Huge Oil Is a Huge Loser (of Cash, However Additionally Life)

The Fearless Girl statue stands in front of the New York Stock Exchange in New York's financial district.The Fearless Girl statue stands in front of the New York Stock Exchange in New York’s financial district. Photo: Mary Altaffer (AP)

If you’re looking to build an investment portfolio, stay away from fossil fuels. A report The report released Tuesday by Carbon Tracker, a financial think tank, shows oil stocks are mounting losses.

Over the past 10 years, the stock value of fossil fuel companies and companies associated with their manufacturing has declined by $ 123 billion over the past 10 years. This isn’t just market volatility, the report said: this sector lagged a major global financial index by more than 50% compared to the MSCI All Country World Index, a major global financial index. In other words, if an investor had only bought fossil fuel stocks in the past decade, they would have had a 52% lower return than their peers with more diverse portfolios.

However, according to the report, investors can’t keep their gloves off fossil fuels, even though these companies are a lost investment. The fossil fuel industry sold around $ 640 billion to global investors during that time, including 2,360 stock market transactions managed by nearly 450 investment banks. That number dwarfs investments in renewable energy. During the same period, renewable energy emissions were only $ 56 billion – less than a tenth of fossil fuel investments.

Illustration for article titled Big Oil is a Big Loser (of money but also of life)

Why on earth do investors keep coming back to fossil fuel investments when they are so unprofitable? This is a “good question with no easy answer,” the report’s lead author, Henrik Jeppesen, told Earther in an email. Fossil fuel stocks have done very well in the past, Jeppesen said – they outperformed the market from 1995 to 2008 – and many investors are skeptical of missing out on another boom period. Financial FOMO is apparently real.

G / O Media can receive a commission

“I still meet investors who use that argument, and many trustees have long memories,” said Jeppesen.

Some also believe that we may be using fossil fuels for a while – especially when it comes to plastics – so they “continue to see potential in this sector,” Jeppesen said.

The flip side of the coin is that investing in renewable energy makes bank. The report finds that renewable energy stocks outperformed the same world index by 54% over the same period, adding $ 77 billion in value. This position has strengthened over time.

“We have seen a lot [of] Major technological advances and breakthroughs in renewable energy and clean technologies in recent years, ”Jeppesen said, noting that renewable energy companies have become even more competitive in recent years compared to the earlier part of the decade. “In general, renewable energy companies tend to be smaller and younger companies that focus on technology development, which is much less capital intensive [than] Companies that use expensive raw material equipment to search [and] Produce oil, gas and coal. “

The world’s financial system seems to be realizing that the fossil fuel industry is a losing bet. Since 2016, according to the report, an “increasing number” of fossil fuel stake transactions have come from investors who already hold those stakes – and who are trying to reduce or sell their investments. “This could be a signal that insiders are less confident about the prospect for fossil fuels,” the report said.

The reform of our financial system is actually an integral part of the Paris Agreementwhich states that “funding flows” “should be compatible with a path to low greenhouse gas emissions and climate resilient development”. This goal is listed at the top of the agreement and keeps world temperatures “well below” 2 degrees Celsius (3.6 degrees Fahrenheit). But until recently there was little discussion or attention given about how the global financial system can be reformed, especially when compared to how much we paid attention to the temperature target in the agreement.

The report comes as big banks, investment firms and other financial institutions make increasing noise about how they are working to solve the climate crisis. But just because financial players are suddenly concerned about the climate doesn’t mean they are willing to step away from fossil fuel gas. A separate report The company, published earlier this year by the Rainforest Action Network, found that global banks provided $ 750 billion in debt financing to fossil fuel companies in the last year alone. And how We talked about it last weekWith many of the most powerful financial institutions in the world promising to hit “net zero” or other types of climate commitments, many of these plans are actually quite toothless if you look closely.

The financial sector is a place where it becomes increasingly important to unravel the PR impact of climate on a company’s actions and investments, which the report underscores. For example, BlackRock made one concerted efforts to make a name for themselves as a leader in the “net zero economy”. According to the report, the company remains the world’s largest shareholder in fossil fuel stocks. These companies’ shares were $ 149 billion as of December. And Wells Fargo, which became the last big bank that month Make a net zero commitmentwas the largest fossil fuel transaction advisor over the past decade of the 10 major investment banks surveyed. By comparison, only 1% of transactions were in renewable companies.

Consumers who want to distinguish fact from fiction and hold financial players accountable would do well to “follow the money,” said Jeppesen.