Carbon cash machine
As the world burns, shareholders are getting record cash pay outs from their fossil fuel investments. Cash earnings made by shareholders in the UK’s two largest oil companies BP and Shell are now triple the amount they were when the Paris Agreement was signed in December 2015.
This is the headline finding of our new report written and researched in collaboration with Corporate Watch.
The report uses a unique analysis of financial data to calculate the combined earnings of shareholders derived from dividend pay outs and share buybacks.
We found that shareholders in BP and Shell have earned a total of £131 billion in dividends and share buybacks combined since the Paris Agreement was signed. And this is just the value of cash earnings; the value of their shares has risen significantly in this period.
In the same period, the top 8 shareholders have significantly expanded their holdings in BP and Shell; those 8 companies alone have raked in a total of £28.7bn in cash earnings from both BP and Shell. The report analyses the environmental and social strategies of those top eight shareholders in BP and Shell and raises major questions about the failure of fossil fuel divestment strategies and market solutions to climate change.
Those shareholders are not likely to be influenced by campaigners demanding divestment since they all use passive investment strategies. Passive investing is the strategy of buying and holding stocks and based on sector and market benchmarks, such as stock market indices such as Dow Jones, S&P 500 or Nasdaq. Passive investment strategies therefore involve fewer judgement calls and are more automated, making them less responsible to non-financial considerations.
Asset management firms deploying passive investment strategies have ensured that the tidal wave of fossil fuel investment has not abated, despite growing demands for divestment. While some investors have decreased their shareholding in Shell and BP since 2016, a large majority have retained or increased their stakes in the two companies.
The report concludes that we will not be able to stem the flow of oil unless we stem the flow of cash to rich investors. The report therefore raises fundamental questions about the limits facing divestment campaigns. While investment and divestment patterns will be explored in more detail in a follow-up report next month, the analysis we present here demonstrates that a move away from fossil fuels at a pace necessary to abate climate change is simply not possible while power is becoming even more concentrated in the hands of asset managers.