More and more institutions are realizing that ridding themselves of investments in fossil fuel companies – those that have at least half their assests in oil, gas, coal – is not only the proper way to withdraw support from greenhouse gas emiiters, but the most prudent way to make money.
“Another divestment domino has fallen, with the Australian Academy of Science announcing this morning it will divest from fossil fuel interests.
“Fossil fuel divestment advocacy organisation 350.org congratulated the academy on its decision to join the list of more than 450 global institutions that have divested from companies on environmental grounds.” (australianmining.com, Oct. 27, 2015)
“Uppsala just became the largest city in Sweden so far to commit to divest itself from fossil fuels, after the city council voted to ban investments in coal, oil and gas.” (gofossilfree.org, Nov. 3, 2015)
“ … tax documents posted Monday show that the [Bill and Melinda Gates Foundation] has significantly scaled back its holdings in some of the world’s biggest oil, coal and gas companies.” (seattletimes.com, Nov. 16, 2015)
In today’s world, how are fossil fuel investors faring?
“Energy Stocks Drag Markets into Deep Hole as Crude Oil Drops Over 10%.” (nasdaq.com, Dec. 11, 2015)
(Some weeks ago, I wrote that my amateur understanding of Technical Analysis [of Stock Trends] indicated, from an examination of Brent Crude’s chart, that the commodity’s price would drop to at least $40/barrel. Today it hit $37.93. [See chart below.)
Please notice on that chart the high volume of selling (red bar) at the last downward entry. Technically this is an indication of ongoing high interest in selling the commodity.
But how do knowledgeable business interests evaluate current prospects for the oil/gas industries?
“At a time when the oil price is languishing at its lowest level in six years, producers need to find half a trillion dollars to repay debt. Some might not make it.
“The number of oil and gas company bonds with yields of 10 percent or more, a sign of distress, tripled in the past year, leaving 168 firms in North America, Europe and Asia holding this debt, data compiled by Bloomberg show. The ratio of net debt to earnings is the highest in two decades.
“If oil stays at about $40 a barrel, the shakeout could be profound, according to Kimberley Wood, a partner for oil mergers and acquisitions at Norton Rose Fulbright LLP in London.” (bloomberg.com, Aug. 26, 2015)
How successful have big money managers been with fossil fuel investments?
“The California Public Employee’s Retirement System (CalPERS) posted a 28 percent decline on its oil and gas portfolio, while the California State Teachers’ Retirement System (CalSTRS) lost 27 percent on a similar set of investments for the fiscal year ending June 30th. Over the same period, most other stock investments held by the two pension funds rose.” (sustainablebrands.com, Aug. 19, 2015)
“Fossil Fuel Investments Cost Harvard $21 Million in Past Three Years” (bostonmagazine.com, Apr. 30, 2015)
What does the future hold for fossil fuel investment?
“This is the beginning of the end. …The race for renewable energy has passed a turning point. The world is now adding more capacity for renewable power each year than coal, natural gas, and oil combined. And there’s no going back.” (bloomberg.com, Apr. 14, 2015)
If you are an individual investor who’d like to get smart on this issue, make sure you understand what your investments are doing. Earlier this year, I switched my IRA holding from a large company that told me it had no fossil-fuel-free portfolios to one that specialized in fossil-fuel-free investment. You can do it too. It’s not hard. Start a Google search and join the future.
William Smithers
Santa Barbara