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Climate Assets monthly update: Sin stocks

Date: 22 October 2021

Fossil fuel stocks have become the new sin stocks

It appears ‘fossil fuel stocks’ have become the new ‘sin stocks’ joining the offside-bench with sectors such as armaments, gambling and tobacco. The clients who walked through the doors of Quilter Cheviot wanting to be fossil fuel free used to be heartfelt green investors, faith organisations and environmental charities. However, in the last couple of years things have changed dramatically and we are seeing many more of our clients wanting out of oil and gas stocks entirely, to reallocate their capital to companies contributing to decarbonising the economy. Investors want to make their money matter and this is one reason why our “fossil fuel free” Climate Assets Fund has become a popular choice for those seeking investment solutions that contribute to a cleaner and better world.

 Smoking chimneys and a wind turbine

Allocating capital to positive solutions is unquestionably beneficial. Take our Climate Assets Fund, our analysis shows that 70% of the revenues from companies in the fund, align with the UN Sustainable Development Goals (SDGs). In particular the greatest revenue alignment is with those SDGs that marry up to our five investment themes, demonstrating that we are achieving what we set out to do.

Yet the trend for divestment of oil and gas stocks is sometimes criticised. Unless fossil fuel businesses are totally starved of capital, divestment won’t change the amount of carbon emitted that then threatens climatic disaster. Also, by divesting there is the danger that environmentally conscious investors lose influence over these companies.

Importantly this overlooks what divestment has achieved shifting the conversation, empowering other investors to act to increase efforts with engagement, triggering rigorous conversations on the issues with senior management and boards of oil and gas companies. Those seeking divestment have helped the rest of the investment community to realise, that fossil fuel businesses without a robust transition plan, will have worthless stranded assets and won’t be a sensible home for their capital. Active share ownership by responsible investors is now driving change. If you want to hold these stocks, be responsible and make sure your asset manager is engaging for change, which is what we do at Quilter Cheviot.

Yet there is one course of action (or should I say, inaction) that should be “taboo” in today’s carbon constrained world. Divestment has its place and active ownership has a role, but please do not own the new ‘sin stocks’ and put your head in the oil-sands.


Caroline Langley

Investment Director

I have over 16 years of experience in the private client industry and 14 of those are with Quilter Cheviot where I have worked since 2006. I manage private client portfolios (taxable accounts, ISAs and JISAs, trusts, SIPPs, small charities and offshore bonds) working with clients directly or alongside advisers. I am also Deputy Fund Manager for the award-winning Climate Assets Balanced Fund and the Climate Assets Growth Fund.

Climate Assets Fund

The Climate Asset Fund invests in companies that make a positive contribution to the world, with a strong underpinning of ethical values.
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