Institutional investors including Vanguard Group and BlackRock hold a combined $4.3 trillion in stocks and bonds from fossil fuel companies, according to a report released Tuesday by Germany-based nonprofit Urgewald.
Urgewald and partner nonprofits tracked investments in about 3,000 companies in the coal, oil and gas sectors. Investing in climate disruption in 2024This follows a similar study they published last year.
The report said the $4.3 trillion in funding would jeopardize the rapid phase-out of fossil fuels needed to avert uncontrollable climate breakdown.
“If institutional investors continue to back companies that continue to expand their coal, oil and gas operations, it will be too late to phase out fossil fuels,” Katrin Ganswind, head of financial research at Urgewald, said in the report. “Investors need to draw the line on fossil fuel expansion, and they need to do it now.”
Urgewald examined the holdings of more than 7,500 institutional investors around the world as of May 2024, including “pension funds, insurance companies, asset managers, hedge funds, sovereign wealth funds, endowments and the asset management arms of commercial banks.”
Given the lack of transparency in the bond market, the actual total investment figure may be higher than $4.3 trillion, the report’s authors estimate that only 20-30% of fossil fuel companies’ actual bond holdings are in the hands of investors.
Of the $4.3 trillion, more than half was invested by U.S.-based companies. In fact, $1.1 trillion was held by just four companies that Urgewald dubbed the “Dirty Four”: Vanguard, BlackRock, State Street, and Capital Group, each of which held more than $160 billion in fossil fuel investments.
Alec Connon, co-executive director of Stop the Money Pipeline, said the U.S.’s disproportionate role was the result of poor governance.
“This reflects a complete lack of action by U.S. regulators to effectively monitor and address climate and transition risks for large institutional investors,” Connon said in the report. “This inaction lays the groundwork for the next economic crisis and will put the world fast toward climate chaos.”
Nearly $4 trillion of the $4.3 trillion in holdings went to companies that are actively developing new fossil fuel projects as well as leveraging existing ones, though the report doesn’t specify how much actually went to new developments. Many companies are doing both.
Either way, it’s clear new developments are thriving: Companies are increasing capital spending on oil and gas exploration by more than 30% since 2021. ExxonMobil, one of the biggest beneficiaries of the institutional investments cited in the report, is alone spending $1.4 billion per year searching for new reserves in 37 countries, the report said.
All of this is happening despite pledges to “divorce” from fossil fuels agreed to by countries at the UN climate summit in Dubai in December. Environmental activists are trying to use those pledges, which may be riddled with loopholes, to pressure institutional investors and regulators to act.
“The question is whether institutional investors will continue to buy the bonds of companies like Saudi Aramco, Exxon Mobil and Total Energies whose business model is global warming,” the report’s authors ask. “Or will pension funds, insurers and asset managers realize that these investments will create more heat waves, more devastating floods and more climate disasters?”
Urgewald is one of the NGOs that publishes it annually. Betting on climate chaos The latest edition of the report found that big banks have pumped nearly $7 trillion into fossil fuel companies in the eight years since the Paris Agreement was signed in 2015. The report, released in May, found that big banks including JPMorgan Chase and Citigroup have lent a combined $705 billion to fossil fuel companies through 2023, the hottest year on record.
