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Wellcome Trust loses millions due to plummeting value in fossil fuel investment

Wellcome Trust. Public Domain, 2005.

The Wellcome Trust building in London. Public Domain, 2005.

The medical charity Wellcome Trust lost an estimated £175 million in value in 2014, due to a sharp loss in value of its fossil fuel investments.

Research conducted by the Guardian shows that while the Trust sold off two-thirds of its investments in Shell, it simultaneously increased investment in the fastest falling of its stocks, mining giant BHP Billiton, by 8%.

The Wellcome Trust, globally the second largest non-governmental funder of medical research, has been the target of the ‘Keep it in the Ground’ campaign of the Guardian and environmental NGO 350.org, asking the Trust to sell off its fossil fuel investments, which currently stand at an estimated £370 million.

Currently Wellcome invests in four major fossil fuel companies, all of which have been affected by large drops in their share prices during 2014: BHP Billiton’s share price slid by 45%, Shell’s by 30%, Rio Tinto’s by 29% and BP by 21%.

The central argument of ‘Keep it in the Ground’, which has attracted over 226 000 supporters so far, is that current fossil fuel reserves are already several times greater than could be burned in order to keep below the internationally agreed target of 2C of global warming. At the same time, fossil fuel companies continue exploring for new reserves, supported by extensive government subsidies and corporate finance.

The campaign also argues that financing fossil fuel companies is inconsistent for an organisation such as the Wellcome Trust – dedicated to improving global health and funds research into diseases such as cancer, malaria and Ebola – given that a recent landmark report from the Lancet/UCL commission on health and climate change concludes climate change threatens to undermine half a century of progress in global health.

Last week, close to 1000 health professionals from around the world signed an open letter asking the Wellcome Trust to move its money out of fossil fuels based on the same argument.

Bill McKibben, founder of 350.org and the global fossil fuel divestment campaign which has seen companies, universities, churches, cities and philanthropic organisations around the world divest, said the Wellcome Trust’s failure to divest from fossil fuels resulted in lost funds which could have been used for its programmes.

He said:

It’s sad that the Wellcome Trust is fine with drilling the Arctic and building vast new coal mines; and it’s sad, too, that their ability to finance their fine work suffers from this myopia.

I’m sure they’ll wise up eventually, but for the sake of the planet one hopes it happens sooner rather than later.

A Wellcome Trust spokeswoman said:

The range of individuals and organisations working to improve human health is wide and it would be surprising if this community did not contain a diversity of opinion about how best to reduce carbon emissions. The Wellcome Trust believes that engagement with the small number of energy companies in which we invest gives us the best opportunity to contribute to change, but we understand and respect the views of those who disagree.

Guardian research shows that the Wellcome Trust sold off two-thirds of its shareholding in Shell, reducing its investment to £53 million, according to share register data filed on 1 June.

Shell has the 8th largest oil and gas reserves of any publicly traded company in the world, and is actively exploring the Arctic for oil and gas, as well as operating in Canada’s tar sands. Scientists say that both of these projects are incompatible with tackling climate change.

At the same time, according to a filing on 1 June, Wellcome increased its holding in BHP Billiton by 8.3%, which has the 6th largest coal reserves of any public company.

If burned, the carbon emissions from those coal reserves would be equivalent to the annual emissions of the US, European Union, India and Russia combined.

Wellcome’s shareholdings in its two other major fossil fuel investments, BP (£131m) and Rio Tinto (£97m), were unchanged.

BP’s oil and gas reserves are equivalent to the combined annual emissions of the US and Russia, while Rio Tinto’s coal reserves are equivalent to the combined annual emissions of all the nations in the European Union.

Mark Campanale, executive director of the Carbon Tracker thinktank, which pioneered analysis of the financial risks of fossil fuel investments, said:

That Wellcome has been selling down its position in Shell reflects a mood swing in the City against oil companies owning high cost, low margin projects. They can’t charge a high enough price to pay for their Arctic projects. Shell’s acquisition of BG group requires some heroic assumptions about its ability to cut costs and the oil price recovering. Wellcome, like many investors, is appearing not to buy that story.

Campanale said that Wellcome’s increased stake in BHP Billiton appeared like a bet on recovering mineral prices, but warned that, given the continuing underperformance of the mining sector against the market, the recovery did not look imminent.

According to Campanale, the question for the big mining companies was whether any coal activities were justified when demand was falling in key markets such as China, driven by competition from renewables and attempts to cut air pollution.

Campanale said:

Wellcome has to be careful that it doesn’t misjudge the speed of the energy transformation and get caught holding stocks that reflect last decade’s economy, not the coming one.

The Bank of England and the World Bank are among the major global institutions who have warned that fossil fuel investments could be left worthless if the world’s governments are to fulfill their pledge to tackle climate change, with binding agreements on global emission cuts set to be made during the UN climate talks this December.

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