Investment in Fossil Fuel Companies is on Shaky Ground – and that Includes Pension Funds

In a report released on March 26, authors Marc Lee and Brock Ellis warn of a possible “carbon bubble”, akin to the high tech or housing bubbles that have rocked financial markets in the past. The study finds that at least 78% of Canada’s proven oil, bitumen, gas, and coal reserves must remain in the ground in order to keep global temperature rise under 2 degrees C. This stranded, unburnable fossil fuel is part of the carbon liability of oil and gas companies, and has not been adequately recognized and accounted for by financial analysts. Because the Toronto Stock Exchange is highly weighted towards the fossil fuel sector (with 405 oil and gas companies and a total market capitalization of over $379 billion on the TSX in 2011), the authors argue that this failure to account for these climate risks means that large amounts of invested capital are vulnerable – including the pension assets of working Canadians. They also point out the intergenerational inequity implied in ignoring the interests of younger workers in pension fund management. They propose a series of measures to deflate the carbon bubble and green Canada’s investment markets as part of an orderly transition to a clean energy economy.  

Unburnable Carbon, a report by the Carbon Tracker Initiative, discusses the implications of these stranded carbon assets for world and U.K. financial markets. A 2013 update will be available in late April.

Meanwhile, the U.S. campaign for divestment of fossil fuel investments, spearheaded by Bill McKibben and 350.org, is gathering momentum in Canada. See the website ofhttp://gofossilfree.ca/ to follow the campaign to lobby universities to divest themselves of any investments related to fossil fuel companies.

LINKS

Canada’s Carbon Liabilities: The Implications of Stranded Fossil Fuel Assets for Financial Markets and Pension Funds is available at:  http://www.policyalternatives.ca/sites/default/files/uploads/publications/National%20Office/2013/03/Canadas%20Carbon%20Liabilities.pdf

Unburnable Carbon
 (2012, and forthcoming 2013 update) is available at the Carbon Tracker website at :http://www.carbontracker.org/carbonbubble

“Global warming’s terrifying new math” by Bill McKibben in Rolling Stone, July 2012 at: http://www.rollingstone.com/politics/news/global-warmings-terrifying-new-math-20120719

 

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