Unlock the Editor’s Digest without spending a dime
Roula Khalaf, Editor of the FT, selects her favorite tales on this weekly publication.
Union Funding, considered one of Germany’s largest asset managers, has divested all of its holdings in US oil main ExxonMobil, accusing the corporate of “inadequate dedication” to local weather targets.
Henrik Pontzen, Union Funding’s head of sustainability, mentioned the €500bn asset supervisor had bought its holdings in ExxonMobil and smaller US peer EOG Assets following a assessment of probably the most carbon-intensive investments in its portfolio.
Union’s transfer highlights a divergence between fund managers in Europe and US asset managers, as various the latter reassess or pull again from climate-related initiatives in response to US political strain.
At its peak final 12 months, Union held about €500mn of Exxon shares and an analogous quantity in EOG inventory throughout its actively managed funds. Exxon has a market capitalisation of round $440bn, whereas EOG’s is about $60bn.
“As a part of our local weather technique, we require all corporations to decide to long-term, complete local weather targets,” mentioned Pontzen. “If an organization fails to even set such targets, we see no foundation to imagine it is going to obtain them.”
Following “intensive, and at occasions troublesome, dialogues”, Union determined to promote its stakes in Exxon and EOG “as we couldn’t establish a ample dedication to the required local weather targets”, he added.
Whereas Exxon does have internet zero targets for its operational “Scope 1 and Scope 2” emissions, it has not set targets for the Scope 3 emissions that come from the top use of its oil and gas. In response to Union, Scope 3 targets are important as a result of they make up round 90 per cent of complete emissions.
Exxon has mentioned on its web site that this metric is flawed and counter-productive, stating that Scope 3 reporting “ignores rising power demand” and “permits no comparability of different methods to fulfill that demand”.
Responding to a request for remark, ExxonMobil referred to a bunch presentation on the corporate’s local weather objectives, which stresses it is going to work on “assembly society’s power wants and lowering emissions”.
The corporate was investing as much as $30bn on “lower-emission initiatives” to the top of 2030 and was “on monitor” to fulfill its 2030 emission discount plans, a spokesperson added.
EOG, which additionally has no Scope 3 goal, didn’t reply to a request for remark.
Asset managers have come below extra strain over local weather motion since US President Donald Trump was elected. A number of, together with the world’s largest cash supervisor BlackRock, have withdrawn from the Net Zero Asset Managers initiative, a coalition that pledges to assist the purpose of internet zero greenhouse gasoline emissions by 2050 or sooner.
However Union Funding is comparatively insulated from these political impediments, with Pontzen saying that it has “no American purchasers, no subsidiaries there, and isn’t depending on US authorities contracts”.
“Local weather change stays — no matter who’s in political energy — a central consider our funding technique,” he added.
Pontzen additionally famous that Union had saved stakes of round €1bn every in TotalEnergies and Shell, saying that they “met the minimal necessities” of a reputable technique to cut back greenhouse gasoline emissions. Each have Scope 3 discount targets.
He hinted that extra divestments may comply with, constructing on tips the group revealed final 12 months. “We got here to the conclusion that demand for oil and gasoline will start to say no no later than 2030,” he mentioned. “From that time, we are going to assist solely these components of the trade which might be credibly dedicated to transformation.”
For typical funds, this meant preliminary exclusions of tar sands operators. In its sustainable funds, Union had totally exited the oil and gasoline sector by April this 12 months. “This demonstrates that the transformation is continuing at two completely different speeds,” Pontzen mentioned.
Nonetheless, exclusions aren’t Union’s most popular choice. “They don’t cut back emissions, they merely reassign them to another person,” he mentioned. Nonetheless, he argued that lowering publicity to probably the most polluting corporations was vital to fulfill the group’s goal of a climate-neutral portfolio by 2050.
Exclusions aren’t everlasting, he added. “Our assessments evolve with enterprise fashions,” leaving open the opportunity of reinvestment in Exxon or EOG if they modify their local weather insurance policies.
Further reporting by Malcolm Moore and Kristina Shevory
Local weather Capital
The place local weather change meets enterprise, markets and politics. Explore the FT’s coverage here.
Are you interested by the FT’s environmental sustainability commitments? Find out more about our science-based targets here
