Generation “not comfortable” with engagement as a strategy with fossil fuel firms – David Blood

David Blood, co-founder with Al Gore of sustainable investment boutique Generation Investment Management, says the firm supports the fossil fuel divestment movement as it’s “not comfortable” engaging with the big oil and gas firms.

“It would be great if they [the energy firms] stopped searching for what will become stranded assets,” he said, “but the reason we have been supportive of the divestment movement is that we were not comfortable that engagement is a useful strategy.”

Even the “most enlightened” energy companies would be “reluctant to strand their own assets”, he added, responding to a question on the merits of engagement with fossil fuel firms at the InvestDivest event, part of London Climate Action week.

Generation has not invested in hydro-carbon stocks for over 10 years, he said. His words echo his colleague Mark Ferguson’s remarks recently that the “quiet diplomacy” of investor-corporate dialogue has failed.

But proponents of engagement can point to positive outcomes at the likes of Glencore, as documented here.

Warning of the risks inherent in the energy sector, Blood said, “we have no idea when these assets will become worthless, [but] we know they will become worthless and taking the bet on [when] is not smart asset allocation decision”.

He was talking on the same day that the UK institutions the National Trust, the Royal College of Emergency Medicine and the Royal Society of Arts all committed to divesting fossil fuels.Blood, the former CEO of Goldman Sachs Asset Management, also said that large asset owners – pension funds, sovereign wealth funds, foundations – are “not frankly at the table yet” when it comes to financing the transition to the low carbon economy.

“The reason we have been supportive of the divestment movement is that we were not comfortable that engagement is a useful strategy.”

Investors that were moving weren’t “deploying as much capital as they ought to be”. He added that more must be done to make the business case to institutional investors.

Blood argued against the “incrementalism” that characterises climate action.

“We’ve had incremental change over the last 10-15 years… even if we have faster incremental change, we will not make it.” What we needed was “transformational change”.

Asked about whether there were supply chain issues with investing in the transition, he said “we manage $25bn dollars and we’re not finding any issues investing that capital”.