Ten Financial Actors Can Accelerate a Transition Away from Fossil Fuels

A 2020 analysis by Fossil Free Funds found that just 200 companies (known as the Carbon Underground 200 or CU200) own 98% of global oil, gas and coal reserves. This amounts to carbon stores three times greater than the total carbon budget for remaining below 1.5C of planetary heating.

This paper examines who owns these companies, using network analysis to map the market structure of their equity ownership and identify shareholders with the greatest potential influence on their corporate governance.

Combining Fossil Free Funds data on CU200 companies with ownership data from the Bloomberg Terminal, the study examines the organisational characteristics of prominent CU200 equity owners and the influence they have over industry governance. It also identifies the equity owners with the greatest potential impact on the governance of fossil fuel companies.

The top ten owners of CU200 fossil fuel reserve holders are Blackrock, Vanguard, the Government of India, State Street, the Kingdom of Saudi Arabia, Dimensional Fund Advisors, Life insurance Corporation, Norges Bank, Fidelity Investments and Capital Group, the study finds.

Together, these ten shareholders own 49.5% of the 674 gigatons of carbon emissions potential from CU200 fossil fuel reserves – enough to push the world well beyond 1.5C of global heating.

The study also finds that these top ten fossil fuel reserve owners are disproportionately central to the ownership network of CU200 firms, with an average degree centrality of 43.9 compared to 2.4 across the remainder of the shareholders.

“This indicates that not only do these ten shareholders account for a sizable share of emissions potential, they also have immense potential influence in enabling sustainability transitions among the CU200 and, more broadly, the incumbent carbon-based energy regime,” the study says. “We conclude that the decisions by these financial actors, through their holdings in the CU200, have the potential to drive a low-carbon transition.”

The remarkable concentration of ownership of the world’s unburnable fossil fuel reserves may allow the potential for a small group of actors to powerfully influence major fossil fuel companies, but the authors are not optimistic.

“The financial system may be unlikely to sustain the transformative changes that are necessary to respond to the climate crisis unless it is disciplined to do so,” they suggest, urgently calling for further research to hold financiers to account for “sustaining or restricting economic activities that coordinate or stall transformative processes.”