Warren Buffett is feted as the world’s most successful investor. Yet on one measure, Berkshire Hathaway is the worst-performing public company in Europe and North America. The conglomerate is the only US or European stock on a list of 159 major polluters that has no strategy to combat climate change.
The $630bn conglomerate, is opposing two shareholder proposals that ask its board to publish annual reports on how it is tackling environmental and diversity issues.
Berkshire’s shareholders are expected to follow his lead and reject those initiatives at the company’s annual meeting. But this may leave the 90-year-old Mr. Buffett, perhaps the world’s most admired investor, increasingly out of step with the times. But this should come as no surprise. Buffet has regularly stated that he invests only in what he understands, investing in only predictable business with strong cashflows and high ROCE, yet in 2016 Berkshire took the plunge in Apple, which made 100$b and is effectively Berkshires best investment of all time. It accounts for the large surge in value of Berkshires’ equity portfolio and makes up about 44%.
Similarly, E.S.G is yet a new sphere that goes beyond Buffets typical investing philosophy with estimated AuM of $22.5tn. The process of transparent ESG within Berkshire and its holdings can be expediated through its shareholders pushing for change, either through votes or by excluding Berkshire from their portfolio, yet if Berkshire takes the plunge, they could reap, not only towards their holdings, but also their own E.S.G.
“We are not going to shy away from holding Berkshire accountable just because it’s run by Warren Buffett,” said Simiso Nzima, the head of corporate governance at Calpers, the giant California public pension fund that co-sponsored a climate disclosure proposal.
Time will tell the importance of E.S.G and whether Berkshire will again adapt to the times.
Source: Financial Times