Last week, they did. Tobacco, which features on wanted posters, alongside asbestos and Nazi war criminals, was sucked into the coal debate by ethical investors who decried the use of coal to keep their houses warm during the northern hemisphere’s chilly winter and said they would prefer some other heating source.
Nuclear perhaps? Oh please, said the ethical investors, we scrubbed nuclear years ago. Oil? Ditto.
All we want, said the ethicals, is power we know is pure and which does not cause us to mortgage the kids to keep the house warm.
Well, dear ethicals, The Hog has news for you. It ain’t been invented yet. If you want warmth in a northern winter, and want to retain ownership of the family home, then you had best accept that coal is the “go to” heating source.
The same situation can be found in Australia as it sizzles over a southern summer. If you want to stay cool then be prepared for air-conditioners powered by coal.
What launched The Hog on this week’s rant about the lunacy of the climate-change zealots and their close relations, the ethical investor’s league, was a Bloomberg news service report that noted that Norwegian ethical investor Storebrand had sold all of the shares it owned in 24 coal and oil-sands companies in the five months since July.
“Hopefully, other investors will be acting along the same lines,” Storebrand head of sustainable investments in the fund’s Oslo head office Christine Torklep Meisingset said.
“There could be an interesting parallel to tobacco.”
Wow. There it was, the moment The Hog had been waiting for. The Dirty Harry moment. The time when an ethical played the tobacco card and The Hog replied: “thanks, you’ve made my day”, because your view is so totally wrong and the tobacco comparison so daft, especially from an investor’s perspective.
Abandoning coal as a legitimate investment class because of a belief that it is in the same category as tobacco goes beyond silly. It could prove to be expensive for the members of the fund.
The problem goes like this: the more do-good, feel-good ethical investors vote with their misplaced consciences, the greater the profit that flows to you competitors.
Take tobacco, a drug that The Hog chooses to not use but one that is totally legal and a big taxpayer to governments around the world. More importantly tobacco is a fabulous investment and while governments benefit from it why shouldn’t investors.
Consider a few investment facts. Over the past few, as the ethical and climate change league has taken control of some of the world’s big investment funds, one of top performing investment classes they refuse to touch has been tobacco.
London listed Imperial Tobacco, for example, is up from £21.20 in late August to trade at around £23.58, a handy 11% rise. British American Tobacco is up a more modest 5%. Both operate on fat profit margins and pay generous dividends.
Imperial is valued on the London stock market at £23 billion and British American has a value of £:63 billion ($A106 billion), roughly same as Westpac Bank, and a shade short of BHP Billiton’s shares listed on the ASX.
The question comes down to this: given that the world requires coal to generate 30% of its electricity how can you, as a manager of other people’s savings, apply the tobacco test and say “I don’t like it”, thereby eliminating potential profits for the people whose money you manage?
Coal, whatever its faults, is the world’s primary source of heat and electricity.
One day, perhaps, the sun will take over but until the rise of affordable solar power it is a very brave manager of other people’s savings who says I don’t like coal therefore I won’t invest your money in it.
That, dear investment manager, is not your job. Your job is to maximise the return on the savings of your members. If you don’t, then The Hog has every right to say: “go ahead, sell your highest yielding stocks, and explain yourself”
Mixing ethical questions with business is tricky because once you decide that one investment class is unethical (albeit legal) the door is open to widen the ban by including products such as cars because they kill people, or alcoholic drinks because they cause family break-ups.
Some investment managers might not like coal but it is a fundamental error to make investment decisions about other people’s money using your personal beliefs as a guide.
