More European Fund Managers Prune Their Fossil Fuel Holdings

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You can’t say the words “climate change” in Florida any more, thanks to the willful ignorance of the governor, Rotten Ron DeSantis, an immigrant who hates immigrants and would rather see his state destroyed than lift a finger to address the approaching climate calamity. DeSantis and other repugnican governors have decreed that their states may not do business with any financial companies that pursue woke policies like divesting from fossil fuel stocks or promoting social justice goals.

What is true in much of America is not true of other nations, however, especially those where recognition of impending risks is considered part of the fiduciary duty everyone who handles investments on behalf of others is obligated by law to scrupulously observe. According to Bloomberg, there is a growing list of institutional investors in Europe who are stripping oil and gas stocks out of their portfolios — a move they say reduces the risk of ending up with stranded assets and financial losses.

Ending Fossil Fuel Investments

The latest to do so is PFA, the largest commercial pension fund in Denmark with roughly $110 billion of assets under management. It recently sold its $170 million stake in Shell based on an assessment that the company’s capital expenditure on renewables is worryingly low. “There was a cry to them to engage more in the transition,” Rasmus Bessing, head of ESG investing and co-chief investment officer at PFA, told Bloomberg recently. “But especially over the last year or so, a bit more perhaps.” He noted that Shell has been signaling it wants to “go in a different direction,” pivoting away from investing an low and zero carbon opportunities to double down on it fossil fuel activities.

A spokesperson for Shell referred to a comment made by Chief Executive Officer Wael Sawan at the company’s annual general meeting on May 21, when he said shareholders “have strongly backed” its strategy. “Our focus on performance, discipline, and simplification enables us to invest in providing the energy the world needs today, and in helping to build the low carbon energy system of the future.”

Going Backwards On Fossil Fuel Emissions

In March of this year, Shell backed off its already modest emissions reduction goals, in response to pressure from investors worried about declining profits. According to Bloomberg, the previous goal was to reduce its emissions 20% by 2030 and 45% by 2035, compared to its emissions in 2016. But now the new goal is a 15% to 20% reduction by 2030 and the 45% percent by 2035 is no longer on the table, due to “uncertainty in the pace of change in the energy transition.” There’s a textbook example of a weasel-worded statement that should be included in every B School curriculum.

The company, through some combination of magical thinking and pixie dust, still maintains it will achieve net zero status by 2050, even though its action plan to get there is being watered down. The change reflects Shell’s move away from supplying renewable power to homes, following the sale of its UK and German retail business last year.

BP is also pulling back on any happy talk it might have engaged in previously. Last year, it said it would pump more oil and gas and have higher emissions this decade than previously planned. Meanwhile, Hurricane Beryl is churning through an overheated Caribbean sea, setting records for how, where, and when it formed. But nothing to see here, folks. Just keep on doing what you have always done — sucking down dino juice to power your extravagant lifestyle, in which two-thirds of all the energy in the fuels you buy is ultimately wasted.

Other Investors Pull Back

Other institutional investors also are losing patience with oil and gas holdings, Bloomberg says. Stichting Pensioenfonds ABP, Europe’s biggest pension fund with about $550 billion of assets under management, said in May that it exited all its liquid assets in oil, gas, and coal — a portfolio that was worth about $11 billion. It has said it plans to divest a further $5 billion of less liquid fossil-fuel assets.

In France, new sustainable investing requirements mean asset managers using the label will need to purge their portfolios of an estimated $7.5 billion in combined fossil fuel assets, a development that will impact companies like TotalEnergies and Shell. In the UK, both the Church of England Pensions Board and the Church Commissioners for England, which together oversee about $17 billion in assets, said last year that they will start blacklisting oil and gas majors.

Sweden’s AP7 fund, which manages more than $100 billion, has exclusion policies targeting a range of oil producers, including Saudi Aramco and India’s Oil and Natural Gas Corp. It also blacklisted ExxonMobil. AkademikerPension, a Danish pensions investor, axed its last remaining oil and gas holdings in its $20 billion portfolio at the end of 2023 and is now in the process of offloading companies that provide equipment and services to fossil fuel producers.

But aren’t ESG investments bad for investors? Not necessarily, says Troels Børrild, the head of responsible investments at AkademikerPension. The impact on returns of such divestments has been “neutral to slightly positive,” he told Bloomberg. Down the road, there’s a transition risk “and that will materialize for a number of companies,” Børrild said. “It’s not priced in at the moment,” but as regulations take their toll, low carbon portfolios are poised for “even more positive” risk-adjusted returns, he claimed,

According to a study published in March by the Transition Pathway Initiative Center, Shell lags behind other European oil majors in its clean energy transition. What’s more, oil investors are unlikely to have a clear idea of the risks they face because the industry isn’t generally providing them with the information they need, according to the study’s authors. Shell’s goal is to invest around $10 billion to $15 billion between 2023 and 2025 “to support the development of low carbon energy solutions,” a spokesperson for the company said. That includes e-mobility, low carbon fuels, renewable power generation, hydrogen, and carbon capture and storage. Shell says it invested a total of $5.6 billion in low carbon solutions in 2023, which was 23% of its capital spending. Of course, CleanTechnica readers know carbon capture is bunch of hooey the fossil fuel companies put out there to bamboozle people with hopium.

The Takeaway

Many in the US may want to tell financial organizations how to do their due diligence so it serves their political agenda, but in the rest of the known world, those who are professional financial managers are doing their homework and deciding fossil fuels are no longer good investments for their clients. That’s progress, but whether it is going far enough, fast enough is a question that cannot be answered accurately. Hope is not a plan, unfortunately, but hope is pretty much all we have as the fossil fuel industry tries every trick in the book to preserve its hegemony over human civilization.

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Steve Hanley

Steve writes about the interface between technology and sustainability from his home in Florida or anywhere else The Force may lead him. He is proud to be "woke" and doesn't really give a damn why the glass broke. He believes passionately in what Socrates said 3000 years ago: "The secret to change is to focus all of your energy not on fighting the old but on building the new." You can follow him on Substack and LinkedIn but not on Fakebook or any social media platforms controlled by narcissistic yahoos.

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