To Own Or Not To Own (The Worlds Most Polluting Companies)

Please note that the value of an investment and the income from it could go down as well as up. The return at the end of the investment period is not guaranteed and you may get back less than you originally invested.

Just 100 companies globally are responsible for more than 70% of global emissions. Unfortunately, no amount of taking public transport or cutting meat and dairy products is going to change that stark fact.

Should investors exclude companies that are not environmentally friendly?

The question asked of investors, therefore, is whether to exclude these companies from portfolios, altogether, in an attempt to not support the companies that do the most damage or to commit to try and push for reform as shareholders. Organisations such as the climate activist shareholder group and Follow This, advocate for pro-environmental resolutions at shareholder votes, notably, at large energy companies such as; Shell, BP, and Total.

Many of these companies, particularly the oil and gas giants, have known about climate change for over 50 years. They systematically suppressed this knowledge from Governments and the public, alongside highly effective marketing campaigns akin to those employed, famously, by the tobacco companies to sow doubt about how bad the problem really is.

The executives of these companies knew that increased carbon in the atmosphere would cause climate change and carried on polluting anyway. Is this still a problem at the largest emitting companies in the world, which pledge to make changes and set targets like net zero by 2050? It seems likely that many are still more focused on shareholder returns than on their obligations to the planet and the people who live on Earth.

Environmental, Social, and Governance (ESG) initiatives

There is a very real concern around Environmental, Social, and Governance (ESG) initiatives being “greenwashed” which essentially means companies pretending to do the right thing or saying they will make the necessary changes in the future but in reality doing nothing. Prevalent examples have been, carbon offsets, such as buying forests and promising not to cut them down, despite there being no danger this would happen, and then claiming the CO2 taken out of the atmosphere by the forest effectively offsets the carbon emissions the company actually does produce.

The latest proof point is the waning support for ESG resolutions by the so-called Big Three asset managers – BlackRock, Vanguard, and State Street. According to new data, broad support for ESG resolutions fell to 15 per cent in 2023, from 25 per cent in 2022 and 32 per cent in 2021. Signalling, perhaps, that the big ESG push has not only stalled but is actually in decline as other priorities takeover.

Perhaps it is better to focus attention on trying to encourage banks not to lend money to these companies instead as cutting them off from funding their exploitative ventures might be more effective. The five largest banks listed on the FTSE 100 were responsible for lending $35.7 billion dollars to fossil fuel companies in 2022 alone.

The scale of the problem is enormous however there are some positive signs. Whilst the $35.7 billion dollar figure is very high it is down significantly from 2021 where the figure stood at $51.6 billion, a reduction of 31%, moving significantly in the right direction. Highlighting that positive changes can and are being made. This positive change does however need to be tapered as total carbon emissions are still increasing despite all of the science and activism.

There is no right answer to this question and people hold differing and entirely justifiable positions for avoiding or engaging with these companies. Ultimately, it comes down to your own personal views and whether investors, particularly activist investors, can actually change these companies positively or not.