The smart money

3rd October 2014


Related Topics

Related tags

  • Energy ,
  • Pollution & Waste Management ,
  • Renewable ,
  • Conventional

Author

Gregg Taylor

News that the Rockerfellers are moving investments out of fossil fuels adds momentum to analysts' warnings that investments by the oil and coal industry in new reserves are not financially viable, Paul Suff argues.

The irony of the Rockefeller Brothers Fund, which was built on oil money, divesting from fossil fuels will not be lost on environmentalists.

But it’s a sign of the times. Increasingly individuals and institutions are moving their money out of stocks in oil and coal companies. Ahead of the UN climate summit last month, the global Divest–Invest coalition announced that more than 800 investors – including the heirs to the Rockefeller fortune – had pledged to switch funds totalling $50 billion from fossil fuels to clean energy technologies.

In a statement, Stephen Heintz, an heir of Standard Oil tycoon John D Rockefeller, said: “We are quite convinced that, if he were alive today, as an astute businessman looking out to the future, he would be moving out of fossil fuels and investing in clean, renewable energy.”

And there’s the nub of the argument: more money is likely to be made in the future from sustainable energy sources than from dirty, polluting fossil fuels.

Analysts are increasingly sceptical that investments by the oil and coal industry in new reserves are financially viable. Risk experts at the Carbon Tracker Initiative warned ExxonMobil recently that its relatively poor stock market performance reflects its choice to invest more in capital-intensive, high-carbon projects, including tar sands, heavy oil and Arctic developments.

The initiative says that in 2007, such projects accounted for 7.5% of ExxonMobil’s proven gas and oil reserves and around 15% of its liquid reserves, but that by the end of 2013 these had risen to 17% and 32% respectively.

In 2012, Australian listed companies spent an estimated AU$6 billion on developing more coal reserves. Yet research by the Smith School of Enterprise and Environment at the University of Oxford has warned that China’s changing policy on coal – it recently announced a ban on coal imports with an ash content higher than 40% and sulphur content higher than 3% in an effort to improve air quality in the country – will put coal assets in Australia increasingly at risk.

It concluded: “China’s coal demand patterns are changing as a result of environment-related factors and consequently less coal will be consumed than is currently expected by many owners and operators of [Australian] coal assets … This would result in coal assets under development becoming stranded or operating mines only covering their marginal costs and subsequently failing to provide a sufficient return on investment.”

As the world edges closer to busting the carbon “budget” required to keep global temperature rise below the important 2°C threshold, more stringent regulation will be introduced to curb greenhouse-gas emissions, leaving many fossil fuel reserves untapped. That’s why the smart money is going elsewhere.

Subscribe

Subscribe to IEMA's newsletters to receive timely articles, expert opinions, event announcements, and much more, directly in your inbox.


Transform articles

Corporate clean power buying hits record high

Global corporations such as Amazon and Google purchased a record 46 gigawatts (GW) of solar and wind energy last year, according to BloombergNEF (BNEF).

13th February 2024

Read more

Three-quarters of UK adults are concerned about the impact that climate change will have on their bills, according to polling commissioned by Positive Money.

13th February 2024

Read more

The reality of delivering net zero is that we need solutions tailored to specific areas. Peter Gudde explores models that local authorities could adopt

15th January 2024

Read more

Heat pump installations in UK homes increased by nearly a fifth last year, with over 200,000 now having been installed across the country.

11th January 2024

Read more

Last year was the warmest ever recorded, surpassing the previous annual high set in 2016 by a large margin, scientists have confirmed today.

9th January 2024

Read more

This year’s COP28 climate summit concluded with an “historic” agreement between countries to “transition away from fossil fuels”, although the final Global Stocktake text has been described as containing “a litany of loopholes”.

14th December 2023

Read more

The huge quantities of data we generate online every day is having an increasingly negative impact on the environment. Chris Seekings examines what is being done to tackle the problem

30th November 2023

Read more

The Labour Party’s climate policy team took part in a panel discussion with IEMA representatives at Westminster this morning, outlining what they plan to do should they win the next general election.

29th November 2023

Read more

Media enquires

Looking for an expert to speak at an event or comment on an item in the news?

Find an expert

IEMA Cookie Notice

Clicking the ‘Accept all’ button means you are accepting analytics and third-party cookies. Our website uses necessary cookies which are required in order to make our website work. In addition to these, we use analytics and third-party cookies to optimise site functionality and give you the best possible experience. To control which cookies are set, click ‘Settings’. To learn more about cookies, how we use them on our website and how to change your cookie settings please view our cookie policy.

Manage cookie settings

Our use of cookies

You can learn more detailed information in our cookie policy.

Some cookies are essential, but non-essential cookies help us to improve the experience on our site by providing insights into how the site is being used. To maintain privacy management, this relies on cookie identifiers. Resetting or deleting your browser cookies will reset these preferences.

Essential cookies

These are cookies that are required for the operation of our website. They include, for example, cookies that enable you to log into secure areas of our website.

Analytics cookies

These cookies allow us to recognise and count the number of visitors to our website and to see how visitors move around our website when they are using it. This helps us to improve the way our website works.

Advertising cookies

These cookies allow us to tailor advertising to you based on your interests. If you do not accept these cookies, you will still see adverts, but these will be more generic.

Save and close