What is Forceful Stewardship?

Since 2014 I have served on the Board of Preventable Surprises, a CIC devoted to challenging investors to better anticipate and address financial disasters arising from systemic risks such as climate change and biodiversity loss.  Founded by the inspiring Raj Thamotheram but supported by some of the world’s leading financial experts, it is dedicated to the concept of Forceful Stewardship, the active, disruptive and ethical (and occasionally radical) role that shareholders should take in their investments.  Crucially, we challenge large corporate and charity investors (including hedge funds and pension funds) to fulfill their legal obligations to their clients by adopting an active role in avoiding systemic risks either through shareholder engagement or divestment.  In doing so, we have widened the the ESG (Environment, Social and Governance) shareholder community.  But we also hold those investors accountable to their legal obligations and to their pledges, identifying patterns of inconsistent voting and problematic behaviour.

This is not an initiative I ever anticipated joining.  I am not an expert on finance and investment.  I am quite skeptical of the free market approach with which this project is inherently in dialogue.  I joined because it complemented the Divestment agenda of student colleagues at the University of Bristol and because it was an opportunity to modestly step into environmental activism and learn from that.

And it has achieved both of those goals.  Bristol was one of the first Universities to divest from fossil fuels, a journey bracketed by a 2015 pledge to carbon neutrality and the first academic declaration of a Climate Emergency in 2018.  Key to that was my involvement at PS and the insight it gave me into responsible investor behaviour. Organisations, including the University of Bristol, were countering the global divestment campaign by arguing, often cynically so, that more could be achieved by holding investments and serving as engaged stakeholders. However, few if any of them have the capacity – let alone the will – to act in such a manner. At Bristol, these discussions and an honest recognition of what we could achieve paved the path towards divestment as the ethical and appropriate alternative.

At the same time, Preventable Surprises helped me redefine the parameters of my own environmental activism, facilitating my shift from being a scientific expert politely contributing knowledge to policy debate but restrained from critiquing it to a far more radical view of directly challenging government failure to act on the Climate and Ecological Emergencies. In particular, it provided a gateway to activism because Preventable Surprises does not advocate for any particular solution or action, a more comfortable position for scientists who are reluctant to step outside of their area of expertise. Instead, PS advocates for investors to do no more than adhere to their legal obligations and their own pledges to ethical behaviour. My view towards activism has changed significantly over the past decade, and my involvement with Preventable Surprises has been central to that.

Below is some further information on Preventable Surprises and the Forceful Stewardship model it has championed for ethical investment.  And below that, some further personal reflections on what this approach can achieve and whether a more radical approach is needed. I think that I have probably given and learned as much as I can from this initiative.  I think that we are identifying the limits of what even the strongest free market interventions can hope to achieve.  I think I am ready for the next stage of my own social and environmental activism.  But responsible investment still has a crucial role to play.

From the Preventable Surprises website:

For many years, Preventable Surprises has been addressing financial disasters that investors could–and should–have seen coming. Concerns about BP’s safety record, the accounting practices of Tesco, sloppy mortgage lending–these were in the public domain for years before disaster struck. Preventable Surprises, a community interest company, is a ‘think-do’ tank that seeks to prevent, or at least mitigate, corporate and market implosions.

We work with a group of positive mavericks within the investment industry to persuade and cajole the financial sector to better address systemic risks. Using climate change as an example, we define systemic risks using three features:

  • They are pervasive and not confined to a sector or territory. The Sustainability Accounting Standards Board found that 72 of the 79 industries in the SASB classification system are affected by climate change.
  • They are non-linear with unpredictable tipping points. The long-term climate transition will almost certainly be volatile and messy. Global temperatures and rainfall may rise incrementally on average but extreme changes will be localised and deadly.
  • They are inter-related, making it impossible to predict the likelihood of Black Swan events.

While regulators, the media, NGOs and consumers each have a role to play in building a more transparent and sustainable market system, most of the power lies with corporations and their investors. Preventable Surprises focuses on institutional investors because, through the trillions of dollars in assets under their management, they have enabled corporate and market dysfunction. While this may be unintentional, the continuing damage caused to investors and to ecosystems in untenable.

Long-term investors cannot use stock-picking or hedging strategies to avoid systemic risk. In the case of climate change, institutional investors’ end beneficiaries will pay the price as the extent of portfolio risk is revealed. That is why investors must mitigate systemic risk through forceful stewardship. As fiduciaries, they must go beyond private engagement to publicly vote for resolutions at AGMs that force companies to align with the 2°C scenario envisaged in Paris.

