(7 minute read)
Published: 30 April 2026
Written by: Alice Thornton, Head of Research and Impact with Matthew Roberts, Head of Alternative Solutions at Fulcrum Asset Management
Last year, we took the decision to exclude any investment in new primary market capital for fossil fuel production and infrastructure – meaning, for example, we will not buy new shares issued by oil and gas companies. Since then we have been working to implement this change with the fund managers that we invest our endowment with, including Fulcrum Asset Management. We wrote a blog with them, which can be accessed by clicking here, sharing initial reflections on what we had learnt about shifting the investment management industry towards a more sustainable future for the planet.
One year on, together we have successfully engaged with three underlying funds that have total current assets of circa £215m to no longer provide new primary market capital for fossil fuel production and infrastructure. It has been very satisfying to discover that, despite our small size, we have been able to use our voice as an asset owner to materially influence the investment approach taken by fund managers with combined assets much larger than ours. In this blog, we share how we achieved this progress and hope to inspire other asset owners to play a similar role in tackling the climate emergency through the use of their endowments.
Why we have excluded primary market investment in fossil fuel production
Providing new investment to fossil fuel production and infrastructure is fundamentally misaligned with the aims of the Paris Agreement, which seeks to keep temperature rises well below 2°C above pre-industrial levels. Evidence is clear that we cannot continue to expand fossil fuel production if we are to avoid the worst consequences of the nature and climate emergencies. We are a very small investor with an endowment of circa £150m, and the majority of our investments are in secondary markets (i.e. existing shares in companies that have already been issued, rather than new investment). This means that, in reality, the potential amount of our endowment that might be used to make primary market investments in fossil fuel production is very small. Nonetheless, we chose to adopt this policy to signal the importance of this issue to our peers, larger investors, and ultimately the energy industry – and we are not alone in doing this. There is a growing awareness amongst asset owners and in the wider investment industry that ceasing primary market investment in fossil fuels is essential to avoid the huge environmental, social and financial consequences of the climate and nature emergencies.
Investing in a pooled fund of funds – an opportunity for wider impact
We have invested in Fulcrum's Diversified Liquid Alternative (DLA) strategy for over six years. It is a ‘fund of funds’, i.e. Fulcrum invest a portion of our money with other underlying fund managers as well as investing some of it directly themselves. We currently hold around 15% of the circa £118m invested in the fund.
Investing via third party fund managers makes compliance with our Investment Policy more challenging – because there are multiple fund managers to ensure alignment with, rather than just one. This challenge, however, also provides an opportunity for greater impact: the potential to leverage our influence by engaging with more fund managers than would be the case otherwise.
When we updated our Investment Policy, Fulcrum committed to exploring whether it would be possible to encourage DLA’s underlying managers to consider excluding primary market investment in fossil fuels, starting with a focus on bond issuers. There is relatively limited potential for this type of investment to be made in the portfolio (and as such the return implications of any change in approach are negligible), but there are a few underlying funds where it would be possible.
What did we achieve in the past year?
Last year, the DLA fund was invested in 25 underlying fund managers. This means that to ensure compliance with our updated Investment Policy, the team at Fulcrum had to engage with all 25 fund managers to check that their investment strategies complied with the exclusions we set out in our Policy; use this engagement process to identity any risks of potential non-compliance; and, where necessary, encourage managers to change their approach in order to comply.
Focusing on the credit managers in the portfolio, Fulcrum found:
- One was not compliant, but the manager was willing to change their investment strategy to no longer provide new primary market capital for fossil fuel production and infrastructure – and therefore committed to become compliant within the following six months. Importantly, Fulcrum did not feel that this change would detract from future returns for the strategy.
- Two emerging market debt managers were not compliant, and these fund managers felt that supporting emerging economies – including their oil and gas industries – is an important part of a Just Transition. We felt, however, that there was a path for compliance with our policy over the medium term, which required ongoing engagement to discuss these issues in greater depth.
What has happened since?
The process of engagement with these two emerging market debt managers took place over many months. The team at Fulcrum discussed the broad topics of sustainability and just transition with these managers, and, for context, shared the Foundation’s goals and the previous blog that we co-authored with them.
The two managers are very different in terms of size, structure, and organisational process. Additionally, there are potential complications that needed to be considered with respect to making changes to the investment guidelines of commingled funds given the interests of and commitments to other investors.
With one manager, over time, Fulcrum discussed the topic with the lead Portfolio Manager, the ESG (Environment, Social and Governance) specialist and relevant Credit Analyst, which ultimately led to an agreement that they would take the matter forward in compliance with the Foundation’s wishes. With the other manager, Fulcrum's relationship manager was the key advocate within the firm, supporting discussions with their product team as well as the portfolio management team. This manager has also agreed to comply with the Foundation’s wishes.
In both cases, we can say with certainty that a combination of clear rationale, Fulcrum's perseverance, and strong, long-term relationships helped secure the outcome that we were seeking.
In total, the three underlying funds that are now aligned with our exclusions policy have current assets worth circa £215m – meaning that our engagement with these managers has influenced the way assets are invested that are much more significant in size than our own.
What have we learnt in this process?
A key challenge in the engagement process was that most fund managers do not typically differentiate between primary and secondary markets when applying sustainability-related exclusions. Fulcrum therefore began by asking managers to explain their rationale for providing new primary market capital to fossil fuel issuers. It opened detailed discussions with portfolio managers about why they participate in primary issuance, what (if any) opportunity cost they associate with avoiding it, and how they assess the financial and climate risks tied to these exposures. It also provided a valuable opportunity to explore the managers’ engagement approach with these companies in greater depth.
There is a clear opportunity here for Foundations like us, with charitable objectives that cannot be achieved if fossil fuel production is expanded, to engage with our fund managers on this issue and use our influence to drive greater awareness in the investment industry of the importance of preventing capital being used for this purpose.
We also learnt that, even as a small asset owner with limited funds, we do have the ability to influence fund managers’ investment practices. The investment industry cannot and will not change unless clients ask for it, and make a clear and compelling case for why this is important. This requires working with people who are willing to listen and put in the time to make the required changes. It highlights the importance of strong relationships, both between the Foundation and Fulcrum, but also between Fulcrum and their underlying fund managers – without which, these changes would not have been possible.
What next?
Looking ahead, we will continue to work closely with Fulcrum as they build on their engagement, and continue to have focused discussions with managers to ensure alignment with our policy. We also expect continued engagement on the credibility of managers’ climate transition plans, as we believe this remains an essential part of achieving meaningful and lasting progress. Finally, we look forward to continuing our work with Fulcrum across other engagement priorities, including biodiversity loss, diversity, and the just transition.
We invite all Foundations to join us in tackling climate change through the use of their endowments, by using their influence as an asset owner to shift the investment management industry towards a more sustainable future. Please get in touch with Alice Thornton, Head of Research and Impact, if you would like to find out more about our approach.