The Church of England Synod voted earlier this summer to disinvest from fossil fuel companies if, by 2023, they had not shown enough progress in aligning their business plans with the Paris agreement to limit global warming to 2 degrees C.
Although this looks like a divestment announcement, in fact the church is really emphasising an "engagement-first" approach, having extended the deadline from an initial proposal of 2020 to give time for "robust engagement" to take effect.
In practice, many fossil fuel companies have already made steps towards alignment with the Paris agreement, and the latest action from the Synod will no doubt add to the pressure on the laggards to adopt a more sustainable approach.
And it has had success in the past. It was Edward Mason, head of responsible investing at the Church Commissioners, that successfully led the shareholder revolt against Exxon’s management last year: 62 per cent of shareholders backed the call for Exxon to report on an annual basis on the impact of climate change and its Paris-aligned business strategy.
This shareholder pressure has resulted in a number of major oil and gas companies committing to reduce their carbon dioxide emissions. Shell has pledged to reduce its net carbon emissions by 20 per cent by 2035 and 50 per cent by 2050, and BP is targeting zero net growth in its operational emissions and has set a sustainable emissions reduction target of 3.5 million tonnes by 2025. In addition, there has been significant investment in renewable energy sources, such as BP’s £200m investment in Lightsource, one of Europe’s largest solar companies.
Exxon, Shell and BP have also backed natural gas as an effective solution to meet consumers' energy demands while still reducing emissions. That’s because natural gas produces about half the emissions of coal when used to generate electricity, according to the International Energy Agency.
Fossil fuel companies will need to reconcile the growing global demand for energy while reducing the carbon intensity of that energy. Diversifying into alternative energy sources and taking steps to reduce emissions will help these businesses successfully manage the transition to a lower carbon economy.
Kate Rogers is head of policy at Cazenove Charities