Skip to content

“Anyone who believes in infinite growth on a finite planet is either a madman or an economist” 

David Attenborough

Despite scientists’ warnings of the severe and harmful consequences associated with climate change[i], emissions continue to rise year-on-year and are now at an all-time high.[ii] Warming already stands at 1.2°C above pre-industrial levels and there is a two-thirds likelihood we will have surpassed a 1.5°C rise by 2027[iii].

Limited progress has been made and we examine the hotpot of players involved in the climate landscape, focusing on 1. polluters, 2. governments and 3. investors.

Given the significant action required to tackle the climate emergency, we need interests to align and global buy in for change. Investors have a key part to play in influencing these various stakeholders.

The polluters – Fossil fuel companies are not on track for 1.5°C

We know that almost three-quarters of global emissions come from energy use[iv] and that the oil and gas (O&G) industry will need to play an important role in the energy transition. Global fossil fuel consumption subsidies in 2022 are estimated to have doubled from the previous year, reaching an all-time high of USD 1 trillion. [v]

There is a growing disconnect between O&G companies’ climate rhetoric, including some ambitious net zero commitments that have been made, versus their action. Between January 2021 and March 2022, O&G companies approved over $160 billion of investments in new projects aimed at increasing production, despite having set targets for net zero emissions by 2050. Almost all of these investments are incompatible with a 1.5°C scenario.[vi]

When it comes to investments in renewable energy, in absolute terms, O&G companies do make contributions that play a vital role in addressing climate change. However, these investments in renewables represent a relatively small proportion of money flows, as compared with total capital expenditure, or as compared with shareholder payouts.[vii]

Discrepancies between O&G majors’ climate aims and activities have led to accusations of greenwashing. Last month, the UK’s Advertising Standards Authority banned ads by Shell, Repsol and Petronas regarding their emphasis on low carbon technologies, noting they are misleading for consumers and unrepresentative of their business models.[viii] Many of the O&G majors are currently aligned with a scenario of more than >5°C warming,[ix] which is far beyond the threshold deemed safe by climate scientists and will require a significant upheaval towards a change in direction.

Governments – Climate politics appears to be deteriorating

Globally, governments have made broad commitments to the fight against climate change, specifically in signing up to the Paris Agreement and subsequent COP movements. However, alongside these wins, there are rising concerns around politically driven climate losses. The UK Government has announced just this week that it will grant over 100 new oil and gas permits.

The US Republican party has also made headlines this year, with Al Gore accusing them of promoting a new wave of climate denialism through their campaign, which has resulted in more than half of US states restricting the use of ESG factors in public pension plan investments.[x] This somewhat limits investors’ climate scope, creating a barrier to the Inflation Reduction Act which has sought to tunnel hundreds of billions of dollars into renewable energy deployment.[xi]

Since taking office in 2019, Brazilian president Jair Bolsonaro has weakened environmental enforcement and funding (in favour of agribusiness).[xii] This has contributed to a significant rise in Amazon deforestation – at current rates, 27% of the Amazon will be without trees by 2030.[xiii] This is particularly concerning given the Amazon currently serves as the largest land carbon sink on Earth, and with rising temperatures, this could trigger widespread tree loss and transformation into a savannah, posing a severe threat to global warming.[xiv] Other emerging market economies are being criticised for continuing to set net zero targets beyond 2050.[xv]

It’s not all bad news. New climate commitments have been made, including Switzerland seeking to cut emissions after a fractious referendum.[xvi] Additionally, climate finance momentum is mounting ahead of the climate negotiations in the oil rich Middle East later this year (COP28). Macron’s recent summit in Paris pushed the World Bank and International Monetary Fund to factor climate change into lending decisions (albeit several G7 leaders failed to attend).[xvii]

Investors – Investor climate activism is ramping up

Amidst company and government inaction, stakeholder interests are on the rise, with these interests also moving into the investor sphere. Extinction Rebellion, the UK-headquartered climate activist organisation, have staged protests at several pension scheme meetings as well as outside the offices of a number of large investment managers, demanding no new investments in fossil fuels.

