Fidelity Management & Research, Dimensional, BlackRock, Vanguard, State Street, Life Insurance Corporation of India and Capital Group are among the 10 investors with the most influence over the world’s fossil fuel reserves, according to new academic research.
Researchers based in Canada, France and New Zealand have collaborated on what they describe as the first study to “examine equity ownership through the lens of future-looking supply-side solutions”. The result, Ten financial actors can accelerate a transition away from fossil fuels, calculates the influence that shareholders have over 182 of the largest fossil fuel companies, based on the size of their holdings, the nature of their ownership and their position in the market.
The analysis is based on the Carbon Underground 200 (CU200), a database hosted by FFI Solutions, which identifies 200 oil, coal and gas companies that between them own 98 percent of proven reserves. Using Bloomberg data, the authors of the study identified all investors with more than 1 percent equity in the firms (18 of which were excluded from the analysis due to lack of data). In addition, the study identifies investors that hold stakes in the companies’ shareholders, and therefore have the potential for indirect influence. Altogether, 918 investors are covered by the analysis.
The results conclude that just 10 financial entities have the ability to influence 49.5 percent of the emissions potential from the CU200. Alongside the seven asset managers, the “top 10” most influential investors include state entities in India, Saudi Arabia and Norway.
“These 10 actors have the greatest potential impact on the future usage of most of the world’s carbon reserves, based on the number and size of ownership and the related emissions potential of the firms,” the report said. “We conclude that the decisions by these financial actors, through their holdings in the CU200, have the potential to drive a low-carbon transition.”
While most of the asset managers assessed were found to have numerous small stakes in the 182 firms, government-backed institutions held large stakes in just one or two. This dictates the type of influence each has, the authors noted, adding that asset managers “may benefit from coalition building and coordinated engagement to exert greater influence across the industry that is needed for a systemic transition”.
Fidelity Management & Research, Dimensional, State Street and Life Insurance Corporation of India did not respond to requests for comment. Capital Group declined to comment.
Vanguard and BlackRock both pointed to their existing efforts on climate change.
A spokesperson for BlackRock cited a letter written by the asset manager in 2021: “Because the global economy today is itself carbon intensive, the portfolios of most diversified investors… remain carbon intensive. That cannot and will not change overnight, and BlackRock’s aggregate portfolio will necessarily be subject to the investment decisions of our clients.”