The politics of resources redefined™
The politics of resources redefined™
The politics of resources redefined™
The politics of resources redefined™
The politics of resources redefined™
The politics of resources redefined™
The politics of resources redefined™

‘Changes in investor attitudes pose fundamental challenges to fossil fuel companies’

Mark Campanale, founder and executive chairman of the Carbon Tracker Initiative, discusses investor expectations facing mining and oil and gas companies during the energy transition and the problematic disconnect between international commitments on climate change and government actions.

Mark Campanale

Investors are questioning if the incumbents can lead the energy transition

“History shows us that incumbents in most industries struggle to adapt to new technologies or to broad business model shifts. This is also the central issue for many fossil fuel companies: their boards are tied up in traditional thinking and conventional ways of doing things. Even though there is a mixed picture in terms of how incumbents are responding to the energy transition, many companies have failed to move fast enough. Most companies should have started adapting to the shift five to ten years ago, and if they are only now just beginning to change, it is probably too late. Even in some well-advertised cases, for example that of Shell, the increased investments into renewables remains small relative to their massive ongoing investments into upstream oil and gas.

Nonetheless, some businesses are progressing in the right direction. Ørsted, for instance, has not only made a very dramatic business model switch from fossil fuels to renewables, but has also taken clear ownership of their emissions. Taking responsibility for the emissions from products, namely scope 3 emissions, is a crucial step for companies to take and one that investors are increasingly interested in. The latter is crucial both for the transition and because investors know that regardless of whether it is through policy actions like a carbon price, changes to consumer preferences or some kind of regulation, companies’ ability to take ownership of scope 3 emissions and bear the costs of this will be a significant challenge. It will be expensive, and it is currently unclear how companies will manage it in practice. For example, will they transfer this cost to consumers by raising prices? If they do that, renewables and other clean energy alternatives like electric vehicles will become even more attractive.

Within this context, new companies pioneering new technologies suddenly present far less risk for investors, because they have a more focused business strategy, and more reasonable investment plans adapted to the needs of a lower-carbon future. Investors also observe trends in consumer demand for new technologies and, perhaps more importantly, they like to buy ‘growth companies’ – companies with a competitive edge or niche, which can capitalise on exponential growth in demand for a specific technology. This in part explains why Tesla has become the second most valuable car manufacturer by market capitalisation, despite producing a fraction of the cars that Volkswagen or Toyota produce.”

‘Money doesn’t just talk, it shouts!’

“Global protest movements are attracting much-needed global public attention to the issue of climate change. These movements have already impacted broader public opinion and will subsequently affect policy. However, it is changes in the investor community that pose the more fundamental challenges to the fossil fuel industry. To paraphrase Bob Dylan, ‘money doesn’t just talk, it shouts.’ For example, it is very significant that Climate Action 100+ has reached around $40 trillion of investor support. Top institutional shareholders are demanding to know what is being done with shareholder funds and questioning why fossil fuel companies are pursuing strategies that are going to destroy company value over time.

Investors are particularly concerned that the incumbents will be strategically ‘stuck’ during the transition, unable to adapt to the needs of a lower-carbon economy. Exxon, to name one example, is investing $30 billion a year into upstream expansions, at a time when forecasts are predicting that demand for oil and gas will not materialise in the 20- to 30-year time horizon they are considering. There is a false sense of security among incumbents, and investors are beginning to penalise companies adopting strategies that will leave them vulnerable. If investors become concerned that companies are essentially misusing shareholder funds, they will become more assertive in their interactions around company strategies or board compositions. These developments pose a much greater risk to the major companies than what is going on in the streets.”

If they can adapt, mining companies have a clearer transition pathway than oil and gas companies

“Broadly speaking, mining companies may not encounter the same kind of challenges during the energy transition as oil and gas companies. This is partly because diversified mining companies can more easily shed declining business lines – for instance, several mining companies have offloaded their thermal coal operations and doubled down on other minerals, giving them a clearer transition pathway. Many mining companies have also recognised that cobalt, lithium and copper are going to be key materials for the energy transition. In fact, there are a lot of opportunities available to the mining industry in the transition because there is a clear similarity between the mining skills needed in the current economy and those needed in a lower-carbon future. Conversely, despite oil and gas companies using some of their offshore engineering skills for offshore wind projects, their overall skill set may not translate as readily to the broader array of renewable energy technologies.

Nonetheless, the mining industry also faces a question around stranded assets, especially related to how it deals with existing licenses and infrastructure. Investors do not seem to have understood this risk to the mining industry in the same way as they have for oil and gas. Among other things, ships are still being constructed to transport coal. There will be a lot of excess capacity in the next decade when these ships, or the extra capacity built at ports, are no longer needed.”

There is a fundamental disconnect between government commitments and actions

“There is increasing pressure to reduce emissions, and although there is optimism about regional carbon markets, there are still no international treaties in sight for establishing a global carbon price. Even though the Paris Agreement is, at its core, an emissions-reduction treaty with targets for governments, it does not explicitly mention fossil fuels. The thinking is now moving towards assessing the total stock of carbon owned by governments and companies through mining and fossil fuel licenses. Our estimates at Carbon Tracker show that governments and corporates currently hold seven or eight times more proven reserves of coal, oil and gas than we can possibly burn if we are to keep to below 2°C. This is problematic, as many governments continue to say that they will do as much as they can on climate change, while simultaneously insisting that they must develop their natural resources. I have heard leaders and government representatives from Norway, Canada and Argentina express this perspective.

Although a carbon price suppresses demand, it is not going to suppress supply – and there is a lot of pending supply, with almost $1 trillion a year going into the fossil fuel economy. A few people are now thinking that we are going to need an international agreement to control the supply side. This would begin with a global registry of coal, oil and gas projects, including their embedded carbon dioxide, and a methodology by which governments would agree to give up licenses. This seems to be a far more equitable way of working out who ‘wins’ and who ‘loses’ from the point of view of supply. It also provides a way to constrain global supply in a way that would result in a below 1.75°C or 1.5°C temperature outcome. Corporates and governments can then work out between themselves who has the right to produce the last barrel of oil, the last cubic metre of gas or the last tonne of coal.

Governments cannot protect their national resource sector by maximising their fossil fuels production and still expect to abide by their Paris commitments. Eventually, we need to go down the same route as with nuclear weapons, creating a kind of ‘fossil fuel non-proliferation treaty’ that allows countries to accept ‘losing’ individually, in order to collectively achieve the goals of the Paris Agreement. Otherwise we will be stuck in this ridiculous situation where governments race to expand their natural resource sectors, while continuing to pay lip service to the Paris goals. You cannot have both at the same time.”


Mark Campanale is the founder and executive chairman of the Carbon Tracker Initiative, a non-profit think tank that researches the impact of climate change on financial markets. He is also the founder and board member of Planet Tracker, its sister organisation. Prior to forming these groups, Mark spent over 20 years in investment management, during which he co-founded some of the first responsible investment funds at Jupiter Asset Management and AMP Capital.

For more information on the ‘fossil fuel non-proliferation treaty’ mentioned in this interview, see