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No longer such a hot investment? Oil pumps in California. Photo: CGP Grey via Flickr.com.
No longer such a hot investment? Oil pumps in California. Photo: CGP Grey via Flickr.com.
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FTSE and Blackrock join to fight fossil fuel investment

Rebecca Cooke

1st May 2014

One of the world's biggest fund managers has joined forces with London's FTSE group, writes Rebecca Cooke, to steer investors away from putting their money into risky oil and coal investments.

Some companies have vastly over estimated their fossil fuel reserves - by failing to take into account the fact that in order to comply with carbon emissions reduction targets, around 60-80% of their assets are 'unburnable.'

Fears are growing that a 'carbon bubble' could lead to a financial collapse if fossil fuels that have been accounted for by large oil and gas companies have to be left in the ground, in order to meet emissions targets.

Fund managers and economists have been raising awareness of the dangers posed to investors who put their money into unburnable carbon assets.

But now FTSE and Blackrock are aiding the divestment movement, by creating a new set of guidelines that exclude companies that invest in fossil fuels from their stock market indices.

A huge boost for the 'divestment' movement

The new FTSE guidelines are believed to be the first that exclusively prevent fossil fuels companies from being indexed.

Some of the biggest names likely to be on the list of exclusions are the likes of BP, whereas companies which don't engage in fossil fuel mining and oil production and have more of a positive relationship with renewable energy will be included. These range from Apple and Google to Johnson & Johnson. 

Last September a group of activists visited the Bank of England dressed as carbon bubbles in a stunt to warn of the impending financial crisis that would ensue if investors and fund managers continued to pour huge amounts of capital into fossil fuel investments.

'Unburnable' reserves

The theory, pioneered and brought to the financial mainstream by organisations including 350.orgCarbon Tracker and ShareAction, warns that some companies have vastly over estimated their fossil fuel reserves - by failing to take into account the fact that in order to comply with carbon emissions reduction targets, around 60-80% of their assets are 'unburnable.'

The market looked as though it may have been turning a corner for investors looking for more transparency in carbon investments when oil giant Exxon Mobil announced it would publish its carbon asset risk for investors.

However the company has since said that it does not see climate change policy as a threat to its fuel reserves, does not intend to modify its business model in line with decreasing carbon emissions or investments and is instead planning for world temperature rises of 4 degrees C.

 


 

Rebecca Cooke is Trillion Fund's content editor. She graduated with a BA (Hons) in Journalism from The University of Sheffield in 2012. She loves writing, travelling, Xbox and cheese. Not necessarily in that order.

This article was originally published by Trillion Fund.

 

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