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An Open Letter To Bill Gates Regarding Climate Change And His Good Friend Warren Buffett

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This article is more than 2 years old.

Dear Mr. Gates,

By way of introduction, I would like to thank you for everything you and your wife Melinda’s foundation is doing to combat climate change. I read your excellent book “How to Avoid a Climate Disaster: The Solutions We Have and the Breakthroughs We Need.” In it you rightly note the important role that companies can play and state that “As an employee or shareholder, you can push your company to do its part.” You also point out that this will involve companies “accepting more risk” and that “Shareholders and board members will have to be willing to share in this risk, making it clear to executives that they’ll back smart investments even if they don’t ultimately pan out.” One of the smartest investments a long-term shareholder can make is a climate-informed vote.

The Bill & Melinda Gates Foundation Trust, with assets of around $51 billion, is the largest foundation in the U.S.—nearly four times larger than the number 2 Ford Foundation—and owns large equity positions in a limited number of companies. One of them is Berkshire Hathaway, where your foundation’s trust has a 3.07 percent stake in the class B shares (after Vanguard at 9.37, BlackRock at 5.53, and State Street Global Advisors at 5.48) making your trust the fourth largest class B holder. Furthermore, the trust’s stake in Berkshire Hathaway represents about 42 percent of its total equity portfolio. This is a high degree of investment concentration, so the fate of your endowment is heavily tied to the fate of this investment.

It is in this context that I am writing to ask you for two small favors. Both are easy to do and in your self-interest, although one is more awkward than the other, so we’ll start with that one.

The first favor is that I request  you call your good friend Warren Buffett, and ask him to vote in favor of the Berkshire Hathaway shareholder proposal submitted by the California Public Employees Retirement System (CalPERS), Federated Hermes, and Caisse de dépôt et placement du Québec (CDPQ) which requests “that the board of the Company publish an annual assessment addressing how the Company manages physical and transitional climate-related risks and opportunities, commencing prior to its 2022 annual shareholders’ meeting.” For some further background, please see this correspondence between Mr. Timothy Youmans, Lead-North America for EOS at Federated Hermes, and Mr. Marc D. Hamburg, Senior Vice President at Berkshire Hathaway.

The board of the company has unanimously recommended that shareholders vote against this modest proposal. They are doing so on the dubious argument that since Berkshire Hathaway is extremely decentralized with a small staff at headquarters, it is impossible for them to meet this request and, further, is contrary to the company’s culture. The company has 63 subsidiaries so if the staff is very small, I doubt they are doing an adequate job keeping track of these companies. But if they have enough staff to be tracking risks and opportunities at all subsidiaries, including on climate change, it shouldn’t be too hard to add a few more to help put together a consolidated company climate-related report. Resources are certainly not an issue. Page K-57 of Berkshire Hathaway’s 2020 annual report states that, “At December 31, 2020, our insurance and other businesses held cash, cash equivalents and U.S. Treasury Bills of $135.0 billion.” Yes, I understand the difference between assets on the cash flow statement and liquid assets but allocating say, 0.001 percent of that cash balance would provide $1.35 million which I estimate would cover this work. Of course, this will involve taking some cultural risk from this modest degree of centralization. But since Mr. Buffett is one of only three trustees of your foundation, along with you and Melinda, I would hope that he agrees with your quote above about the need for smart risk taking in dealing with climate change.

Several weeks ago, I analyzed the company’s argument and made the case for why it is in Mr. Buffett’s interest—and the right thing to do—for him to change his mind and vote in favor of this proposal. I pointed out that Berkshire Hathaway is one of the top 100 companies in the world in terms of its greenhouse gas emissions (GHGs). Since that article, Climate Action 100+ has published its “Net-Zero Company Benchmark” study. It assesses the 167 companies in its benchmark according to nine disclosure criteria such as targets for GHG reduction over the short-, medium-, and long-term; decarbonization strategy, capital allocation alignment, and compliance with the Task Force on Climate-related Financial Disclosures (TCFD). Berkshire Hathaway was assessed against these criteria and did not meet a single one of them. It is one of only a handful of companies that fail to meet any of these criteria.

I understand you may be disappointed to hear this assessment of Berkshire Hathaway. I am also confident that you understand why I am asking you to call Mr. Buffett. Your foundation’s trust has a material financial and reputational stake in this vote. Mr. Buffett has already donated $30 billion to your foundation. I’ve done a rough calculation and estimate that at today’s stock price these annual gifts could be worth another $34 billion for a total of $64 billion over the 35 years since these gifts started. Of course, this number could be greater or less based on how well the stock does. The way Mr. Buffett is dealing with climate change creates a risk that the company’s stock will go down rather than up—with obvious implications for your foundation.

Which brings me to my second and obvious favor—and I think you could see this coming. Please vote the Bill & Melinda Gates Foundation Trust’s Berkshire Hathaway shares in support of this reasonable shareholder proposal requesting an annual climate report. Since you and Mrs. Gates are the only two trustees of the trust, this is completely within your and Mrs. Gates’ control. Failure of the foundation’s trust to support this proposal will illustrate a glaring inconsistency between your foundation’s programs and your endowment of the foundation’s work. I think you are better than those in the foundation world who hide behind the argument of “We make as much money as we can in whatever way is legal so we can contribute as much as we can to make the world a better place.” We have all come to admire your personal compass that has guided the foundation’s work, and I ask you now to maintain the course you charted in your book cited above.

Let me conclude with a modest suggestion to help you do the right thing in this instance, as you have done in so many others. Please call your friend Warren and tell him that you will be voting the foundation trust’s shares in favor of the climate proposal. Explain why and tell him it’s important that he do so with his shares as well. If there’s anyone Mr. Buffett will listen to on what is a sore subject for him, it’s you. And, to be brutally honest with you, it is very hard to square your position on climate change with Mr. Buffett’s argument regarding the shareholder proposal given the close personal, organizational, and economic relationships between you, Mrs. Gates, and Mr. Buffett. This dichotomy isn’t going away, it is going to become more glaring over time, and, in my opinion, you need to address it head on. Of course, if it would be helpful, I would be happy to have a short call with you or one of your representatives about this important issue.


Sincerely yours,

Robert G. Eccles

Said Business School, University of Oxford

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