Partner insight: Fossil fuel assets must be transitioned rather than sold into private hands

The six big oil majors have sold around $44bn of fossil fuel assets since 2018. Investors must use engagement to ensure assets are retained and transitioned, according to Jenn-Hui Tan

Neither excluding difficult assets from a portfolio or divesting carbon intensive divisions or businesses are an effective way to achieve net zero goals.

"Allowing assets to flow into private hands may not be the best way to ensure these industries transition to lower-carbon approaches," says Jenn-Hui Tan, Global Head of Stewardship and Sustainable Investing at Fidelity International.

Since the start of 2018, the Economist reports that the six big oil majors have sold around $44bn of fossil fuel assets. At the same time, the past two years have seen private equity funds spend about $60bn on oil, gas and coal assets, significantly more than they have spent on renewable energy assets.

"Demonising these assets and forcing them out of public hands is counter-productive," says Tan. "The companies continue to make the same carbon emissions, but no-one is pushing them to change.

"Investors must support companies to transition these activities through financing and engagement, even if it is more difficult and time-consuming."

For more on why engagement is preferable to divestment, as well the broader outlook for sustainability in 2022, read Fidelity's exclusive guide

This post is sponsored by Fidelity International