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Thursday, 12 December 2013

Investing And Divesting - Fossil Fuels And Renewables

Calls for organisations and individual investors to divest from stocks, bonds and investment funds in fossil fuels are increasing.   Fossil Free, a campaign from international environmental organisation 350, urges divestment from the top 200 publicly-traded coal, oil and gas companies as between them they hold most of the world’s fossil fuel reserves.  

Indeed, thanks to the fastest-growing divestment movement in history, a number of international academic and religious institutions, cities and foundations have recently committed to divesting from fossil fuels.

In Europe, Norway’s biggest pension fund divested from 19 fossil fuel companies as it believes these organisations will be “worthless financially” in the future and Dutch bank Rabobank now refuses loans to unconventional energy extraction projects for economic and environmental reasons.  EU Climate Commissioner Connie Hedegaard recently encouraged three top international financing institutions – the European Investment Bank (EIB), the European Bank for Reconstruction and Development (EBRD) and the World Bank – to end support for fossil fuels in their energy lending policies.

Yet this movement is gaining momentum at a time where renewable energy subsidies – not fossil fuel subsidies – are being labelled uneconomical.  CEOs from 10 utilities companies, calling themselves ‘The Magritte Group’, cite blackouts, rising energy bills and blows to EU competitiveness among the reasons why wind and solar subsidies should end.

Gas investment is touted by many industries as a way to invest in cheaper energy which still has lower carbon emissions than traditional fossil fuels. However, many claim that the US ‘shale gas revolution’ could never be replicated in Europe for a number of reasons, including geological limitations, an underdeveloped service industry and an unfavourable fiscal climate – as well as lower public acceptance of the technology.

Investing in fossil fuels, unconventional or otherwise, is not only an economic issue, but an ethical one too.  Cost and profit are not the only aspects that should be taken into consideration.  Ninety companies were found to have caused two-thirds of climate change in the industrial age – and all but seven deal with oil, coal and gas.

Thankfully, socially responsible investing (SRI), which takes environmental, social and governance issues into consideration when investing, is on the rise, even in emerging economies.  Aiming to reach a wider audience with this issue, Tcktcktck, a network of 400 non-profits, recently launched Push Your Parents, a UK-based campaign asking young people to help convince their families to find out whether their pension funds are contributing to climate change.

With economist Nicholas Stern warning that the stock markets are overvaluing fossil fuel reserves and that the ‘carbon bubble’ may well burst if internationally-agreed climate targets to keep reserves underground are not honoured, divestment in fossil fuels and continued renewable energy incentives might not be as uneconomical as The Magritte Group would like to think – and it’s much more ethical to boot. 

Blog by Bárbara Mendes-Jorge, Junior Consultant at Brussels-based sustainability communications and PR agency Sustainability Consult

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