Environmental Groups Urged To Buy Cheap Oil And Airline Stocks

Environmental groups should buy up cheap stocks in the sectors that cause the most climate damage, including energy and aviation, the director of a leading European research center has urged.
Some environmental groups have dismissed activist investing in the past, but may not have considered a new strategy proposed last year by an American economist.
The call to invest comes from François Gemenne, director of the Belgium-based Hugo Observatory, which studies interactions between environmental change, human migration, and politics. Gemenne expanded upn a move by People for the Ethical Treatment of Animals (PETA) to buy stock in clothiers—including Burberry and Ralph Lauren—in hopes of protecting sheep and goats.
“A very intelligent tactic,” Gemenne tweeted, asking Greenpeace and Fondation Nicholas Hulot: “Don't you want to do the same with the fossil industries? The Total (French oil company) share is at 33.79 EUR: if you buy massively, you can change the company's strategy towards renewables.
“To all environmental organizations that have a certain financial capacity, my advice: get together and buy stocks massively from the fossil industries. Much more effective than all post-crisis calls and manifests.”
One respondent pointed out that activists would have to buy hundreds of millions of dollars of stock to sway companies with such massive capitalization, and Gemenne replied that airlines are more vulnerable.
His suggestion was embraced by some:
“A genius idea by @Gemenne, based on an initiative by @PETA_France,” tweeted an activist named Anjupetit. “Stock prices are low, due to #covid19, which is the best opportunity for organisations with financial power to buy stock, and influence decision-making for more renewables and sustainability from the inside!”
But it was dismissed by others, including Nicolas Haeringer, a global organizer for 350.org, who cited instances in which environmental organizations had concluded that divestment was a better strategy than investor engagement.
“The fact that the price of the majors of the sector is at the lowest does not change anything,” he tweeted. “The aging fossil industry will not be organized from the inside.”
But the conversation has not considered an economic strategy proposed late last year by Brigitte Roth Tran, a senior economist for the U.S. Federal Reserve Board.
In a strategy she calls “mission hedging,” Roth Tran argues that foundations and endowments should invest in the “socially objectionable” firms they oppose, not just to influence corporate policy, but because if the influence fails, and the firms flourish, the activists find themselves with greater resources to increase pressure on the firms.
If the activists succeed and the firms decline, the activists’ resources may also decline but at a time the activists need them least.
“Consider a foundation that funds climate change mitigation efforts,” she writes in American Economic Review: Insights. “If that foundation invests heavily in fossil fuel stocks, then an unexpected weakening of greenhouse gas (GHG) emission regulations would provide the foundation with a positive asset shock at the same time that its marginal value of funds increases due to the unfavorable state of the world with respect to its mission.”
If the foundation and the objectionable track returns together, she continues, “then the foundation can better align funding availability with need and increase expected utility by boosting its exposure to the objectionable firm beyond that of a typical portfolio.”
Roth Tran’s suggestion intervenes in the traditional debate between socially responsible investing, in which foundations avoid objectionable firms; activist investing, in which they invest to positively influence objectionable firms; and firewall investing, in which foundations keep their finances distinct from their missions.
She concludes that foundations may best serve their missions through mission hedging:
“While major divestment movements have the potential to bring about change, my results show that firms that are seen as bad actors may provide good opportunities for hedging foundation-specific risks.”