Forceful stewardship complements the normal approach to responsible investing – in which traditional investment decision-making is overlaid with a filter for environmental, social and governance issues – by focusing on the rights that investors have as owners. But forceful stewards also go beyond private engagements with investee companies, which lack transparency and are hampered by conflicts of interest. Many of us and those we work with are deeply pro market. But as experienced insiders, we know there are many reasons why the financial industry ignores systemic risks, such as climate change, until it is too late.

“Forceful stewards” engage with companies, and use their full influence to make business part of the solution to address systemic risks. They vote for resolutions to send a public signal and thus to drive deeper and faster corporate change. And forceful stewards also engage with all the other players involved in investment – from research analysts to investment consultants to regulators – to ensure they, too, play their part in addressing systemic risks.

In summary, a forceful steward does three things:

  1. Indicates in advance a willingness to vote in favour of resolutions requesting action to address systemic risks, and to vote against management if the company has repeatedly failed to take action to limit systemic risk.
  2. Makes it clear in private engagements with board directors and senior executives that box ticking will not be sufficient; results matter and should match the urgency of the situation.
  3. Requires fund managers, sell-side research, credit rating agencies, and investment consultants to review corporate disclosures and advise on portfolio implications. And advocates for essential regulatory changes that align incentives in financial markets with risk mitigation and long-term wealth creation.

Why do I personally think that Forceful Stewardship is so important?

Forceful stewardship is not a participation prize for showing up.  It is not box ticking.  It is not about empty gestures, many of which cannot be evaluated. It demands action. It centres accountability.  I joined in 2014 but writing this in 2022, I look back on nearly a decade of Climate Emergencies, Pledges, Commitments to Net Zero – and despairingly little action towards those.  Words must precede action.

Our most successful campaign was the Missing 60, in which we identified the 60% of investors who had voted against climate risk resolutions for US companies but in favour of near-identical resolutions for European companies – simply because the former opposed those resolutions and the latter did not.  That is not leadership.  That is not accountability.  That is not the action of a fund manager acting in the best, well-informed interest of their clients.

Forceful stewards do not sit on the sidelines or follow the crowds.

But nor do Forceful Stewards dictate the nature of action.  Climate change is a challenge, but no one has a monopoly on the solution.  Arguably, inferred assumptions of what those solutions must be has been a major part of its politicisation – political divides around science have arisen not from the science itself (although it is not free from critique) but rather from ideological divides around free market vs government intervention.  I have my own opinions about what is needed to tackle a challenge of this magnitude and they do involve ‘big government’ interventions and multi-state coordination, but Preventable Surprises is not the forum for sharing those views.  It demands action but is agnostic to the political, behavioural, financial or technological action an organisation takes; it only demands that the action be legitimately engaged with the nature and magnitude of the systemic risks an organisation faces.

This approach has given Preventable Surprises legitimacy and influence in surprising places.

However, it also exposes the limitations of any approach that is embedded within the free market rather than challenging its existence. Corporate actions can be legitimate responses to the climate emergency but replicate other sector sins; copper and lithium mining and major hydro-energy projects can damage the environment and perpetuate inequality just a much as climate change can.

Their are limits to what the free market can achieve because the one thing it can never do is return power and wealth to others at its own expense. In fact to do so is in direct contradiction of the Preventable Surprises core approach – demanding that companies recognise climate change because climate change is a risk to the investment.

Those businesses might change but they will always extract.

Some final reflections

Many of my colleagues are very pro free market.   Or more precisely, they are in favour of the most noble possible vision of the free market.  Preventable Surprises aspires to make the most of our current socio-political system.  And inevitably, any solutions that arise from Preventable Surprises’ interventions will be market-driven ones.

I do not share that optimism. Those of you who follow this blog or my twitter account know that I am not ‘pro market.’  On some days I am quite skeptical of capitalism and other days I am anti-capitalist.

But I currently live in a capitalist country and capitalist forces shape the world.  Forceful Stewardship is about making that system work as ethically as it can.  Like the fossil fuel divestment campaigns, we understand that we are in the game and so we play the game.  I do not think that market solutions will solve the climate problem – and even if they did, I suspect they would give rise to an equally exploitative and colonial ‘green’ energy economy – but we do what we can within the constraints imposed upon us.

