Far from being close to reaching a consensus, the fossil fuel divestment debate divides SRI investors like no other. Responsible investors are just as constrained by benchmark tracking, fiduciary duty, investment mandates and the need to meet long term liabilities, as mainstream investors are. Excluding such an important sector from a portfolio is never going to be an easy call.
Instead, many SRI investors believe that engagement with companies is their most effective way to help mitigate climate change. The divestment vs. engagement approaches so far seem irreconcilable.
In addition, the carbon bubble thesis has failed to convince all SRI investors. This was one of the main talking points during the recent RI Europe Conference 2014 where a number of responsible investors expressed their mixed views on the topic. Some fear that the different scenarios played out by carbon tracker possibly overstate the chance that legislators from around the World will ever commit to imposing limits on the use of fossil fuels. Indeed, successive summits at Kyoto, Copenhagen and Rio have reminded us of the enormous difficulty to overcome prevailing short-termism and national interest.
Contrary to what many might have expected, despite the pressure from divestment campaigners, SRI investments across our oil & gas clients in Europe continue to increase, according to the institutional ownership data that NASDAQ OMX Corporate Solutions analyzed on behalf of listed companies. Currently, one in ten shares held by institutional investors in the sector is currently managed by SRI investors which have integrated companies’ Environmental, Social and Governance performance indicators in their investment allocation process. Furthermore, their presence in the sector has accelerated and has nearly caught up with the all-sector European SRI Ownership Benchmark.