Fossil Fuel Companies Methodology

What does the Fossil Fuel category cover?

It covers companies involved in extracting, producing, refining and distributing carbon based fuels e.g. coal, oil and natural gas created by fossils laid down millions of years ago. It also includes companies providing services for production and distribution and also power companies generating electricity from fossil fuels.

Why does Mindful Money screen for Fossil Fuels?

Harms and investment risks relating to fossil fuel companies are high so Kiwis investors need to know if a fund invests in the sector. Investors can decide what action to take e.g. finding a fund with zero or less investment, or avoid the companies that are actively expanding production.

What are the major harms?

The massive increase in burning fossil fuels for energy over the past 200 years is the major cause of climate change. When fossil fuels burn, these climate changing greenhouse gases are emitted: Carbon Dioxide (CO₂), Methane (CH₂) and Nitrous Oxide (N₂O).

Emissions are generated when fuel is used. However, fossil fuel companies and petrostates perpetuate dependency. Instead of directing their immense financial resources to develop alternatives, they lobby for policies to encourage continued high production. In NZ, they lobbied for removal of EV incentives. In the US they lobbied against government support for development of new green energy. As providers of the key ingredient for plastics, oil companies also lobby against policies to control plastic use or improve recycling.

Extracting fossil fuels also has direct negative impacts on the environment and communities e.g. from oil spills such as BP Deepwater Horizon, destruction of habitat caused by open-cast mining of coal, and the displacement of people from land. Burning of fossil fuels also causes air pollution which leads to higher rates of lung diseases. 

What are the investment risks?

The share price of fossil fuel producers reflects ownership of oil, gas and coal fields and expected future profit from extracting and selling these resources. However, to address climate change, most nations and many companies have set targets to reduce emissions which means reducing use of fossil fuels.

The International Energy Agency (IEA) has declared we are in the Age of Electricity. Rapid advances in technology for renewable energy sources and battery storage will lead to decline in demand for fossil fuels. When this happens the share prices of fossil fuel companies could fall steeply.  This risk is a key driver in the under-performance of Fossil Fuel companies over the past 10 years. Between 2016 and the end of 2025, the US Oil&Gas Sector declined by 7% vs the S&P 500 which added 230%.

How does Mindful Money identify companies?

For this category, Mindful Money uses Morningstar Sustainalytics database (covering 20,000 companies). It identifies types of activity and provides the percentage of related revenue. Mindful Money has set a threshold of revenue for each category as shown in the table:

Fossil fuel tags: transition to lower carbon economy

There are tags against some fossil fuel companies to show if they are an Expander or on a 1.5℃ Pathway. 

The Paris Agreement signed by 195 nations (including NZ) at COP21 (2015) set the goal to limit global warming to +2℃ (vs pre-industrial averages) by 2100 and ideally 1.5℃ to avoid catastrophic global warming. Achieving the 1.5℃ goal requires Net Zero Emissions (NZE) by 2050.

The International Energy Agency (IEA) has modelled NZE compatible scenarios. The analysis shows that by 2035 new investment in fossil fuel supply needs to fall by 67% vs the early 2020s (IEA Report p346)). But, Mindful Money’s in-depth report (2023) showed a majority of fossil fuel companies are expanding investment exploration and production. Mindful Money tags these companies as Expanders.

On the positive side, many Power Generators currently using fossil fuels are making rapid progress on shifting to renewable sources. IEA models indicate the power sector could achieve NZE by 2040 (IEA Report p331). Mindful Money has given a 1.5℃ pathway tag to companies whose emission reduction plans are aligned to this goal.

Identifying Expanders 

We use the GOGEL database on the oil and gas industry. It focuses on expansion, is updated yearly and published by highly respected German environmental and human rights NGO Urgewald. We also use Global Energy Monitor to identify expansion through developing pipelines and terminals. 

Expander Case Study: ExxonMobil

ExxonMobil is one of the US’s largest oil and gas companies, and is the third largest company globally contributing to CO₂ emissions (Carbon Majors Database). GOGEL’s analysis (2025) shows ExxonMobil is expanding investment in exploration, production, pipelines and liquified natural gas operations. They are also very active lobbyists and spent $7.7m in 2023 (Advocacy Report) on direct federal and state lobbying plus over $10m through industry organisations. 

Identifying 1.5℃ Degree Pathway Power Generators

We use Transition Pathway Initiative (TPI) and Science Based Target Initiatives (SBTi) to identify power generation companies where management have set strong plans to reduce emission and have set targets aligned to a 1.5℃ pathway (validated by SBTi). 

Case Study: Enel Spa

Based in Italy, Enel is one the largest electric utilities companies in Europe and Latin America serving 74m customers. Enel has a target validated by SBTi to reach net-zero GHG emissions by 2040 (vs 2017 baseline year). It has set a strategy for this goal and has reduced fossil fuel generation from 16% to 4% (between 2020 to 2024).  Between 2025 and 2027 it will invest €12 billion in renewables with a focus on onshore wind, hydro and battery storage and phase out all its coal powered plants. By 2040 the only electricity it will sell will be renewable.