Public pressure on asset managers to divest from fossil fuels has slowly boiled over, leading some to warn that investors risk losing their "social licence to operate" over ESG policies.

Last month, environmental activist Greta Thunberg pulled out of the Edinburgh International Book Festival over its sponsorship by Baillie Gifford, due to the firm's investment in fossil fuels.

Recent polling by Ipsos found public concern about climate change and the environment had sharply increased, rising to the joint-third biggest issue facing the country in its August survey, behind only inflation and the economy, and tied with healthcare.

Growing public pressure

Ellie McLaughlin, senior policy and advocacy officer at Positive Money, said that campaign groups were "quite rightly shining a light on the huge role of asset managers in propping up the fossil industry, and fuelling devastating climate impacts in the process".

Just Stop Oil and similar organisations have increased their pressure on the UK government to tackle climate change via public protests and sit-ins across the country, and have also focused on financial institutions, with the former causing approximately £20,644 worth of damages to the Bank of England building in November 2022 as part of a demonstration.

McLaughlin warned the asset management industry was "out of touch with public sentiment", adding that further outrage should be expected if managers fail to shift their investments away from pollutants.

Julia Dreblow, CEO of SRI Services, agreed, adding she "absolutely" expected instances in which asset managers are publicly admonished over fossil fuel investments to occur more frequently.

At the end of last year, BlackRock CEO Larry Fink faced various calls to resign from activist investors over the asset manager's position on shareholder resolutions on thermal coal.

"Fund managers are likely to find themselves increasingly at odds with the views of many of their clients," Dreblow said.

She explained that asset managers tend to listen to "'the investing public and not ‘the general public'", who she said are more worried about "our collective future".

‘The investing public' tends to "lack the necessary urgency" to tackle climate change, as they are more focused on short-term returns, she argued.

"Few major managers are seriously responding to the reality that seeking short-term profits may be putting their future survival at risk as climate costs will spiral over time if nothing changes," Dreblow added.

Juliet Schooling Latter, research director at Chelsea Financial Services, pointed to recent controversy with Barclays and the National Trust, bringing further evidence that "activists are stepping up the pressure" to apply "greater scrutiny" to financial services.

The charity's connection to Barclays was called into question over environmental concerns and an attempt to stop the National Trust banking with Barclays failed at its annual general meeting, although a grandson of one of the charity's largest donors is still pushing the campaign.

Schooling Latter touched on the Greta Thunberg-Baillie Gifford debacle, stating it was "a bit odd" that Baillie Gifford was selected as the first target of the environmental movement, given its relatively small fossil fuel investment.

In the firm's response to Thunberg's greenwashing accusations, Nick Thomas, partner at Baillie Gifford, said the company was not a "significant fossil fuel investor... [as] only 2% of our clients' money is invested in companies with some business related to fossil fuels", compared to a market average of 11%.

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"Most major asset managers just have too many funds and strategies to divest from fossil fuels entirely without it impacting their businesses," added Schooling Latter, noting that a single FTSE 100 tracker would contain "a lot of fossil fuel investments".

Meanwhile, Jake Moeller, senior investment consultant at Square Mile Investment Consulting and Research, argued that "admonishing has to be commensurate to the influence a fund group has", meaning that activists should be pressuring "huge multi-regional passive funds rather than a small boutique fund manager".

"Until the large index groups start flexing their muscles more readily, the large fossil fuel companies are not going to be overly concerned about small minority shareholder views," he explained.


As public pressure mounts on asset managers, some have suggested that their sponsorship of public events, such as the Edinburgh International Book Festival, may decline to avoid public scrutiny.

While SRI's Dreblow doubted fund managers will "go into hiding" as pressure increases, she said they will have to "explain their positions far better, both for individual funds and across all their assets".

"They will have to become far better at presenting plain English explanations of what are often complex strategies," she added, such as engagement with firms and voting, and ensuring clients have the option to avoid anything to do with fossil fuels, if that is what they want.

Square Mile's Moeller agreed, arguing that in the face of activist pressure, he expected many firms to stress their "obligation to fiduciary duties and investor preferences".

"Shareholders that are genuinely and actively lobbying companies to transition businesses need to be able to show evidence of how they are doing this, and what attributable effects it is having," he said.

"That is something worth publicising. Talk is cheap. Action matters."

"Companies need to be out there talking to their investors and it is also good to see them supporting events," added Schooling Latter, but argued it was "possible that some will be more cautious in the future" around publicly sponsoring such events.

However, Robert Fullerton, senior research analyst at Hawksmoor Investment Management, said reports around public admonishment of asset managers over investing in fossil fuels often fall "between the cracks of other news stories", especially over the last 18 months, due to high inflation and the rising cost of living.

This means that investors or clients may be unlikely to pay attention to such stories, leaving techniques such as boycotting events ineffective at changing the behaviour of firms.

By contrast, Moeller contended that "anything that creates bad news flows is likely to be effective", noting the asymmetric PR coverage of the financial industry that often leads to bad stories being more publicised than the industry's good work.


"Boycotting cultural events backed by fossil financiers plays a crucial role in bringing public and policymakers' attention to greenwashing and the broader need to rapidly redirect finance away from fossil fuels," said Positive Money's McLaughlin, adding that firms will continue to lose their "social licence to operate".

In response, she said she expected firms to become more cautious, while adopting "ever more sophisticated strategies of greenwashing in response to criticism".

McLaughlin therefore argued that regulators and policymakers should "step up" and set anti-greenwashing standards, as well as taking "concrete action" to phase out fossil financing.

Dreblow agreed regulation had a large role to play, pointing to the new Sustainable Disclosure Requirements from the Financial Conduct Authority.

"At present, there is not much that encourages divestment or signals that switching away from fossil fuels will be beneficial to clients over the course of their investment term," she explained.

The SDR regime, due to launch later this year, will see three levels of sustainability ascribed to funds, namely sustainable focus, sustainable improvers and sustainable impact.

Through these, clients that favour divestment will have a clear view of which funds are more likely to hold fossil fuels, Dreblow said.

"Until the UK government takes the fossil fuel reduction targets more seriously, there is nothing to discourage firms or investors from investing in them as profits are still high," Fullerton added.

While Fullerton said he had "no doubt" that firms invested in fossil fuels will become more cautious about sharing their investments publicly, he argued that it will not "stop firms investing in fossil fuels anyway".