That is something.  We all do our best to make the world a better place. I am proud of what we have achieved.

But these campaigns have served another purpose – and this is why they are now serving as a springboard for a step change for my own environmental activism.  Divestment and shareholder activism are exposing the limits of what our current socio-economic system can achieve.  In striving to make the free market behave as ethically as possible, they spotlight its limitations.

When even best practice and the most well-meaning actors fail to create an environmentally and socially just world, then we have run out of excuses for avoiding far more radical change.


The forecast is for volatility.


The Climate Change challenge to society, industry and investors is not well represented by the concept of long-term global warming (although that will happen) but rather as system wide and unpredictable shifts to a world characterised by increasingly volatile food, water, security and weather.

Climate scientists continually emphasise the difference between the climate and weather – the former being a long-term description of the average state of our planet and the latter being the expression of that climate on highly localised and short-term timescales. Our understanding of climate is relatively robust, based on physical principles that in many cases were established hundreds of years ago.  In contrast, our ability to predict how that will impact a specific region at a specific point in the future, i.e. weather, is weaker due to how climate change is manifested through a very complex system.

Long-term climate change is typically represented by the iconic IPCC global warming figure showing the ~1C warming of the past century and the near certain warming up to the year 2100, the forecasts and uncertainty derived from an ensemble of climate models. They collectively depict a relatively monotonic warming if we continue a ‘business-as-usual’ fossil fuel/agriculture trajectory, as well as the associated uncertainty, resulting in cumulative global warming by 2100 of about 4 to 6C.  But this trend does not say anything about the year-to-year variability in any particular place.  It is not a weather forecast.

It is possible – unlikely but possible – that in the year 2100, in a world 4C warmer than that of today, the Northeast of the United States will be experiencing its coldest year on record. These deviations from the norm could be due to natural variability over-riding the larger global warming trend in that particular time and place.  It could be due to global warming having unexpected impacts on ocean and atmosphere circulation.  In any case, there are very good reasons for scientists to focus on long-term climate trends, but those trends do not reflect what it will be like to live in a warmer world.  They do not reflect how people will be affected, what they will react to or how, or the pressures under which politicians will be making decisions.

The defining features of climate change will be volatility and uncertainty.

Crucially, therefore, these future forecasts fail to inform our understanding of the socio-political landscape relevant to investors.

If climate change is gradual, then the savvy investor should adopt a wait and see attitude.  As warming continues, as damage gradually accrues and as political rhetoric (and regulations) grow sharper, investors can adopt different risk strategies, with some inevitably bailing out from high risk ventures too soon and others too late.

But this is not how climate change will be experienced. It will be experienced as extremes, the unexpected, the unusual.  In some areas, the 1-in-20 year heat wave will be 10C greater than it is today (i.e. England could experience ~40C heat waves every 20 years rather than ~30C heat waves).  A ramped up hydrological cycle on a warmer planet will cause some areas to become wetter and others drier; but in all areas, actual rainfall events are likely to become more intense. In 2050 – or even 2020 – the Midwest of the United States might experience pronounced floods or be in the middle of a devastating 5-year drought.

This volatility is being manifested today. Extremes are part of natural climate variability and we have warmed the world by 1C, the latter sufficient to amplify and complicate the former.  In particular, there is strong evidence that warming is already amplifying heat waves, droughts and floods.  And most recently, horrifying wildfires. By extension, we could be on the verge of experiencing particularly acute volatility in food prices. Investors in every sector should be deeply concerned about this increased volatility.

However, investors in the energy and fossil fuel sectors should be additionally concerned by how this volatility impacts policy. 

If nations actually do enact policies that could limit global warming to 2C (let alone 1.5 C, the ambition of the Paris Agreement), then most of the fossil fuel sector’s assets will become stranded.  In fact, even policies that limit warming below 5C will strand significant fossil fuel assets. Many are arguing that until actual policies are put in place, any disinvestment is premature.  ExxonMobil has further argued to the SEC (unsuccessfully in 2015-2016) that they do not believe nations will enact such policies and therefore they have no need to plan for them.

