New Report: Asset Managers are Using Peoples' Retirement Savings to Finance Fossil Fuel Projects and Fuel the Climate Crisis

NEW YORK — A new report by the Sierra Club’s Fossil-Free Finance campaign reveals how five major asset managers BlackRock, Vanguard, JPMorgan Asset Management, State Street Global Advisors, and Invesco are putting peoples’ investments and retirement savings at risk by using their money to finance fossil fuel projects and fuel the climate crisis. These asset managers collectively manage more than $25 trillion on behalf of their clients — which is more than the GDP of the entire United States — including holding $741 billion in shares and bonds of fossil fuel companies.

• Read the report: Investing in Carbon Bombs: How Asset Managers Are Using Your Savings to Finance Fossil Fuel Projects and Fuel the Climate Crisis

The analysis details the growing role of bond financing in propping up fossil fuel companies like ConocoPhillips, BP, EQT Corporation, TotalEnergies, and Pioneer Natural Resources, which are behind several controversial fossil fuel expansion projects in the U.S. including the Willow Project, deepwater oil drilling, the Mountain Valley Pipeline, LNG exports, and Permian Basin drilling. From a financial standpoint, these projects are bad climate decisions and dangerous investments at risk of becoming stranded assets. They also contribute to the systemic financial risk of climate change. 

“Climate change is one of the biggest emerging risks to the economy and financial markets, but most of the world’s largest asset managers seem to be ignoring this fact. They continue to buy debt in companies engaging in fossil fuel expansion, thereby enabling the very activities that exacerbate risk for their clients’ portfolios. Portfolio and retirement fund managers risk violating their fiduciary duties in failing to adopt strategies that mitigate climate change and its impacts on financial markets,” said report author Jessye Waxman, Senior Strategist in the Sierra Club’s Fossil-Free Finance campaign.

The report reveals that over the course of just 17 months from January 2022 to May 2023, these five asset managers alone spent $1.6 billion purchasing new bonds to support these fossil fuel companies: ConocoPhillips ($715 million), BP ($520 million), EQT Corporation ($140 million), TotalEnergies ($108 million), Pioneer Natural Resources ($157 million).

This financing comes despite the fact that these major asset managers have made public climate commitments and signed on to the Net Zero Asset Managers (NZAM) initiative — although Vanguard later dropped out. NZAM is an industry-led initiative with a goal of supporting investing aligned with net-zero emissions by 2050.

GROWING ROLE OF BOND FINANCING

Fossil fuel companies raise most of their money from four sources: the sale of fossil fuels, loans they get from banks, the sale of bonds to investors, and the sale of new shares to investors. Over the past two decades, bond sales have constituted a growing share of the financing for fossil fuel companies, growing from 14% of total fossil fuel financing in 2000 to 52% in 2020. The investors purchasing these bonds are typically large institutional investors like asset managers and pension funds.

The funds a company raises from a new bond issuance either can be earmarked for a specific project — like the construction of a new pipeline or coal power plant — or can be used for general operations — including the acquisition of a new company, payroll expenses, or exploration for new fossil fuels. Even if a bond is not earmarked for a fossil fuel expansion project, this new capital can offset or free up money to be spent on fossil fuel expansion. In other words, even if investors are not buying bonds explicitly targeted for fossil fuel expansion projects, their money will be used in a way that either directly or indirectly makes that expansion possible.

“Simply put, buying fossil fuel bonds enables fossil fuel expansion, which in turn proliferates risks to people, planet, and portfolios. Asset managers need to make the responsible choice, for both their clients and the global community, and commit to stop buying new fossil fuel bonds,” said Waxman.

QUOTES FROM REGIONAL CAMPAIGNS

“Despite backlash from the public and local leaders, and in the face of scientific consensus, fossil fuel companies are continuing to build unwanted, unnecessary, and extremely controversial projects like the Mountain Valley Pipeline that not only contribute to the climate crisis, but cause serious harm to communities in West Virginia and Virginia. That asset managers are knowingly financing and supporting these kinds of harms make them culpable in executing these harms,” said Caroline Hansley, Senior Field Organizer at the Sierra Club.

“Banks and asset managers investing in Gulf LNG facilities willfully ignore the destruction they’re funding,” said Emma Guevara, a Field Organizer with the Sierra Club located in Brownsville, Texas. “What we live every day is the desecration of sacred Indigenous land, the bulldozing of wetlands that protect our people from hurricanes and give wildlife a home, and the polluting of the air that Brownsville kids grow up breathing. The community opposes these facilities — and Europe’s gas consumption just fell to a 10-year low so they’re not even needed. Brownsville LNG facilities are a bad investment on so many levels, and asset managers should stop making the destruction possible.”