Skepticism about divestment and McKibben

[bananas]

3. "Forget ethics, carbon divestment looks profitable"

http://blogs.reuters.com/breakingviews/2015/06/11/forget-ethics-carbon-divestment-looks-profitable/

Forget ethics, carbon divestment looks profitable
By Olaf Storbeck
June 11, 2015

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

As long as it was just the pension funds of the Church of England or Stanford University announcing to ditch investments in fossil fuel companies, it was easy to shrug off the trend as feel-good investing. Not anymore, now that Europe’s second-largest insurer AXA and Norway’s $880 billion sovereign wealth fund are doing the same.

They may still talk about doing the right thing. But global warming and the fight against it are likely to hurt the bottom lines of companies contributing to rising levels of carbon dioxide in the atmosphere – even if political action against climate change remains lacklustre.

The coal industry is likely to take the first and biggest hit, as it has a particularly heavy carbon footprint. In the United States, the historic link between GDP growth and coal demand broke down in 2007, and the North American coal industry has basically been in crisis since then. The industry’s global prospects are even bleaker: consultancy Mercer estimates that anti-climate change policies will erode between 26 and 138 percent of the sector’s annual returns to shareholders over the next decade.


From an investor’s perspective, climate change creates two different kinds of risk.

One is political. Future regulatory actions – be it carbon taxes, subsidies for green power or outright emission caps – may make it more expensive to operate carbon-heavy business models.

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The other type of risk is technological. Whatever politicians do in the future, the billions of dollars spent on developing green power and energy efficiency will bear carbon-reducing fruit. Already, Germany needs almost a fifth less energy to produce one euro of GDP than in 2000.

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The business models of traditional utilities have been undermined. They are closing many fossil plants prematurely. Investors have suffered. Over the last five years, the share prices of E.ON and RWE have fallen 45 percent and 64 percent respectively, while dividends tumbled. Engineering giant Siemens has given up any hope it will ever be able to sell a new gas turbine in its home country. Lignite coal is next in line for the cull.

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