With Boss man Mark Polson away, it’s down to me to write this week’s update. Finally, someone sensible, you’re probably thinking. Someone we can get on board with.

Don’t set your hopes high though. Doing an OK job means he may want me to write it again, and I’ve been stung before. At home I have to vacuum every time because I did a reasonable job once. So, he’s not going to get me on that.

Doing a decent job by doing fairly little would make a good slogan for passive investing if someone had the cojones. Buy and hold. My topic for this week.

The eye-opening news was that passive, index-tracking funds might be aiding climate change. Passives are growing their share of ownership in UK fossil fuel companies while the active sector is retreating, so the claim went.

It’s not a flattering look for the passive folk who are, after all, supposed to be the cost-conscious good guys of asset management. Here’s what’s happened.


As mistrust in investment markets grew following the ‘07/08 financial crisis, so too did passive index investing. According to some observers, it’s only a matter of time before passive assets overtake active in mutual funds and ETFs.

Campaigners argue passive funds are providing fossil fuel companies with a steady supply of capital and influence just as investors should be pulling back. The rise of passive – and of the voting rights of a few providers in particular – has been described as the “biggest climate finance problem nobody is talking about”.

Now think tank Common Wealth is talking. It claims passives are set to become ‘holders of last resort’ in fossil fuel companies, effectively extending their lives. Its findings raise fundamental questions about passive funds’ stewardship activities, voting policies, and overall transparency, it says.


If as a firm you favour passive strategies, might these findings trigger some uncomfortable conversations with clients? They may do.

There are plenty of advisers out there who tilt towards passive, sometimes the whole way. A 2019 straw poll of 19 firms found 12 leaned towards active, five towards passive, while two favoured neither one nor the other. Meanwhile, more than half of advisers in our most recent State of the Adviser Nation report said they had taken steps to reduce client costs by recommending less expensive investments, including via a shift to passives.

And it is worth considering whether climate awareness is triggering a small rebalancing of the adviser-client dynamic.

Where clients were typically more concerned with knowing whether they were on track than with the allocation of their assets, are you finding that this is less often the case? Research suggests that two-thirds of consumers believe their money can make a social or environmental difference. Heck, younger investors claim they’re even prepared to accept a lower financial return to guarantee it will.

So, all told, this is one worth getting out in front of. If you like active, well, this is a pretty good ball to swing at. Bettered only by learning passive funds are investing in speed cameras or something. You can’t miss.

If you’re a passive proponent, it may be an opportunity to talk about how you address issues like these as a firm, and to show clients what you can do about it if they wish to make a change. To show them they can still wield power over their investments even in a passive environment. You might even tell them about the splendid work of organisations like Tumelo, which is giving retail investors new insights into – and even votes on – where they’re invested.

Or this whole thing could fly under the radar and clients will never ask about it. Please let me know if they do though. It’ll give me something to write about next time. If I’m asked again.


  • Our own Tom McPhail has an admirer. And fair dos. Few people can tick off pension freedom, retirement income, consumer engagement, and value for money, at Boss level, in under half an hour. Which is exactly what Tom does in his most recent Podcat.
  • A sharp prod masked as a gentle nudge to complete our new-look quarterly provider ratings survey. It’s not just on platforms this time, but other providers too, and yet the survey’s shorter than before. Science. Come on in.
  • And finally, your music pick. Loved it the moment I heard it. How a track can be uplifting and downright melancholic at the same time I’ll never know. Look pensively out of a window as you listen to Oh That I Had by Ruby Frost and Mt. Eden.