In case you didn’t catch it, this past weekend saw the inaugural Global Divestment Day: the launch of an annual anti-fossil fuel celebration that was punctuated by a pledge between the UK Prime Minister and major parties to phase out all ‘unabated coal fired generation’.
The UK pledge – which, incidentally, included bipartisan pledges to limit global temperature rise to below 2°C and to set carbon budgets accordingly – is rather a big deal.
It has added serious momentum to the growing global shift away from investment in heavy-polluting fuels like coal, oil and gas – a movement driven by the efforts of environmental group 350.org that has so far focused on investment funds and academic institutions.
“This is another warning to investors on the increasing financial risks of stranded assets,” said Tim Buckley, director of energy finance studies, Australasia for IEEFA, in response to the UK announcement.
“Coal mining and the associated infrastructure assets are at risk, as are the Governments who continue to peg their economies on the hopes of continued growth in the coal industry,” he said.
It also seems to have caught the attention of some of the traditional resources giants, like Shell.
The Australian newspaper reported on Monday a warning from Shell Australia country chair, Andrew Smith, that turning away from “affordable energy” would have serious consequences for the economy and people’s lives.
It’s a popular argument among supporters of a fossil fuel-driven economy – like Australia’s Prime Minister, who has argued, variously, that coal is “good for humanity” and “essential for the prosperity of the world.” In November, Tony Abbott told the G20: “I am going to stand up for coal.”
Taking up this argument, Smith told The Australian that traditional energy companies had translated to strong investments and were strongly represented in the best performing companies.
Organisations that invested money on behalf of communities should consider the cost of turning away from such high performing stocks, he said.
In the same article, NSW Minerals Council chief, Stephen Galilee, described the fossil fuel divestment movement as “environmental activism” dressed up as investment advice.
“The number of serious economists and academics who have now discredited the anti-mining dives
tment campaign, highlight the serious risks inherent in taking investment advice from political activists,” he said.
“Academic institutions and individual investors should look at the facts and consult bona fide investment consultants rather that taking advice from anti-mining activists with an axe to grind.”
This last comment presumably refers to the University of Sydney, who last week committed to begin divesting from heavy-polluting and fossil fuel companies, in an effort to cut the carbon footprint of its investment portfolio by 20 per cent in three years.
At least Minerals Council chief, Brendan Pearson, takes the campaign seriously, despite Australia having only “minor examples” of super funds or universities pledging to divest a small portion of their portfolio.
“On balance most people understand that reducing your options and lowering your investment horizons generally isn’t good for your investment returns,” Pearson said.
“We take the campaign seriously because it is designed to demonise and stigmatise coal but their proposition that we can end fossil fuels would leave more than 140 countries without energy under the international energy agency’s most ambitious forecast for 2014.”