Such attitudes are understandable in a world of long-term, incremental change and politicians reluctant to institute policies that overly disrupt the status quo.  But incremental change is not the forecast.  Volatility is the forecast. Superstorm Sandy had a minor but real impact on the politics of the US Northeast.  What would be the consequence of three such storms happening back to back? What would have been the consequences if it had knocked out one of NY City’s central distribution centres, causing tens of millions to face food shortages?  Heat waves in the Middle East resulted in thousands of deaths last summer; what are the political consequences of a somewhat more extended heat wave that results in tens or hundreds of thousands of deaths?  What are the political consequences of two more years of California drought, especially if it begins to drive farms out of business and food prices upwards? Or if wildfires rip through more populated areas?

I do not pretend to know what tipping points could cause policy makers to switch gears from prevarication and incremental steps to the drastic policy changes that would limit global warming to 2C and be devastating for certain fossil fuel industries and their investors. But we have seen how a combination of factors has devastated the coal industry, with its value perhaps never to be recovered. We have seen how Fukishima had huge impacts not only on the nuclear industry in Japan but also in Germany – with knock-on effects across the EU.

Given this, I can see no logical reason for investors to not demand as much information as they can from their investments, especially those vulnerable to policies that would limit climate change. I can understand if investors want to bet against politicians making difficult choices!  But to also bet against technological innovation (fusion, microgrids, batteries)? To bet against economics (decreasing price of renewables)?  Ultimately, to bet against people who will be on the front lines of this volatility? Regardless, if fund managers want to make the best possible bets – and they are legally compelled to do so – they need the best possible knowledge. And this begs the question: why would a responsible fund manager not ask all of their major investments – not only but especially the fossil fuel industry – to conduct 1.5 C stress tests.

Different investors – with different risk tolerances – will read the above through different lenses and reach different conclusions.  Nonetheless, given the complexity and unpredictability inherent in the climate change challenge, it is astonishingly naïve for any company to argue that politicians will never act on the commitments made in Paris and thereafter. Investors should demand a clear message from those companies that they understand both systemic climate change risks as well as the associated policy and economic risks to their assets. And investors should have confidence that those in whom they have invested have planned for both.


Some final thoughts that did not quite get it into the blog but bear re-emphasis. The key point is that climate change will create volatility and that is not good for anyone.  It is especially bad for investors, who rely on stability and predictability. And most of all, investors rely on confidence.  The crash of 2008 was not due simply to an accumulation of subprime mortgage funds but rather a loss of market confidence in them arising from increasing awareness of those fund’s quality; the bubble burst. If (when) climate change causes investors to lose confidence in a property market, the re-insurance sector, the construction industry, a government bond market, it is almost certain to create widespread financial shocks.  The Bank of England Governor Mark Carney quite correctly views this as systemic risk.

But it is a bit less clear what might cause that loss of confidence.  Will it be a particularly severe event in terms of financial or humanitarian terms or will it be a shocking and unprecedented event.  Or an accumulation of events. My suspicion is that it will be the cumulative exhaustion associated with volatility and unpredictability. Markets will adapt to long-term gradual change, but adapting to a volatile and uncertain world is far harder.

And unfortunately, volatility is exactly what is happening now and almost certain to be one of the defining features of our future.

Adapted from Blue & Green Tomorrow  (see page 29 of the Guide to Sustainable Investing for original).

Adaptation or Mitigation? Both. Obviously.

Ever since the historic Paris Agreement on climate change, policy makers, business leaders, scientists, and investors have been debating its near- and long-term implications. It was and remains an ambitious agreement, with a goal to limit warming to well below 2°C. But it is also an agreement with a weak enforcement and reporting framework and the current “intended nationally determined contributions” limit warming to only about 3 to 3.5°C—and more after this century.

This creates a rather politically and potentially legally fraught terrain for decision makers. The list of critical questions is getting longer:

  • When will imminent climate impacts drive policy change?
  • How will governments change:
    • energy-subsidy programs.
    • incentives for innovation and infrastructure investments by companies and long-horizon investors.
    • carbon taxes.
    • accountability standards relating to investors’ role as stewards.
  • How quickly will new energy sources come on line and how messy and volatile will the transition be?
  • And crucially, will businesses and institutional investors lead these initiatives or be victims to them?

