Last month, 295 Stanford professors asked that the university divest from coal. They wrote that to limit global warming to 2°C (the currently-agreed international goal), the global community:
“must cap carbon dioxide emissions at 565 gigatons. Because companies currently own fossil-fuel holdings sufficient to produce 2795 gigatons of carbon dioxides, the risk is clear: 2795 gigatons is five times the scientifically designated limit [and cannot be used]. . . .Professor James Engell of Harvard writes: ‘The fossil fuel companies are decent investments only under two assumptions: first, the oil and gas and coal they own in the ground shall be sold and burned. Second, they shall continue to find more oil and gas and coal and shall sell that to be burned, too. Any investor in them must want this to happen, and any investor is putting up money to make this happen with all deliberate speed.”
The Stanford professors and Professor Engell make clear that fossil fuels are no longer decent investments. Selling and burning current fossil fuel holdings (not to mention future ones) puts our globe on track to warm up by 6°C. The consequences of this are unacceptable.
These unacceptable consequences coincide with a reality for long-term investors – that for many companies, especially those in the American coal industry, it is already unprofitable to invest in fossil fuels. This financial reality occurs even before taking into account the gross external damages from fossil fuels.
For example, if you invested $1000 in Arch Coal in March 2011 when Arch Coal was trading at $35.99 per share, your $1000 would now be worth $32.78 because Arch Coal’s current share price is $1.18. That’s right, you would have lost $967. A terrible investment. This doesn’t even take into account why it’s a terrible investment from the perspective of climate change (“the single greatest source of man-made carbon dioxide (CO2) emissions heating up our planet… 44% of global emissions from fossil fuels come from coal”) or how it endangers human health and the environment by emitting pollutants such as mercury, sulfur dioxide, and nitrogen oxides. A truly terrible way to make a profit. And it isn’t going to get better.
According to a January 2015 report from Goldman Sachs’ commodities research team, coal is at “retirement age.” They state, “Just as a worker celebrating their 65th birthday can settle into a more sedate lifestyle while they look back on past achievements, we argue that thermal coal has reached its retirement age.” Coal is in its retirement and oil’s energy usage is trending downward (in 1973, oil supplied 46% of the world’s energy in 1973 and only supplied 31% in 2012). Fossil fuels are no longer profitable long-term investments and, more importantly, they contribute to a hotter and thus catastrophic future.
Tomorrow is Global Divestment Day. The divestment movement is growing. All over the world, people are standing up and demanding that institutions that invest on their behalf no longer invest in fossil fuels and a hotter, catastrophic future. People, like you and me, no longer want money to be invested to make climate change occur “with all deliberate speed.” They, and we, want public institutions, pension funds, and the entire capital market to dramatically shift away from fossil fuel investment because the window to avoid the most catastrophic of climate impacts is closing, and quickly.
If you want some ideas for where you can invest your money post divestment, check out this recent article from Time. Disappointingly, this article also highlights how simple fossil-free investment options for the individual investor are still falling woefully short, so please share other anti-global warming investment ideas in the comments below.
Originally posted on February 12, 2015.