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The drive to do good

Tomorrow (5 June) is World Environment Day, when the UN will attempt to draw our attention to the urgency of preventing catastrophic climate change. This isn’t a new message or battle so it’s no surprise that activist groups are already taking drastic action to force change on the dawdlers to the cause. Certainly their patience with oil majors’ slow progress has worn thin.

Woe betide any company which poses a threat to humans or the planet. There is only one thing you can do when the products and services you offer are in demand but are bad for us and our world, and that is transition to a better (healthier, cleaner, greener) alternative. After all, governments and regulators might be more understanding on timelines, but they too will be deploying their own tactics such as those used against the big tobacco firms for decades (taxes and health warnings). Germany has recently introduced a new National Emissions Trading Scheme that means millions of Germans must now pay more for their petrol and heating as the country tries to meet its emissions reduction targets. The sugar tax was introduced to force food producers to reformulate their unhealthiest recipes.

The targets and issues don’t stop at big oil. Banks and asset managers are being encouraged to accept responsibility for emissions enabled by their lending which tend to be much larger, in aggregate, than the emissions from their own operations. A report from the Carbon Disclosure Project in April showed these "financed emissions" were around 700 times greater than financial institutions' operational emissions. This issue of how banks cause climate change is something ShareAction – which exists solely to make investment a force for good – urges investors to focus on.

But other non-energy related issues such as poverty, obesity, and social progress are also battlegrounds for AGM activists. Perhaps in a reflection of which way the wind is blowing, Nestlé has been pondering the fact that more than 60 per cent of its mainstream food and drinks products do not meet a “recognised definition of health”. ShareAction has already filed a motion at Tesco to make the grocer stop selling junk food and promote a healthier diet. And while there aren’t many listed water companies left in the UK, there are many groups angered by shareholder dividends and determined to get water back under state control.

Activists have long cottoned on to the benefits of being on the shareholder register, but now leading the battle from within has been shown to be a strategy that delivers results. A presence inside the company also allows protesters to spell out the risks to fellow shareholders of ignoring the issue – for example how economic disruption stemming from climate change will put entire portfolios in danger, or the risk of law suits over unhealthy and dangerous products. Trojan Horse tactics will inspire and embolden campaign groups everywhere as they attempt to make investors and listed companies “do the right thing” and acquiesce to demands for action.

So yes, “transition” is the obvious solution, but it’s not always so easy to achieve – a point explored in our cover feature on energy this week. Ultimately, every company’s existential crisis is likely to mean a dividend crisis for shareholders as funds are diverted from investors’ pockets into developing renewable, healthy and socially progressive alternatives. One more reason for investors to ensure they always diversify their dividend sources, sectorally and geographically.