(Monday 17th June) Today ShareAction, the responsible investment charity, is calling for asset managers to take a stronger approach to fossil fuel producing companies. In a new paper, ShareAction sets out how asset managers can adopt a more limited and selective approach to investing in fossil fuel companies and a more purposeful use of stewardship levers. The organisation also challenges some of the arguments made by asset managers against adopting a more robust approach.

Under current plans, fossil fuel companies are set to produce more fossil fuels than the world needs if we are to meet net zero ambitions. By competing with renewable energy, they will put transition at risk. This risk warrants a new blueprint for investment and stewardship from asset managers.

The paper sets out how asset managers must adopt robust policies for the sector, in the long-term interests of their clients. Investors have the power to influence the success of transition. As visibly damaging temperature rises are occurring materially faster than expected, they should apply the full extent of that influence, with urgency.

Commenting on the release of ShareAction’s new paper Niall Considine, Head of Investor Standards at ShareAction said: “The transition to net zero is not just environmentally and socially beneficial, it is economically desirable and financially prudent. But fossil fuel companies are resisting calls to reduce production and putting that transition at risk.

“We have set out the parameters for a more purposeful approach to the fossil fuel sector in our new blueprint, and urge asset managers and other investors to embrace it. There are complexities in considering how investors can most effectively use the levers at their disposal. But the stakes are too high, for society and for the financial system, for complexity to stand in the way of clear-eyed progress.”

Current restrictions are severely limited

Current policies do not go far enough to mitigate the risks the fossil fuel sector poses to transition. Alongside the publication of the paper ShareAction analysed 25 of the largest global asset managers and found that most have very limited restrictions on fossil fuel companies, with none implementing restrictions on oil and gas companies applied across all funds, and 16 having no restrictions at all on investing in conventional oil & gas companies.

ShareAction calls on asset managers to embrace a new blueprint for action, including:

• Setting very tight investment restrictions on thermal coal and unconventional oil & gas companies which are expanding capacity, including no participation in their primary debt or equity offerings, and excluding or divesting secondary exposure;
• Significantly limiting exposure to conventional oil & gas companies which are expanding capacity or planning to increase production to a minimum; and
• Engaging robustly with fossil fuel companies where exposure is retained, escalating where change is not forthcoming.

Notes to editors

Details of the 25 asset managers assessment:

For the purpose of this report, ShareAction reviewed the investment/exclusion policies and sustainability documents of 25 of the largest applicable global asset managers. We found that:

• Most, though not all, large asset managers apply some form of fossil fuel-related investment restrictions, however, these are mostly limited to coal or unconventional oil & gas and applied only to ‘labelled’ funds.
• 21 had restrictions relating to thermal coal, but only two applied those restrictions to all funds.
• 18 asset managers had some restrictions on unconventional oil & gas, but none were applied across all funds.
• Nine asset managers applied any restrictions on conventional oil & gas, none of which applied to all funds.

ShareAction launched a new definition for responsible investment in 2023 as part of its ongoing work on RISE. Central to the approach has been creating a clear framework setting out the benchmark for what responsible investment should mean to all asset managers:

“Responsible investment is a transparent approach, embedded throughout the investment process, that takes the negative positive impacts on people and planet as seriously as financial risk and return.”