At the heart of these discussions is one of the oldest debates in the climate change communication and policy arena—should we focus on mitigation or adaptation? Up until a few years ago, scientists were reluctant to discuss adaptation because of the recognized negative impact it had on individual and social behaviour change. Even if very costly, high risk and disruptive adaptation strategies provided an ‘escape clause’ and a justification to procrastinate on unpopular or challenging near-term decisions. More recently, however, the debate has taken on new dimensions. Given the facts that global warming has already reached or exceeded 1°C, that even more warming is already locked in, and that even the most ambitious national pledges would likely fail to keep warming below 3°C, let alone 2°C, many are privately arguing that mitigation is no longer viable and the focus should be on adaptation.

Now, as then, the sole focus on adaptation is deeply flawed.

Let’s start with those arguing that either the mitigation opportunity has passed by or that nations will be unwilling to enact the perceived painful policies necessary to limit warming. Aside from the ethical flaws of this argument, it would be naive for investors to assume that an agreement among nearly 200 nations will have no legal or policy consequences; even the INDCs, though they are incomplete measures, will require vast social, economic, and political change.

However, the central argument that mitigation remains vital and necessary is scientific. Those suggesting that mitigation has failed or will fail tend to fixate on the 2°C global warming limit at the centre of policy discussions for the past decade and the acute challenge we face in achieving it. There are good reasons to have a 2°C (or lower) limit, as that is the representative temperature when a number of system changes begin to occur, very high sea level rise becomes locked in, and changes in weather, including extreme events, becomes very difficult to predict, all of which will have dramatic economic and social impacts.

Climate change, however, is not a binary. We are already experiencing the consequences of anthropogenic climate disruption. These will become more pronounced as the planet approaches 2°C of warming. And they will become even worse at higher CO2 levels and higher global temperatures. The Earth system does have some bimodal features but the tipping points between them occur at a range of temperatures, with great uncertainty, and in complex ways.

Sea level rise showcases this well. In the Pliocene era, about 3 million years ago, CO2 levels were 400 to 500 ppm; temperatures were 2°C higher; and the sea level was 5 to 20 metres higher than today. Such changes would be devastating in modern times, with huge infrastructure costs, long-term economic consequences, and unprecedented social displacement. The last time Earth experienced 500 to 1000 ppm CO2, however, temperatures were about 4-5°C higher, and sea level was 70-100 metres higher than today. These represent a long-term Earth system equilibrium so neither scenario is expected for the next several hundred years or more; but they are illustrative of the profound differences between a 2°C and 5°C global warming scenario.

Crucially, unabated biomass loss and fossil fuel burning—especially with new technologies allowing unconventional shale gas and tar sands to be exploited—could result in warming of 5 to 6°C, maybe even more depending on how effective we are at tapping new reservoirs, whether climate sensitivity is at the high or low end of our estimates, and whether positive feedbacks in the Earth system will exacerbate our fossil fuel impacts.

To the best of our understanding, 5 to 6°C global warming will have vast and devastating impacts on our climate and ecosystems, probably with similarly devastating impacts on society. In short, even if we fail to sufficiently curtail fossil fuel usage to limit global warming to 2°C, we must certainly do so to prevent far more extreme warming. As long as fossil fuel resources exist to tempt us, mitigation will always be a priority.

And yet.

Even under our most ambitious mitigation strategies, climate change will happen and we must adapt to it. Already, with the Earth having experienced only about 1°C warming, droughts, floods and heat waves—many of which have been directly attributed to global warming—are occurring. When that warming has combined with natural climate variability, which happened with the strong El Niño of this past year, local affects are even more pronounced, whether it be global coral bleaching or crippling heat waves in the tropics. These events, in turn, have affected food security, productivity and global security. They could destroy marine ecosystems and in turn one of our most important food sources and one of nature’s most beautiful features.

And yet, we are committed to further emissions, further warming, and further climate disruption. It is hoped that if we limit warming to 1.5°C, the most severe aspects of sea level rise, extreme weather and ecosystem disruption will be avoided—but we do not know that and some have argued that we have already locked in up to 4 metres of sea level rise. If we limit warming to 2°C, we will almost certainly have to adapt to sea level rise, human displacement, infrastructure devastation; it will also expose us to feedback risks that could add additional warming beyond our direct influence.  And there are many reasons to think that these impacts will be inequitable, with the poorest suffering the most.

There is no choice between avoiding severe climate disruption or adapting to it. We will do both. We will leave fossil fuel assets in the ground and we will adapt to some environmental disruption. The only choices we have are how we balance those two needs, how we do so fairly and equitably, and how rapidly we make the inevitable transition.

Adapted from a blog originally published for Preventable Surprises.