The best of EcoWatch, right in your inbox. Sign up for our email newsletter!
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’s true, fossil fuel stocks have lost 30 cents on the dollar in the last 21 months alone. That translates to big money when looking at large institutional investor portfolios like pension funds and school endowments.
Photo credit: Shutterstock
The reflex response from the Chief Investment Officers, trustees and investment professionals (not to mention the oil industry) has been: "you’re cherry picking, it’s cyclical." What they mean is that there are ups and downs in the price of oil and the value of stocks throughout history. They’re long-term investors so they should ride this out until oil prices climb back up to $100/barrel and the stocks rise with it.
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—climate change.
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’t know of any long-term investors who take it that far).
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’t no normal cyclical downturn. And as we are seeing with the coal industry (and witnessed with Kodak and Blockbuster), there are ups and downs, until there aren’t anymore.
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 and health care industries—almost every sector in the stock market—are going through major changes as global warming rearranges the status quo. For example, 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.
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—fundamentally different—especially when it comes to carbon risk.
There is a simple and clear limitation to the production of fossil fuels. And we’re there. We have about hit our limit. The declining value of fossil fuel stocks can’t be cyclical, because there isn’t a long enough future in fossil fuels for an upswing.
A recent report by the University of Cambridge detailed the material risk of climate change to investment portfolios and found that, “short-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.”
Those major losses are advancing the divestment dialogue this year. California’s pensions systems lost more than $5 billion on their fossil fuel holdings last year. The Massachusetts state pension fund lost $521 million in value from their fossil fuel stocks over the past year (that’s a 28 percent decline). And if calculated as an opportunity cost—what would have happened if you had divested—most funds are looking at a huge missed opportunity.
The University of Cambridge report wasn’t groundbreaking. The growing risk to the economy and investment funds because of climate change has been reported by the financial giants of the world—HSBC, Deutsche Bank, Standard and Poor’s, CitiBank, The Bank of England and my favorite mainstream awakening Jim Cramer—to name a few. If investors don’t wake up to the doom in their portfolios and heed the call from Go Fossil Free campaigners … well … let’s just say, we’re already way passed “I told you so.”
YOU MIGHT ALSO LIKE
EcoWatch Daily Newsletter
By Mark Mancini
On Aug. 18, Iceland held a funeral for the first glacier lost to climate change. The deceased party was Okjökull, a historic body of ice that covered 14.6 square miles (38 square kilometers) in the Icelandic Highlands at the turn of the 20th century. But its glory days are long gone. In 2014, having dwindled to less than 1/15 its former size, Okjökull lost its status as an official glacier.
By Alex Schwartz
Among the many vendors at the Logan Square Farmers Market on Aug. 18 sat three young people peddling neither organic vegetables, gourmet cheese nor handmade crafts. Instead, they offered liberation from capitalism.
I’m a Psychotherapist – Here’s What I’ve Learned From Listening to Children Talk About Climate Change
By Caroline Hickman
Eco-anxiety is likely to affect more and more people as the climate destabilizes. Already, studies have found that 45 percent of children suffer lasting depression after surviving extreme weather and natural disasters. Some of that emotional turmoil must stem from confusion — why aren't adults doing more to stop climate change?
For the past seven years, the Anishinaabe people have been facing the largest tar sands pipeline project in North America. We still are. In these dying moments of the fossil fuel industry, Water Protectors stand, prepared for yet another battle for the water, wild rice and future of all. We face Enbridge, the largest pipeline company in North America, and the third largest corporation in Canada. We face it unafraid and eyes wide open, for indeed we see the future.
By Mara Dolan
We see the effects of the climate crisis all around us in hurricanes, droughts, wildfires, and rising sea levels, but our proximity to these things, and how deeply our lives are changed by them, are not the same for everyone. Frontline groups have been leading the fight for environmental and climate justice for centuries and understand the critical connections between the climate crisis and racial justice, economic justice, migrant justice, and gender justice. Our personal experiences with climate change are shaped by our experiences with race, gender, and class, as the climate crisis often intensifies these systems of oppression.