Investments stuck in non-productive assets drain capital for investors.
In a significant turn of events, two climate activists have secured seats on ExxonMobil's board of directors, marking a new chapter in the company's approach to sustainability and climate change. This move comes as part of ongoing activist efforts challenging ExxonMobil's policies.
Six years ago, Exxon Mobile was ranked second on the list of the most valuable companies, but today, Apple is worth around eight and a half times more than Exxon Mobile. The stock value of Exxon Mobile, calculated in U.S. dollars, has lost more than 20 percent of its value over the past decade.
Meanwhile, the stock of Waste Management and Recycling company has nearly quadrupled in the past decade, while the Nasdaq 100 has increased by more than six times in the same period. The share price of Beyond Meat, a company developing plant-based alternatives to meat, is currently around $145 dollars. In comparison, the stock of Beyond Meat was issued at around $25 dollars about a year ago.
These shifts in the market highlight the potential financial rewards of investing in companies developing technologies to mitigate environmental impact. Thomas Buckard, co-founder of the wealth management firm MPF, emphasises this point. Buckard, who previously worked in private banking at Deutsche Bank, is now responsible for customer acquisition and support at MPF.
However, neglecting economic factors while investing based solely on social and ecological criteria can lead to substantial financial risks. Companies responsible for unsocial, unethical, and non-ecological business practices can significantly impair their corporate value in the long run. This fact is a broader statement that includes other companies, as evidenced by the Volkswagen (VW) example given in the text.
In a recent ruling, the district court in The Hague has ordered Royal Dutch Shell to reduce its CO2 emissions by 45 percent by 2030, compared to 2019 levels. Companies with high greenhouse gas emissions, such as Exxon, Shell, Holcim, and Nippon Steel, face the risk of their assets becoming "stranded."
Thomas Buckard, an avid mountaineer, stresses the importance of businesses taking decisive action on climate change. The activists who sat on ExxonMobil’s supervisory board in May last year are expected to pressure Exxon Mobile to reduce its carbon dioxide emissions more than previously planned. This is a shift from the originally planned reduction by 2035, relative to 2016 emissions.
These developments underscore the growing importance of sustainability and climate change in corporate decision-making and investment strategies. As the world grapples with the consequences of climate change, it is clear that businesses must adapt to this new reality to ensure long-term success.
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