Investing for the climate

“Keep investing in fossil if you want to change companies’ environmental policies and production processes.” Finance expert Jac. Kragt explains why large shareholders play an important role in the transition of non-sustainable industries.

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It was big news at the end of October: ABP, the Dutch pension fund for civil servants and teachers, and one of the largest pension funds in the world, was selling its €15bn-worth of holdings in fossil fuel companies, including Royal Dutch Shell. For the ABP board, it was a necessary and urgent change of course to contribute to minimizing global warming to 1.5C. While action groups and environmental organizations responded enthusiastically, critical voices were also heard.

This is one of the examples discussed about the impact that investors can have on the sustainability transition. Polluting and harmful industries - e.g. weapons, tobacco, and gambling - have been shunned by the large institutional shareholders for years. For environmental reasons, partly under pressure from their constituents and clients as well as from society at large, more and more investors want to get rid of their shares in the fossil industry. At first glance, this is an understandable and encouraging choice. However, the question is whether this strategy will lead to the necessary, significant acceleration of transition by the major global oil, gas, and mining companies.

Dr. Jac. Kragt is associate professor of Finance and lecturer for Sustainable Finance at the Tilburg School of Economics and Management (Tilburg University), and a supervisor in the financial sector. He will give an introduction on sustainable investing, explain different strategies that companies and organizations can choose, and discuss the impact of involved shareholding on the sustainability policy of companies. Here, you can read the opinion piece Jac. Kragt wrote about this topic in the Dutch newspaper NRC on 8 October 2021: Pension funds should continue to invest in oil and gas (English / Dutch)

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