Saudi Aramco IPO: the ultimate marriage between carbon and capitalism

A firm with the biggest carbon footprint seeks cash to grow just as the fight against climate change needs it to shrink

A saudi aramco refinery

Roll up! Roll up! The world’s biggest climate polluter, Saudi Aramco is poised to announce the world’s biggest stock flotation in an ultimate marriage of carbon and capital. Any institution with tens of millions of dollars and few qualms about the environment is invited.

Entry is not as exclusive as it sounds. Individuals with a lot less cash and a lot more concern may also inadvertently find themselves as guests through pension funds that automatically track the stock markets.

Scientists warn that fossil fuels and money will soon need to divorce because carbon emissions must be slashed by half over the next decade if the world is to have any chance of keeping global heating to a relatively safe level of 1.5C. Despite this, Aramco expects to receive the greatest infusion of cash in history.

In the modern era, no company has a bigger carbon footprint than Saudi Aramco. The Guardian’s recent Polluters investigation found the oil and gas producer has contributed 59bn tonnes of CO2 since 1965, a third more than any of its rivals. Output is forecast to expand even further between now and 2030 to a level that would mean this single firm will account for almost 5% of the remaining 1.5C carbon budget.

Until now, the company has been state-owned, influenced by the Saudi royal family, and has disrupted, delayed and diluted international efforts to cut carbon emissions. The flotation will not change this dramatically.

The bigger questions are who is going to buy the shares, how will the money be used and will a public listing make the company more transparent and less of an obstacle to climate action. So far, the indications are less than reassuring.

The most likely buyers are sovereign wealth funds and state-backed institutions in Russia, China and Abu Dhabi. Others may follow, but most big private institutions appear to be waiting on the economic and reputational price. A notable exception is Singapore’s investment fund Temasek, which said it would not invest in Aramco’s IPO, partly due to climate concerns.

Oversight and transparency are other concerns. The Saudi royal family is neither open nor democratic. Barely a year after being implicated in the brutal murder of Jamal Khashoggi in October, the crown prince, Mohammed bin Salman is getting positive global attention for his Aramco selloff plans.

He said the sale would raise money for the state’s sovereign wealth fund to invest in a diverse range of businesses across the globe, which would make Saudi Arabia less dependent on oil.

Climate campaigners believe it is reckless to pour such money into a petrochemical giant when fossil fuel firms should be scaling back. Last month 10 environmental groups signed a joint letter to bank chief executives, including the bosses of HSBC and Goldman Sachs, urging them not to participate.

“This IPO will be a boost to a planet-wrecking company linked to a regime with a dubious human rights record,” said Adam McGibbon, senior campaigner at Global Witness.

Yossi Cadan, global finance campaign manager for, said: “Investors who expressed concerns about climate change and human rights violations must be sincere to their word and not be investing in Saudi Aramco’s climate wreckage sale.”

In a letter to the Guardian last month, Aramco’s chief technology officer, Ahmad O Al-Khowaiter, said the company supported a cut in the overall carbon footprint of the oil and gas industry and end-use markets. He said his company had already made progress. “We have achieved the lowest carbon intensity of any major oil producer.”

Saudi oil is of high quality and close to the surface, which means it requires less energy to extract and process than fuel from Canadian tar sands, Venezuela’s Orinoco fields or Brazil’s deep sea reserves. Even so, the Climate Tracker watchdog estimates half of potential Saudi spending on new projects would not fit within even a 1.7C climate scenario.

In an earlier bond prospectus, Saudi Aramco said the firm was pursuing various initiatives to manage its carbon footprint. Tellingly, it also declared support for Saudi efforts to achieve the Paris agreement objectives. If the same is true for the equity raise, then investors and financial market regulators would be entitled to ask how it reconciles this with a plan that would break the global carbon bank.

Richard Heede, at the Climate Accountability Institute in the US, said a proportion of the capital raised should be invested in expanding Saudi Arabia’s solar electricity generation, energy efficiency and carbon sequestration programmes, at a scale that goes beyond freeing up domestic use so there is more oil for exports. “It would be prudent for investors to do climate-related due diligence, and for the kingdom to assure investors that steps to protect the global climate will be taken,” he said.

But stock markets and asset management companies continue to champion fossil fuel firms, via listings in benchmark indices and by investment algorithms that automatically track the biggest firms.

The FTSE recently benchmarked the Tadawul as a secondary emerging market, which already puts it on the radar of global investors. If Aramco later lists in a major international stock exchange, its size would ensure it becomes a major player in any index. It would then appear in every major pension fund portfolio “benchmarked” to the FTSE All Share Index, which could mean millions of pension policyholders end up unknowingly with a stake.

“There would then be a transfer of risk from the Saudis to the rest of the world, ie London, then to every pension fund member or saver in a passive fund. Only those funds with ‘no carbon’ benchmarks are likely to avoid it,” said Mark Campanale, of Carbon Tracker.

If the financial markets are serious about climate change, they need to be reorganised to separate climate and carbon, not push them closer together.

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