16 Jan 2020 4 min read

When red herrings turn green: debunking unhelpful climate stereotypes

By Investment Stewardship team

We know about the cow burps, the coal burning and the constant bulldozing of the Amazon rainforest. Yet one cause of global warming has hitherto escaped mainstream attention: pointless finger-pointing. The physics is simple: hand-waving agitates air molecules, which makes them heat up. And recent years have seen eddies and turbulence aplenty added to our already beleaguered atmosphere from furious fists and indicting index fingers.


But these red herrings do not help advance thinking about what companies, investors and individuals can do to tackle the climate challenge.

In my experience, such denunciations tend to fall into two categories.

In – usually – the right-wing corner, we have an excessive focus on individual actions. Greta Thunberg uses a plastic cup! Someone in her entourage took a flight! The reality is, fossil fuels provide around 80% of the world’s primary energy, plus all sorts of derivative products – detergents, cosmetics, even medicines – so anyone but a hermit’s actions are likely to hide an oil ‘stain’ somewhere. Of course, individual lifestyle changes are important, but focusing too much on the individual as a consumer, and not as a citizen (or as an investor) risks detracting attention from the ambitious policies that are urgently needed. With around 70% of the world’s future energy investments set to be made by governments, lobbying our elected officials holds more potential for change than replacing our cotton buds[1].

In – usually – the left-wing corner, we have the scapegoating of large corporations. ‘Just 100 companies are responsible for 71% of global emissions’.‘100 CEOs killing the planet’ . Or, in more restrained phrasings, some exposé of the companies ‘behind’ (or ‘linked to’) a proportion of carbon emissions.

There is no doubt that the companies on such lists are carbon-intensive businesses. Most, in fact, are literally in the business of selling carbon, which is why historical analysis has been able to link the world’s use of fossil fuels back to a relatively small number of national and listed energy companies.

However, in my view, there are two significant problems with this argument. First, it is backward-looking. Why does the exact number of companies that have historically produced the world’s oil and steel matter? Had the US Justice Department decided in 1911 to break up the Standard Oil Company into 340 companies, not the 34 it eventually settled on[2], today we would very likely have had the same emissions, but just fewer headlines like the above.

From a climate perspective, the key question is how to change high-carbon business models going forward, particularly when some sectors (steel, cement, heavy transport) do not have cheap, scalable carbon-free alternatives today. Assigning historical climate liability is not, I believe, particularly helpful.

Second, it is a cavalier treatment of causality: the vast majority of the emissions associated with fossil fuel companies do not come from the companies’ own operations or their supply chains (so-called ‘Scope 1 and 2’ emissions).  They come from customers using their products, such as utilities burning gas for electricity, or motorists filling up their tanks and driving their cars (‘Scope 3’ emissions).

Oil and Gas analysis


So upon closer inspection, it wasn’t ‘just 100’ companies that caused global warming – we, the people did.

This is not to claim companies have no responsibility. For example, given their scale and influence, energy companies often have the ear of governments worldwide. An increasing number of investors, including LGIM, are therefore putting pressure on such companies to refrain from political lobbying that undermines the Paris Agreement on climate change, with some results now starting to show.

Although companies might not directly be responsible for their emissions down the chain, they are still exposed to the associated risks. With evolving climate policies, a growing number of climate-conscious citizens/consumers, and the ongoing progress of ‘clean tech’, the financial shockwaves of high-carbon products being phased out or substituted will transmitted ‘upriver’, back to the original fossil fuel producers.

To be able to gauge this substitution risk, we have been calling on high emitters to measure and disclose their total carbon footprint (Scopes 1, 2 and 3),  and to think about ways to reduce it – be it through no longer investing in the highest-polluting projects, through research and development in new technologies, or through positive lobbying. Again, a growing number of companies  - even in oil and gasshipping, and airlines - are starting to change their strategies, announcing net zero targets which include Scope 3 emissions.

So there we have it – there is much we can do as individuals, and much companies can do as well. But games of ‘green gotcha!’ will not get any of us there.



[1] In fact, some academic research suggests that taking a small action (like replacing straws) can create a false sense of ‘job done’, discouraging further, more important actions (This problem might even be worsened by the ongoing focus on single-use plastics – alternatives to which might, in some cases, be even more carbon-intensive than the original).

[2] Some of which became household names like ExxonMobil or Chevron.

Investment Stewardship team


Our Investment Stewardship team comprises professionals with experience in areas including responsible investment, corporate governance, and public policy. The team is made up of both sector specialists and experts on ESG themes, such as sustainability, and has a global remit with members in the UK, Japan and the US. The team exercises LGIM’s voting rights globally, holding companies to account. In 2020, LGIM cast over 138,600 votes at over 14,000 meetings.

Investment Stewardship team