Scottish Widows today became the latest investment giant to tighten its policies governing investments in high carbon assets such as coal and tar sands companies.
The move comes less than a week after NatWest and Barclays both did likewise, and Hedge Fund billionaire and climate campaigner Chris Hohn again called on investors to vote against climate laggard bank directors.
There is by now a choreography to how these types of announcement go. Financial institutions say they’ll stop investing in companies that generate a certain proportion of their revenues from certain fossil fuels by a certain date, and shareholders and campaigners then respond based on how certain those certain conditions are.
As a general rule, the new investment or lending policies are welcomed, but activists are also quick to point out how various loopholes could allow for continued investment in high carbon assets and associated infrastructure.
However, one thing that is often lost amidst such analyses is the real world impact genuinely effective investment policies can have. Today’s moves by Scottish Widows to tighten the definition of what it regards as a tar sands, coal, or tobacco company is a case in point. The pension giant confirmed that these arcane sounding policy changes should result in around £1.5bn of divestments from assets it holds, which comes in addition to £1.4bn worth of previous divestments that resulted from its exclusion policies. The company has now effectively excluded assets from its portfolios totalling almost £3bn.
In a world with trillions of dollars of assets under management this might sound like small fry, but it is a pretty big deal. Campaigners want institutional investors to go a lot faster in starving polluting companies of capital and ramping up investment in net zero infrastructure, and rightly so. But it is also true that the iterative process of introducing and then tightening exclusion policies is starting to have a real world impact and leading to capital being shifted towards greener assets.
It may take longer than hoped, but it is also true that momentum is building in a way that might just make all those net zero portfolio commitments that have been so vocally condemned as greenwash genuinely game-changing commitments.
We’ll be discussing all of this in a lot more detail at tomorrow’s day long virtual Net Zero Finance Summit, which will include a presentation from Scottish Widows among many others. If you haven’t signed up to join us as yet the programme is well worth a look, and as ever all sessions will be available on demand after the event. You can still register for a guest ticket to attend here.
I hope to see you there to discuss this most important of topics.