Fossil fuel shares lose $123bn in value over just one decade

31st March 2021

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Jonathan Mawer

The value of share offerings in fossil fuel companies dropped by $123bn (£89bn) over the last decade as investors shifted finance towards low-carbon alternatives, new research has found.

In a report published today, financial think tank Carbon Tracker reveals how $640bn of investments in fossil fuel producers, dependent utilities, pipelines and service companies have lost roughly 20% in value since 2012.

This was despite one of the longest and strongest equity bull markets on record, with levels of new shares issued by fossil fuel companies also falling sharply.

At the same time, equity investments of $56bn in clean energy companies gained $77bn in value, while initial public offerings (IPOs) in the sector overtook carbon-heavy flotations worldwide for the first time last year.

“Investors have woken up to the fact that fossil fuel companies are no longer the growth stories they once were,” said report author, Henrik Jeppesen.

“Climate risk is now very much a material one that cannot be ignored and clean energy stocks are rapidly replacing the old order as the choice investment for a transitioning world.”

The findings also show that fossil fuel issuance fell by 85% between 2012 and 2020, from $70bn to $10bn, while renewables raised a record $11bn from public equity offerings in 2020 alone.

Moreover, the researchers found that an investor who bought into all fossil fuel and related equity issuances during that time would have seen their investment underperform the MSCI All Country World Index by 52%. Investments in renewable energy would have outperformed the benchmark by 54%.

However, despite equity raised by clean energy companies having grown rapidly, it is still trivial in the context of what has to be generated to finance a global energy transition. The IPCC has said that investments into clean energy infrastructure need to be in the order of $3trn to $3.5trn annually.

Of the total equity raised by companies on world markets, 10% was accounted for by fossil fuel producers and electric utility firms since 2012, and only 1% from renewable and clean energy companies.

“It’s astonishing that exchanges are still listing new fossil fuel companies intent on expanding production or developing new reserves in direct contravention of the Paris temperature goals,” said Carbon Tracker founder, Mark Campanale.

“But what this shows is that confidence is really beginning to evaporate as incumbents struggle to access historically strong flows of finance.”

Image credit: iStock

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