{"id":11334,"date":"2015-11-16T18:18:30","date_gmt":"2015-11-16T18:18:30","guid":{"rendered":"http:\/\/gofossilfree.org\/?p=11334"},"modified":"2015-11-16T18:18:30","modified_gmt":"2015-11-16T18:18:30","slug":"why-fossil-fuel-stock-prices-are-doomed","status":"publish","type":"post","link":"https:\/\/gofossilfree.org\/divestment\/why-fossil-fuel-stock-prices-are-doomed\/","title":{"rendered":"Why fossil fuel stock prices are doomed"},"content":{"rendered":"

Numerous fossil fuel divestment campaigners have pointed to the stock markets lately to tell trustees that they are losing significant funds by not divesting. It\u2019s true; fossil fuel stocks have lost 30 cents on the dollar in the last 21 months alone.<\/span>*<\/span> That translates to big money when looking at large institutional investor portfolios like pension funds and school endowments.<\/span><\/p>\n

The reflex response from the Chief Investment Officers, trustees, and investment professionals (not to mention<\/span> the oil industry<\/span><\/a>) has been: \u2018you\u2019re cherry picking, it\u2019s cyclical.\u2019 What they mean is that there are ups and downs in the price of oil and the value of stocks throughout history. They\u2019re long-term investors so they should ride this out until oil prices climb back up to $100\/barrel and the stocks rise with it.<\/span><\/p>\n

There is one major problem with calling this a downturn cycle. In fact, by calling low fossil fuel stock prices a normal ride through the peaks and valleys of the stock market, they are ignoring the elephant in the room \u2013 climate change.<\/span><\/p>\n

Unfortunately, for those CIOs and Trustees, climate change is not on a business cycle (well, maybe a ten thousand year business cycle, but I don\u2019t know of any long-term investors who take it that far).<\/span><\/p>\n

If you factor in climate change and the correlated political and economic shifts (think fossil fuel regulation, renewable energy becoming more competitive, higher cost oil extraction projects, etc.), this ain\u2019t no normal cyclical downturn. And as we are seeing with the <\/span>coal industry<\/span><\/a> (and witnessed with Kodak and Blockbuster), there are ups and downs, until there aren\u2019t anymore.<\/span><\/p>\n

There is a new complex stock market that is reflecting a new complex economy. Agriculture is shifting in formative ways to adjust to drought and heat. Real Estate, Insurance, Utilities, Transportation, Health Care; almost every sector in the stock market is going through major changes as global warming rearranges the status quo.<\/span> For example<\/span><\/a>, the California drought pushed ranchers to move 100,000 cattle across state lines, leading to the closure of one of the nation’s largest packing plants. \u00a0\u00a0<\/span><\/p>\n

Investors are going to have to rethink strategies and integrate climate and carbon into their vision of the world market place. But the Energy sector is different \u2013 fundamentally different \u2013 especially when it comes to carbon risk.<\/span><\/p>\n

There is a simple and clear limitation to the production of fossil fuels. And we\u2019re there; we have about hit our limit. The declining value of fossil fuel stocks can\u2019t be cyclical, because there isn\u2019t a long enough future in fossil fuels for an upswing.<\/span><\/p>\n

A <\/span>recent report<\/span><\/a> by the University of Cambridge detailed the material risk of climate change to investment portfolios and found that, \u201cShort-term shifts in market sentiment induced by awareness of future climate risks could lead to economic shocks and losses of up to 45 percent in an equity investment portfolio value.\u201d<\/span><\/p>\n

Those major losses are advancing the divestment dialogue this year.<\/span> California\u2019s pensions systems<\/span><\/a> lost more than $5 billion on their fossil fuel holdings last year. The<\/span> Massachusetts state pension<\/span><\/a> fund lost $521 million in value from their fossil fuel stocks over the past year (that\u2019s a 28% decline!). And if calculated as an opportunity cost \u2013 what would have happened if you had divested \u2013 most funds are looking at a huge missed opportunity. \u00a0<\/span><\/p>\n

The University of Cambridge report wasn\u2019t groundbreaking. The growing risk to the economy and investment funds because of climate change has been reported by the financial giants of the world; <\/span>HSBC<\/span><\/a>, <\/span>Deutsche Bank<\/span><\/a>, <\/span>Standard and Poor\u2019s<\/span><\/a>, <\/span>CitiBank<\/span><\/a>, <\/span>The Bank of England<\/span><\/a>, and my favorite mainstream awakening <\/span>Jim Cramer<\/span><\/a> \u2013 \u00a0to name a few. If investors don\u2019t wake up to the doom in their portfolios and heed the call from Go Fossil Free campaigners…well\u2026 let\u2019s just say, we\u2019re already way passed \u201cI told you so.\u201d<\/span><\/p>\n

\u00a0<\/span><\/p>\n

*fossil fuel stocks as defined by the <\/span>MSCI World Energy Index<\/span><\/a><\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

Numerous fossil fuel divestment campaigners have pointed to the stock markets lately to tell trustees that they are losing significant…<\/span><\/p>\n","protected":false},"author":46,"featured_media":11335,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[134],"tags":[],"class_list":["post-11334","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-divestment-2"],"acf":[],"_links":{"self":[{"href":"https:\/\/gofossilfree.org\/divestment\/wp-json\/wp\/v2\/posts\/11334","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/gofossilfree.org\/divestment\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/gofossilfree.org\/divestment\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/gofossilfree.org\/divestment\/wp-json\/wp\/v2\/users\/46"}],"replies":[{"embeddable":true,"href":"https:\/\/gofossilfree.org\/divestment\/wp-json\/wp\/v2\/comments?post=11334"}],"version-history":[{"count":0,"href":"https:\/\/gofossilfree.org\/divestment\/wp-json\/wp\/v2\/posts\/11334\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/gofossilfree.org\/divestment\/wp-json\/wp\/v2\/media\/11335"}],"wp:attachment":[{"href":"https:\/\/gofossilfree.org\/divestment\/wp-json\/wp\/v2\/media?parent=11334"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/gofossilfree.org\/divestment\/wp-json\/wp\/v2\/categories?post=11334"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/gofossilfree.org\/divestment\/wp-json\/wp\/v2\/tags?post=11334"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}