Some investors are looking to divestment as the solution to move away from fossil fuel companies. Under the global divestment campaign, 12% of divestment commitments come from pension schemes.[xviii] (In our next blog in this climate series, we provide an overview of the relative effectiveness of engagement versus divestment, to date.)

Others are focusing on shareholder activism. Notably, for Shell, the most recent climate-related shareholder resolution in 2023 was pushing the CEO to set firmer decarbonisation targets. A growing proportion of shareholders (albeit not the majority) supported these resolutions,[xix] signalling growing discontent just as Shell began to backtrack on existing commitments.[xx] Similar shareholder pressure is being applied to other companies, such as BP, Chevron and ExxonMobil. Several large schemes (or pools) are also planning to vote against BP’s Chair as they look to slow the phase out of fossil fuel production.[xxi]

Investors are also dialling up engagement, both via investment managers as well as via collaborative initiatives, such as Climate Action 100+. With best in class managers applying investment sanctions on companies not meeting minimum climate standards.

With the growing disconnect between discourse and action, there has never been a more pressing time to act on climate change. Investors should seek to understand problem spots in the portfolio, playing their role to push investee stakeholders over the line to meet the Paris Agreement goals:

  • Review climate-related metrics, to understand high emitting laggards in the portfolio;
  • Ensure effective engagement to seek to ensure laggard companies demonstrate improvements in their commitments to reducing carbon emissions;[xxii]
  • Collaborate to exert influence that contributes to achieving the Paris temperature target, with concerted efforts by investors to collectively keep the UK Government on track;
  • Adopt a clear public climate position and strategy.

In the next instalment of our climate blog series, we will delve into the characteristics of the relative effectiveness of engagement versus divestment, with some more detailed recommendations for investors.


[i] Intergovernmental Panel on Climate Change (IPCC). Sixth Assessment Report — IPCC

[ii] International Energy Agency (IEA). CO2 Emissions in 2022 – Analysis – IEA

[iii] World Meteorological Association (WMO). WMO Global Annual to Decadal Climate Update (Targe… | E-Library

[iv] Our World in Data. Emissions by sector – Our World in Data

[v] IEA Fossil Fuels Consumption Subsidies 2022 – Analysis – IEA

[vi] Carbon Tracker Initiative (CTI). Paris Maligned – Carbon Tracker Initiative

[vii] Energy Monitor. Are the oil majors destined for extinction? (

[viii] Business Green. Advertising regulation is not fit for climate protection | BusinessGreen Opinion

[ix] S&P Paris Alignment database. CIQ Pro: Office Screener | Application (

[x] Financial Times. Top Democrats lash out at ‘new wave’ of Republican climate denialism | Financial Times (

[xi] McKinsey. What’s in the Inflation Reduction Act (IRA) of 2022 | McKinsey

[xii] New York Times. Under Brazil’s Far-Right Leader, Amazon Protections Slashed and Forests Fall – The New York Times (

[xiii] WWF Forests | Initiatives | WWF (

[xiv] Willcock et al. Earlier collapse of Anthropocene ecosystems driven by multiple faster and noisier drivers | Nature Sustainability

[xv] Forbes. How Are The Leading Countries Faring On The Path To Net Zero? (

[xvi] Financial Times. Switzerland passes law to cut carbon emissions after fractious referendum | Financial Times

[xvii] Financial Times. What’s next on the road from Paris to Dubai for climate finance | Financial Times (

[xviii] Divestment Database. Homepage – Global Fossil Fuel Commitments Database (

[xix] Capital Monitor. How investors voted on climate change at Big Oil AGMs – Capital Monitor

[xx] Capital Monitor. Shell Confirms Change in Strategy to Maintain Fossil Fuel Production Through to 2030 (

[xxi] Financial Times. Pension schemes to target BP’s Lund over backtrack on climate pledges | Financial Times (

[xxii] Reuters. UK pension funds target BP and Shell directors over climate goals- FT | Reuters

Get in touch

Talk to us today to see how our bolder thinking can get you better results.