'Oil is bad, period’ is not smart and it won’t solve the climate crisis

It is exactly 20 years since I rocked up in London with little more than the clothes on my back and the dream of turning my local-paper experience into a stellar journalism career. Trade mags were the order of the day and, having landed a job at Investment Week, I soon found myself being wined and dined in Claridge’s, taken on press trips to the Dolomites, and bombarded with endless chat about the merits or otherwise of top-down, bottom-up, contrarian stock-picking strategies.

It pretty much sums up the fund-management industry at the time – an awful lot of money to spend on having an awfully good time and an awfully big belief in the power of jargon and buzzwordery.

Times have changed to a large degree. The financial crash and the Bribery Act put the kibosh on the worst of the excesses, the rise of stock-market tracker funds gave the lie to the assumption that talented fund managers were the sole source of superior returns, and a step-change in the financial literacy of the general public led to greater scrutiny – and so accountability – when it comes to investment decisions.

Those are all good things that have resulted in many money managers acknowledging their limitations and making decisions that would pass a broadly sensible ethical sniff test. Where once profit would trump all, now there is a realisation that the vast majority of investors don’t want their returns to come at the expense of people or planet. Which is why investment houses pay far greater attention to supply-chain data and take far greater care in choosing stocks than in the days when I was dotting around the City listening to hot takes about the latest investment fad. 

But one man’s ethical investment is another’s aberration. Take Baillie Gifford. The Edinburgh fund manager, which gained some brand recognition via its sponsorship of literary festivals and awards, has cut most of its ties to the arts because a groups of climate campaigners – Fossil Free Books – didn’t like the fact it has holdings in companies like Royal Dutch Shell. An oil major that has committed to the just transition it has the know-how to help achieve is a very different proposition to a coal-fired energy producer, but when it comes to ideological purity there is no room for nuance or sense, and so Baillie Gifford had to fall. 

But if the sum total of the campaign is that the arts has lost a serious financial backer while climate campaigners have earned themselves a bad name, has it really served any purpose? 

It is right that large investors are held to account by the people they manage money for – whether individual investors or pension fund trustees – and increasingly they are. It is also right that they in turn hold the companies they invest in to account, using the clout they have as major shareholders to drive change from the inside rather than selling up and complaining about things from the outside.

But just as ideological purity is all but impossible to adhere to, there can be no such thing as absolute investment purity. If you want to eat, travel, wear clothes, read books, use the internet, walk the streets, sit in the park – you name it – you will have been touched by something you claim not to like. Railing against it won’t make it not so. 

Pensions auto-enrolment has made investors out of most of us. We all have a duty to scrutinise where fund managers are putting our money, and we should absolutely hold them to account if their investment strategies are found to be lacking. Climate change is urgent, real and must be tackled.

But ‘oil is bad, period’ is not the smart statement some activists think it to be and it certainly won’t solve the climate crisis.