Asset managers invest over $400B in oil, gas despite climate commitments

Asset managers invested $417 billion in oil and gas companies last year despite their publicly announced climate commitments to limit global warming to 1.5°C, finds a new report from London-based financial think tank, Carbon Tracker, released Friday.

Over 300 asset managers with $59 trillion of assets under management have signed up to the Net Zero Asset Managers Initiative (NZAM), committing to align all their investments with net zero emissions by 2050.

The report identified 25 members of the NZAM are among the largest shareholders of the 15 world’s biggest listed oil and gas companies that are fueling climate change, including ExxonMobil, Chevron and TotalEnergies.

BlackRock, Capital Group and Fidelity, among the largest US asset managers, and France’s Amundi significantly increased their overall shareholdings in the 15 companies, by doubling down on oil and gas last year.

‘Shares in the 15 companies now account for 6.1% of Amundi’s total investments. In the US, they make up 2.3% of assets under management at State Street, 2% at Capital Group, 1.7% at Northern Trust and 1.3% at Blackrock. They account for 1.3% of AUM at Swiss UBS and 1.2% at UK’s ABDRN,’ the report said.

Also, more than 160 funds marketed with the labels ‘ESG’, ‘sustainable’, ‘climate’, ‘carbon’ and ‘transition’ hold $4.6 billion in investments in the 15 companies, the report finds.

‘Asset managers that join coalitions such as the NZAM are signaling to the market that they will invest in line with the Paris target of holding global warming to 1.5°C. If they invest in oil and gas companies that are not aligned with this target, they risk their reputation among climate-conscious asset owners, while other investors may increasingly be concerned over exposure to energy transition risk,’ said Maeve O’Connor, an oil, gas and mining associate analyst and author of the report.

Carbon Tracker warned that asset owners such as pension funds, insurers, sovereign wealth funds and foundations are increasingly concerned that their investments should not fuel climate change and aware of the risks of investing in high-carbon companies during the energy transition.

If asset managers fail to reflect their climate commitments in their investment practices, asset owners could walk out, and they could also face scrutiny from regulators, the report warns, as regulators in the US, EU and UK have begun to investigate managers whose investments do not reflect their public climate promises.

‘The energy transition from fossil fuels to clean technologies is well underway and is likely to gather pace as the damaging impacts of climate change drive bolder government policies,’ Mike Coffin, the head of oil, gas, and mining at Carbon Tracker and co-author of the report, said.

‘Growing numbers of investors want to support this transition and are seeking to align their portfolios with 1.5°C. However, it is hard to see how they can do this with credibility if they own financial interests in oil and gas companies that are not themselves aligned with the Paris target.’

• Net Zero Asset Managers Initiative (NZAM)