Why paying more dividends could save the planet

Climate emergency demands action, not rhetoric. So, on the eve of COP26, which UK news item promises to deliver the most positive impact for the future of the planet? Not, I suggest, Sadiq Khan’s extension of the Ultra Low Emissions Zone to the North and South Circulars, imposing stinging costs on owners of older diesels who can’t afford newer ones; nor Rishi Sunak’s £7 billion pledge for sustainable transport in cities outside London — only £1.5 billion of which turns out to be new money. No, the headline that matters more is the one that says dividend payments by UK companies are returning to normal.

During the darkest days of the pandemic, most public companies slashed or cancelled payouts to shareholders in response to plunging profits, calls for Covid solidarity and in the case of banks, pressure from the Bank of England. In our anti-business media, it was much said that dividends, akin to City bonuses, were inherently immoral anyway, and therefore ripe to be cut.

The news that dividends surged to £35 billion in the third quarter — led by miners, oil giants, housebuilders and banks, and almost double the figure for last year’s third quarter — will provoke more of the same. Capitalism’s detractors will accuse boardrooms of heaping riches on the rentier class (and themselves) at the first sign of recovery, when they ought to be improving workers’ conditions, reinforcing balance sheets and taking better care of all their stakeholders, including the natural environment.

I beg to differ. Well-run companies attend to those broader responsibilities as well as, not instead of, generating value for shareholders, including pension funds which urgently need restored cashflows from their investments to avert future shortfalls. And Earth currently needs private-sector investment on a huge scale — much more than it needs posturing politicians — to decarbonise the energy, transport, construction and food industries while sourcing rarer minerals needed to drive cleaner technologies.