Capital Splits with Producers Over Climate

Ideas and Issues

May 28, 2021

Little Rock

There might be an interesting narrative where the poster child for climate change is a teenager in Sweden, but increasingly it looks like the real poster might as easily and accurately portray some guy sitting behind a huge walnut desk in some executive suite on Wall Street. Not really of course, one has to push the other, but when capital moves, seen or unseen, the tremors are huge and may be permanent.

Efficient economic systems run with a smooth alignment of capital with producers, whether in the United States as a mixture of private and public investment, or purely state investment like China. Suddenly, we may be at the tipping point where we are finally seeing some rupture between capital forces and resource producers over climate concerns. News of shareholder victories over big oil in recent votes at Exxon Mobil and Chevron are telling.

Don’t be confused. We have been bottle-fed that a shareholders’ “revolt” is the little people finally winning one against the suits. Forget about it. The deck is so staged within corporate governance in the US that when changemakers bring resolutions forward they often declare victory if they win as few as 30% of the votes. The big boys in private equity and public pension funds control the big tranches of votes on these matters. Without them, you’re whistling in the dark. Board seats are even more tightly managed in the fiction of shareholder democracy than resolutions, which seek to instruct action by companies, and in many cases can legally even be ignored in corporate controlled capitalist so-called free markets. For dissidents to be able to successfully win two seats on the Exxon board over management recommendations with several seats still in contest on a platform of forcing Exxon to make more investments in alternative energy and climate change, is revolutionary indeed, but the revolution is less us versus them than it is them versus them, with capital breaking away from the current energy production models.

This day has been coming. Some banks have abandoned financing coal development. Some have shied away from pipeline financing. Some Republicans in Congress have tried to introduce bills to force financing, underlining the division between capital and even capital-controlled politicians.

The movement is picking up steam. Shareholders also clipped Chevron’s program mandating a different direction on climate. Courts, almost always moved by public opinion as significantly as any case law, are moving, as evidenced by the Netherlands decision forcing Shell to speed up its transition away from oil and gas production.

The war isn’t won, but these are clear signs that victories on the battlefield are starting to add up on the side of change, even engaging unusual and unreliable allies.