Director's Update: Fossil fuel investments are a complex issue on which fair-minded people will disagree

Dear colleagues and friends,

You may well be aware that the Guardian recently launched a campaign urging the Wellcome Trust and the Bill & Melinda Gates Foundation to end investments in fossil fuel companies. While we support the campaign's ultimate aim of reducing carbon emissions to restrict global warming to 2^°C, we do not believe this is the strongest contribution we can make to this important goal.

I have explained our view at length in the Guardian and on our website, but in short, it is that we think this issue is more complex than the campaign has allowed, and that there are better ways of maximising our influence as investors. We do this by taking a case-by-case approach that considers individual companies on their merits, including the extent to which they meet their environmental responsibilities.

When we do choose to invest or stay invested (as we have done with 4 of the 200 companies on the campaign's target list), we then engage actively as shareholders. We use our access to company boards to press for more transparent and sustainable policies that support transition towards a low-carbon economy. We apply this approach both to companies that produce and consume fossil fuels: demand is as important as supply.

We have been asked for evidence of how our engagement has made a difference. This is not as straightforward as it sounds because most of the discussions we have as investors are confidential: we could not expect frankness or access to commercially sensitive information were we to publish details.

It is also rare for discussions with a single shareholder to lead directly and immediately to a clear outcome: our influence works over time, and most powerfully when boards hear similar messages from many shareholders. Divestment would remove a strong voice that takes climate seriously from these coalitions of persuasion, with no likelihood that those to whom we sell our shares would engage the same way. It would not only end our own influence with these companies, but also undermine the influence of other investors who share our views.

One current example in the public domain where this process can be seen at work is in the shareholder resolutions proposed at the forthcoming Shell and BP AGMs, which would require detailed disclosures about their lobbying on climate change, the incentives they offer executives on this issue, and low-carbon investment. We are part of the constellation of investors that has convinced the boards of both companies to recommend these resolutions to other shareholders.

The transparency we are helping to create is not in itself an answer to climate change, but it is a necessary step if not a sufficient one. We have seen no evidence from campaigners that the divestment initiatives that have happened to date have had any comparable influence on any fossil fuel companies. We are being asked to exchange an approach that we know to be effective, if difficult and complex, for another based on conjecture.

I understand that not everyone in the Wellcome Trust's network will agree with our position. We have thought hard about this issue, beginning long before the present campaign, and are comfortable with the decisions we have reached. But this is an issue on which fair-minded people who share environmental goals are always likely to reach different conclusions. We are also comfortable with this diversity of opinion, and with criticism and challenge, whether those who disagree with us express themselves privately or publicly, and whether they have strong connections with Wellcome or none. We will continue to listen to the full spectrum of views – if you would like to share your view with us, please do email contactus@wellcome.org.

If you would like to know more about the investments that fund our mission, you can read about them in detail in our most recent Annual Report. Wellcome has also made understanding the connections between environment, nutrition and health one of our five key challenges, and you can read about the work we have started to fund in this emerging field here.

Yours,

Jeremy