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Investors Could Drive Real Fossil Fuel Investment Retreat

[fa icon="calendar'] May 13, 2014 9:00:05 AM / by Carol Pierson Holding

By Carol Pierson Holding

The sustainable investing community has a saying that their greatest achievement will be Wall Streetto put themselves out of business. The fossil fuel divestment movement could say the same: when fossil fuel companies stop their relentless drilling and all assets currently held in reserves are abandoned, drivers of the movement will be looking for work.

The way things are going with fossil fuel companies, we might be able to halt the divestment movement sooner than we think.

Last week’s news seemed to show the market moving towards an acceptance of climate change’s negative impact on corporate earnings — and a rejection of fossil fuel investments on purely financial terms.

On Wednesday, the Obama administration’s National Climate Assessment, was reported in the Wall Street Journal under the headline “Climate Change Is Harming US Economy, Report Says.” The story does not question the report or offer conflicting scientific opinions, but points specifically to greenhouse gases from energy production as the cause:

The congressionally mandated National Climate Assessment…says…that it isn't too late to implement policies to reduce emissions of greenhouse gases, such as carbon dioxide and methane, and calls on governments at all levels to find ways to lower carbon emissions, particularly from energy production.

That’s from The Journal, probably the most fiercely pro-business publication around.

But even more astonishing is the story in Forbes “Fossil Fuel-Free Index Will Help Investors Manage Climate Risks.” While the article says the fund, the FTSE Developed ex-Fossil Fuels Index Series, is aimed mainly at universities and public institutions, it does acknowledge —

“(The) concept of carbon stranded assets pioneered by the Carbon Tracker initiative contends that fossil fuel companies are overvalued by stock markets because their valuations include assets that cannot be exploited if we are to avoid runaway climate change. …Carbon Tracker sheds further light on the risks, (in its) report… Carbon Supply Cost Curves. Evaluating Financial Risk To Oil Capital Expenditures, setting out the assets most likely to be stranded and the companies best placed to adapt to a low carbon future.”

That Report calls out oil sands, Arctic and deepwater exploration as terrible investments.

Carbon Tracker’s website describes magical thinking in the fossil fuel industry: “Exxon saying there is no risk does not constitute prudent management of shareholder funds – it’s like King Canute assuming he can hold back the tide, but investors can see that a shift in energy is already coming in.”

That’s language you’d expect from activists. But Forbes, that bastion of conservatism, joins in the bashing in choosing to quote analyst Mark Lewis of Europe’s leading broker Kepler Cheuvreux: “The oil industry’s increasingly unsustainable dynamics – as manifested, for example, by ongoing capex (capital expenditure) reductions amid record-high oil prices – mean that stranded-asset risk exists even under business-as-usual conditions: high oil prices will encourage the shift away from oil towards renewables (whose costs are falling) while also incentivising (sic) greater energy efficiency.”

Forbes notes that with BlackRock — the world’s largest asset manager — participating in the fund, the anti-fossil fuel movement has gone mainstream.

Mainstream? From a reporter at Forbes, whose self-reported audience statistics place its readers at higher levels of wealth and power than any other business publication, is calling the FTS ex-Fossil Fuel Index a welcome first step in making the idea of a world without fossil fuels a mainstream notion?

Now that’s progress.

Of course there is still enormous weight on the other side of the argument. Fossil fuel companies recognize the threat to their business in the massive shifts in capital that are coming and are determined to get every last bit out of the ground ASAP. Even here in the hyper-environmental Pacific Northwest, the Black Diamond coal mine is reopening after 15 years and proposed coal ports refuse to die.

But there is growing evidence that fossil fuels are just a dumb investment. As stated in a recent report by HIP Investor, “Since 2011, the global energy sector has diverged from the S&P 500 for the first time in a decade, and dramatically lagged the S&P 500. The Coal Index (KOL) is down 28% since late 2011, and the Oil & Gas Index (BGR) is down 8% as well.”

I see the day coming when investors who hold fossil fuel stocks will be derided for poor money management. The smart money? Managers who bought renewable energy stocks early.

Image courtesy of  thetaxhaven via Flickr CC.


Carol Pierson HoldingCarol Pierson Holding writes on environmental issues and social responsibility for policy and news publications, including the Carnegie Council's Policy Innovations, Harvard Business Review, San Francisco Chronicle, India Time, The Huffington Post and many other web sites. Her articles on corporate social responsibility can be found on CSRHub.com, a website that provides sustainability ratings data on 8,900+ companies worldwide. Carol holds degrees from Smith College and Harvard University.

CSRHub provides access to corporate social responsibility and sustainability ratings and information on 8,900+ companies from 135 industries in 102 countries. By aggregating and normalizing the information from 300+ data sources, CSRHub has created a broad, consistent rating system and a searchable database that links millions of rating elements back to their source. Managers, researchers and activists use CSRHub to benchmark company performance, learn how stakeholders evaluate company CSR practices and seek ways to change the world.

