In a recently filed shareholder resolution, an activist group called the Nebraska Peace Foundation (NPF) asks Berkshire Hathaway’s insurance division to prepare a report describing the division’s responses to climate change risks. The report “should include specific initiatives and goals relating to each risk issue identified.” In a letter to shareholders dated February 27, 2016, Berkshire Hathaway Chairman and CEO Warren Buffett explains why Board of Directors unanimously opposes the resolution.
Today’s post examines Buffett’s argument, which straddles fences in ways you might not expect. Before diving into it, I should note that NPF owns exactly one share of Berkshire Hathaway stock. That’s enough to entitle NPF to submit a shareholder resolution but nowhere near enough to give those ‘investor activists’ a stake in the company’s financial health.
For years climate campaigners have used shareholder resolutions to demand that companies with fossil-fuel investments or customers confess their unsustainability in the supposedly inevitable carbon-constrained future. The classic case is Campaign ExxonMobil. In the name of protecting shareholder value, the campaigners tried to persuade Exxon to scare away its own investors–a tactic that, if successful, would bankrupt the company and harm shareholders. NPF is part of the same movement, although its goal may simply be to turn Berkshire Hathaway into yet another multi-billion dollar mouthpiece for the so-called climate consensus.
The remainder of this post reproduces the portion of Buffett’s letter that explains why the Board opposes the NPF resolution (pp. 24-25). Buffett’s text is in maroon and preceded by the initials WB. My comments are in standard black and indented.