Summary
The Geological Society holds a c. £6 million investment portfolio, which partly includes the Society’s necessary ‘free reserve’. Funds are invested targeting real terms value growth, at an acceptable level of risk, with annual income/growth of RPI + 4%. The directly held equity element is invested in around 50-60 generally large, blue chip, dividend-paying companies, typically including a few in the extractive sector. Investment decisions are made by an investment manager in line with the Society’s Investment Policy and under the oversight of the Investment Committee. As a responsible investor, our holdings are prioritised into ‘best-in-class’ companies reflecting environmental, social and governance (ESG) considerations.
Whilst keen to stimulate responsible corporate behaviour in a general sense, the responsible investment policy is presently focussed on the extractive sector, in which many of our Fellows and Corporate Patrons are involved. Through this involvement and our deep understanding of the sector, the Society is well placed to consider the critical role of such companies through the energy transition. Until there is appreciable demand destruction in migrating to a low carbon society, investment is required to maintain oil and gas production to meet demand for energy and feedstock for plastics, pharmaceuticals, fertilisers, etc.
Gas is likely to be utilised in producing decarbonised ‘blue’ hydrogen fuel whilst extractive companies will need to responsibly meet growing demand for critical minerals for electrification and power storage. The Society has long advocated carbon capture and storage (CCS), which the Paris Accord assumes will play a substantial role in decarbonisation, and petroleum companies are best positioned through expertise and capital to rapidly develop CCS as fiscal and regulatory regimes permit. There is also widespread extractive industry recognition of the need for companies to scientifically target and work towards a significant reduction in the carbon footprint of their activities.
It is clear that geoscientists and extractive companies will continue to play a critical societal role in the energy transition, both in extraction and in shaping government policy. For example it is widely argued that governmental policies worldwide do not yet sufficiently promote lower carbon energy solutions, such as renewable energy technologies or CCS. Science-based policies are needed to ensure overall emissions are reduced, rather than offshored and/or increased elsewhere in the supply chain. The Society’s investment policy reflects this considered understanding in favouring a balanced reflection on how to best achieve the Paris Accord targets and the broader intent of the UN Sustainable Development Goals.
The Society’s views on the role of geology in society and its values of sustainability, responsibility and stewardship are reflected in its investment policy. Typical exclusions related to tobacco, alcohol, arms, etc. are applied. In the extractive sector, the policy prioritises investment in well-managed, responsible companies undertaking or working towards sustainable extraction. The policy is not anti-fossil fuels; it recognises continuing but declining future roles for oil and gas. The Society aligns its investments with Paris Accord targets by avoiding companies in the most emissions-intensive extractive and related activities.
This approach also lowers investment risk as such companies tend to be most exposed to value loss in a decarbonizing world. Thus companies with material involvement in coal-based power generation and high emissions fossil fuels production (thermal coal and tar sands) are excluded, except where emissions are appreciably reduced e.g. by CCS, or other significant mitigating factors are identified. These factors reflect our perception that counter-productive ESG outcomes can arise from the overly rigid use of exclusions. Our portfolio of mostly major companies employs a best-in-class approach favouring those fossil fuel companies seeking to reduce their carbon footprint and in the vanguard of strategic and operational change towards meeting Paris Accord goals. In Q1 2020 the Society held energy sector investments in Shell, Total and NextEra, the world’s largest producer of solar and wind energy.
You can download further information about the policy detail and the full policy.