 
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[fa icon="comment"] 0 Comments posted in BlackRock, Carbon Tracker, CSR, divestment movement, Exxon, fossil fuel companies, FTSE Developed ex-Fossil Fuels Index Series, Kepler Cheuvreux, Mark Lewis, sustainable investing, Uncategorized, sustainability, Black Diamond coal mine, Carol Pierson Holding, CSRHub, National Climate Assessment, renewable energy, Wall Street Journal

Assigning Corporate Blame for Global Warming Now Possible

[fa icon="calendar'] Nov 26, 2013 10:08:51 AM / by Carol Pierson Holding

By Carol Pierson Holding

Three recent headlines offer disturbing news to climate advocates. Together, they show climate changecatastrophic aggression from the fossil fuel producers.

First, Huffington Post reported on predictions from the International Energy Agency (IEA) that the U.S. will by bypass both Saudi Arabia and Russia in oil production by 2016 “at the latest,” a year earlier than it predicted in 2012. The U.S. will be world leader in oil production, subsuming climate to energy self-sufficiency.

The second astonishing headline covered the Climate Accountability Institute’s most recent study, as reported by Suzanne Goldenberg for The Guardian: “Just 90 companies caused two-thirds of man-made global warming emissions.” The list is topped by state-owned monopolies in China and Russia, with well over 8% each, and includes 50 fossil fuel investor-owned firms, including such widely recognized brands as Chevron, Exxon, BP, Royal Dutch Shell, British Coal Corp, Peabody Energy and BHP Billiton.

[csrhubwidget company="Chevron-Corp" size="650x100" hash="c9c0f7"]

The list’s top 20 produced nearly 30% of historical emissions. Chevron alone produced 3.5% of total global emissions and Exxon produced 3.2%; the U.K.’s BP and Shell are close behind. We’ve known the primary sources of carbon emissions for some time, but this study quantifies the relative damage each has done. It’s shocking all over again.

The third depressing headline is about the failure of the UN Framework Convention on Climate Change which just concluded two weeks of meetings in Warsaw on Friday. As the New York Times reported, talks stalled because the developed countries refused to pay the $100 billion they’d promised to underdeveloped countries, which suffer the worst of climate change impacts.

But it’s not just developed countries that are responsible for emissions. As Naomi Oreskes, professor of the history of science at Harvard and co-founder of the Climate Accountability Institute, explained in The Guardian article, "There are all kinds of countries that have produced a tremendous amount of historical emissions that we do not normally talk about. We do not normally talk about Mexico or Poland or Venezuela. So then it's not just rich v poor, it is also producers v consumers, and resource rich v resource poor ."

Not surprisingly, the entities most at fault for carbon emissions flaunt their disdain for the U.N.’s process. As evidence, the environmental NGO 350.org cites this fact: “The Polish government not only allowed corporate sponsors for the talks, but co-sponsored a major coal summit during the negotiations. It’s hard to see the U.N. gaining any traction around proposed financial consequences for countries.

But there are consequences for investor-owned companies. We know who those companies are, and now we know how much each is to blame.

Compare the problem of assigning blame and penalties for emissions to the 2008 financial crisis. At first, the task seemed impossible. It was too complex. The problem was systemic. Those who might be at fault were just too powerful. There was no way to parse the blame.

But with the force of public outrage and regulatory will and enough time to unravel specific causes, that’s changing.

Five years later, JP Morgan is the first to be fined, $13 billion for corrupt mortgage practices alone. And while many argue that financial penalties have not hurt the bank, it suspended stock buybacks last year and more could happen again to accommodate growing fines and penalties. And at least one analyst, Oppenheimer’s Charles Peabody, cut the bank’s 2013 earnings estimate by 12.5%.

So far, the only blame fossil fuel companies have suffered has been for oil spills such as Chevron’s currently contested $19 billion fine for polluting in Ecuador. But fossil fuel industry hubris towards global warming is pushing the same combination of public outrage and regulatory will as resulted in financial penalties for powerful banks. And now, thanks to the IEA report, we have the piece that took longest in punishing the banks, a way to quantitatively parse blame.

It’s a long game but it looks like the most recent combination of events —the U.S. becoming the world’s top oil producer, specific emissions numbers making it easier to assign blame, and failure at the U.N. — might just enable a remedy, at least in the U.S., forcing financial penalties on fossil fuel companies that more accurately reflect their true costs.

Picture courtesy of lightsinmotion via Flickr cc.


Carol Pierson HoldingCarol Pierson Holding writes on environmental issues and social responsibility for policy and news publications, including the Carnegie Council's Policy Innovations, Harvard Business Review, San Francisco Chronicle, India Time, The Huffington Post and many other web sites. Her articles on corporate social responsibility can be found on CSRHub.com, a website that provides sustainability ratings data on 8,400+ companies worldwide. Carol holds degrees from Smith College and Harvard University.

CSRHub provides access to corporate social responsibility and sustainability ratings and information on 8,400+ companies from 135 industries in 104 countries. By aggregating and normalizing the information from 290+ data sources, CSRHub has created a broad, consistent rating system and a searchable database that links millions of rating elements back to their source. Managers, researchers and activists use CSRHub to benchmark company performance, learn how stakeholders evaluate company CSR practices and seek ways to change the world.

 

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