individual investors who trust us with their money – for good, focusing on those global companies (in all industries, not just energy) that we have identified as likely to make the biggest difference to the environment.

 Most companies respond positively to our efforts to engage. A few don’t; in 2018 we announced the first eight companies to be completely excluded from our Future World fund range for their inadequate (or non-existent) responses. For 2019, we’re pleased to report that all have responded to our concerns. Two have been welcomed back into the Future World range – such as Occidental Petroleum and Dominion Energy – and others are heading in the right direction. (We like to ‘name and fame’ as well as ‘name and shame’!)

Today we have published our second annual list of large global companies that we have divested (taken money away completely) across our whole Future World range. This year, we will be excluding the following: oil major ExxonMobil, utility Korean Electric Power Corporation, food companies Hormel Foods and Kroger, and insurer MetLife. These names are in addition to the other six exclusions in 2018’s list; China Construction Bank, Rosneft Oil, Japan Post Holdings, Subaru, Loblaw and Sysco Corporation. 

If you’re still to be convinced about the impact of engagement and investor power, take a look at one of the other funds in our Future World range – the Gender in Leadership (or GIRL) fund, our flagship gender diversity fund (to which the Climate Impact Pledge also applies), which I wrote about in my article here last month.  

The GIRL fund recently celebrated its first anniversary and although there were many sceptics at launch it's achieved better performance than the benchmark over the year, and there’s been an 8% increase in the gender diversity scores across all companies - as well as better data, as companies have made an effort to ensure their reports are accurate and up-to-date. If you are investing the minimum ￡20 per month this seems a pretty good result.  

I’m hoping that before too long, this type of investing is not ‘special interest’ but mainstream. With more people than ever taking to the streets to express their views about the environment and all forms of equality, anyone putting their money ‘to work’, whether it’s a large sum or small, should be able to demand that money is invested in accordance with those views as well. The more money that’s invested this way, the more impact we can have.