Fossil investments looking increasingly toxic as smart money moves to renewables


New research warns that US$2.2 trillion of investors money could be at risk if fossil fuel companies continue to pursue high carbon projects. According to the Carbon Tracker Initiative, a “perfect storm” of factors – including including international action to limit emissions, and rapid advances in renewable energy technologies – could leave many fossil fuel projects uneconomic. The world’s largest insurance company, Allianz, clearly agrees, announcing that it will no longer gamble the €2 trillion it manages  on coal company investments. Instead it will  plough money into wind power, which could result in a shift of €4 billion. As governments prepare to meet in Paris to agree a new global climate agreement, Allianz’s move sends another clear signal that the world is ready and willing to shift away from fossil fuels towards a renewable energy future. It comes on the back of a series of high profile divestment announcements including Axa insurance and the Norwegian Sovereign Wealth Fund.



Key Points

  • Continued fossil fuel investment makes neither economic nor climate sense. The world is already on track for 1DegC of warming in 2015, and large swathes of fossil fuels need to be left in the ground if the world is limit warming below the 2DegC danger threshold. No new coal mines are needed, warns Carbon Tracker Initiative, while oil demand will peak around 2020, and growth in gas will be lower than expected. 20-25 per cent of potential oil and gas investments will not be needed. In total, $2.2 trillion of investors money that could go up in smoke in a carbon-constrained world.



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Key Quotes

  • “Too few energy companies recognise that they will need to reduce supply of their carbon-intensive products to avoid pushing us beyond the internationally recognised carbon budget. Clean technology and climate policy are already reducing fossil fuel demand – misreading these trends will destroy shareholder value. Companies need to apply 2˚C stress tests to their business models now.” – James Leaton, head of research at Carbon Tracker
  • “Our work shows thermal coal has the most significant overhang of unneeded supply in terms of carbon of all fossil fuels on any scenario. No new mines are needed globally in a 2˚C world.” – Mark Fulton, advisor to Carbon Tracker, former head of research at Deutsche Bank Climate Change Advisors
  • “Business history is littered with examples of incumbents who fail to see the transition coming. Fossil fuel incumbents seem intent on wasting capital trying to hold onto growth by doing what they have always done rather than embracing the energy transition and preserving value by adopting an ex-growth strategy. Our report offers these companies both a warning and a strategy for avoiding significant value destruction.” – Anthony Hobley, CEO of Carbon Tracker
  • “Aware of the two-degree-target of the Paris climate negotiations as well as the economic risks involved, CEO Oliver Bäte announced that Allianz will stop financing coal-based business models. It will no longer invest in companies that derive more than 30 per cent of revenue from coal mining or generate over 30 per cent of their energy from coal.” – Allianz statement
  • “As the world’s largest insurance company, Allianz knows a thing or two about risk – and there’s no greater risk for the climate than continuing to invest in an industry that is wrecking the planet. Divestment from coal is a heartening first step; ultimately, however, 80 per cent of all fossil fuel reserves need to stay in the ground to avoid dangerous and irreversible climate change.” – Europe campaigner Nicolò Wojewoda
  • “The state of the global climate in 2015 will make history as for a number of reasons. Levels of greenhouse gases in the atmosphere reached new highs and in the Northern hemisphere spring 2015 the three-month global average concentration of CO2 crossed the 400 parts per million barrier for the first time. 2015 is likely to be the hottest year on record, with ocean surface temperatures at the highest level since measurements began.  It is probable that the 1°C Celsius threshold will be crossed. This is all bad news for the planet.” – WMO Secretary-General Michel Jarraud

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