For a healthy and wealthy future, many investors are going fossil-fuel free.
Big oil and coal companies have long been considered blue chip stock investments. But now a new warning suggests that fossil fuel investors may be risking trillions of dollars in losses, due to the impact of climate change and the global economic movement towards cleaner fuels.
Just this summer, the financial giant Citigroup reported that $100 trillion worth of fossil fuel resources are at risk of being left unused in the ground, according to CNBC. The calculation is based on the target goal of the global climate change talks slated for Paris this December.
World leaders headed to the conference have stated that the talks aim to create a roadmap to limit further global warming to no more than 2 degrees Celsius. Experts say that achieving that goal requires leaving about half of the world’s oil reserves and 80 percent of the global coal supply in the ground.
In addition to the climate issues, fossil fuels present a challenging regulatory environment and legal risks from mounting lawsuits by consumer and environmental groups, among others.
While investors are growing wary of oil and coal, given these climate issues, the climate trend is creating a boon for socially conscious investment options, as more and more of those funds are moving away from fossil fuel investments.
Previously, socially responsible investment criteria focused on avoiding stocks in traditional vices, such as weapons manufacturers, alcohol distributors, tobacco and gambling companies. But now many funds are moving away from oil and coal as well.
Institutional investors, like universities and private foundations are moving their investments towards funds that avoid fossil fuel stocks. Stanford University, for example, recently divested from all coal company stocks, and a foundation started by the sons of oil baron John D. Rockefeller has also moved away from fossil fuel investments.
One socially responsible mutual fund called Portfolio 21 has never held fossil fuel stocks, and also avoids mining companies and investments in any other resource extraction industries. Founded in the late 1990s, the fund believes that such investments are too risky for the overall long-term return to investors.
They point to the idea that fossil fuels that must be left in the ground will amount to trillions of dollars in “stranded assets” that could bring the entire fossil fuel industry down.