Bill Gates and 27 big-name investors are forming a multi-billion dollar private fund to invest in energy research and development.
Bill Gates and 27 big-name investors are forming a multi-billion dollar private fund to invest in energy research and development. But should Gates simultaneously divest from fossil fuel companies? Frederic Legrand - COMEO / Shutterstock.com

On the eve of the launch of the Paris climate talks, an unprecedented coalition of business and tech leaders announced a major initiative to tackle climate change. Bill Gates, along with Amazon's Jeff Bezos, Facebook's Mark Zuckerberg, Virgin's Richard Branson, Alibaba's Jack Ma and 23 other big-name investors have joined a private investment fund aiming to invest in technologies to make the cost of widespread clean energy lower than that of fossil fuels.

The Breakthrough Energy Coalition commands resources in the billions of dollars, though Gates, who already pledged $2 billion to the clean energy effort, has not yet named how much the coalition will be investing. Critically, the fund will also advocate for early stage research (which likely won't yield returns for years) in technologies like solar chemical, flow batteries, and solar paint.

But despite Gates's willingness to throw his weight behind new climate change solutions, he still faces pressure from another coalition of people who say it's not enough for Gates to spur investments in clean energy. Today, Gates Divest activists once again called on Gates to take a moral stand on fossil fuel investments. The activists' vehicle this time: a letter to Bill and Melinda Gates signed by more than a thousand health professionals, city council candidates, faith leaders, nonprofits, and activist groups.

None of this is new news to Gates, who has previously called divestment a false solution. Instead, Gates has advocated a research and development approach to solving one part of the climate change crisis. In a paper published today, Gates elaborated on the case for a new wave of investment in energy innovation. "A key part of the solution is to attract investors who can afford to be patient, and whose goal is as much to accelerate innovation as it is to turn a profit," Gates wrote. "I am joining with a number of other investors who are fortunate enough to be in this position."

Gates has called for a new focus on innovation in the energy sector to make up for a gap in energy research and development.
Gates has called for a new focus on innovation in the energy sector to make up for a gap in energy research and development. Bill Gates/Breakthrough Energy Coalition

It's worth noting that while Gates may have snubbed the idea of fossil fuel divestment in print, the Gates Foundation decreased its fossil fuel investments from $1.4 billion to $475 million—66 percent—in 2014. Nevertheless, Gates Divest activists want the Microsoft cofounder to take a public stand against investing in any major fossil fuel companies at all.

"It's not just about reducing the cost of alternatives, but about increasing the cost of fossil fuels," former Seattle mayor Mike McGinn said at today's Gates Divest event. "And divestment sends a powerful signal that we should no longer support that activity. "

Divestment is usually a last resort in shareholder activism. Activist shareholders often maintain some small quantity of shares in fossil fuel companies just so they can have their voices heard by the larger group of shareholders, according to Bruce Herbert, founder of Seattle social impact investment group Newground. Herbert engages with fossil fuel companies, too, to try and get them to lower their carbon impacts. But Herbert is also asking the Gates Foundation to divest from fossil fuels.

"We're very in favor of active engagement, and if an organization is not going to use their shares in a constructive way to change the outcome, then they should divest," Herbert told me. "The Gates Foundation, to our knowledge, hasn't really done anything to engage."

Then again, another idea about fossil fuels may be picking up steam in the investment world, and it has little to do with a moral obligation to divest.

"I would say that increasingly, and you see it most starkly with coal, a lot of these investments are proving to be really shoddy investments," says Sue Reid, vice president of the climate and clean energy program at Ceres, a nonprofit sustainability advocacy group. Investors have also raised serious questions about the dramatic decline in oil prices at smaller oil companies, Reid added. "It raises a very big investment risk even before the likelihood that two-thirds of those resources will be stranded if we want to stabilize the climate."

But Reid, who called Gates's coalition effort a game-changer, sees decarbonizing investments as a complementary strategy to closing the clean energy research and development gap. "There are hundreds of billions of dollars being invested every year in high carbon, high risk energy resources: coal, oil, and gas," Reid said. "Globally that has to stop, and governments around the world are subsidizing fossil fuels. There's a broad set of factors that skew in the favor of the things that are worsening climate change."