The argument about whether to veer away from fossil fuel based industries is not just an environmental one. It is also becoming a financial one and the balance is definitely weighing in favour of the more carbon friendly alternatives.

In its 2014 report ‘Climate Action and Profitability’ the Carbon Disclosure Project refer to how better carbon friendly industries are faring from a financial point of view. In particular they say that companies managing carbon emissions and planning for climate change are showing 18% higher returns on their investments than companies that aren’t. The former are 67 % higher than those that refuse to disclose their emissions at all.

Then there is the issue of stranded assets, i.e. assets that are never going to recover value, and the effect it’s having on Company values .

This is particularly true within the Coal Industry. According to the Institute for Energy Economic and Financial Analysis (IEEA), in their 2015 report, a 50% decline in coal prices has seen most listed coal companies lose 80 to 90% of their equity market value. This is supported by a falling demand for coal.

For example in 2014 China, one of the biggest markets saw a 2% decline in consumption and a reduction of 11% in imports. By comparison companies benefitting from the rise of the renewable market are growing in value.

In Chapter Three of my Book ‘Invest Feel Good and Make a Difference’ I refer to the fact that China has set itself a target that it will generate 15% of its energy from Solar Power by 2020. This will make it the biggest producer in the world. This is making large Solar producers very attractive investment propositions.

J.A. Solar are one of these companies. Based in China they are one of the world largest producers of solar products. According to its fiscal results ending 2014 they saw a 50% increase in net revenue from the previous year and an increase in gross margin from 10.6% to 15.6%, reflecting the sharp reductions in component prices.

So the tide is definitely turning. Responsible investing is not just vital for saving our planet but preferable for a better risk adjusted return.

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There is a considerable amount of lobbying at the moment regarding dis-investment in fossil fuels.

One of the leading lights here is the ‘Guardian’ with their ‘Keep it in the Ground’ campaign. This aims to encourage the world’s two largest charitable foundations, Bill and Melinda Gates and Wellcome Trust to divest their all their endowment s from fossil fuels. The campaign has so far attracted over 145000 signatures.

Not surprisingly perhaps there has been quite a bit of resistance to this type of demand. Wellcome Trust so far have declined to change their stance, whilst a number of high profile political figures have questioned this strategy. Lord Smith, former Cabinet minister and chief of the UK Environment Agency has said “we will have to leave carbon in the ground, but leaving all fossil fuels in the ground is for the fairies”. He argues that, whilst there is a good case for leaving the dirtiest fuels where they are, continued investment in areas like Gas will help a more effective transition to a lower carbon economy.

This sentiment is pretty much adopted by spokesmen from all 3 leading political parties in the UK. However whilst this point of view may seem sensible many argue that a more radical approach is needed, as we are running out of time and we need to take faster action to reach the required low carbon target. In addition many campaigners believe the Fossil Fuel industry are deliberately using blocking tactics to provide their desired line of argument.

One of these is John Ashton, until 2012 UK’s top climate diplomat. He recently wrote to Shell’s CEO, Ben van Beurden. This was in response to a speech van Beurden made where he suggested that those calling for ‘fossil fuels out, renewables in’ were naïve and said provoking a sudden death of fossil fuels was not a plausible plan to tackle global warming. Ashton also challenges Shell’s unsupported claim that the economic and moral benefits of providing cheap energy to the world’s poor exceeds the risks to the same people from climate change.

Finally Ashton pleads “ stop frustrating ambition. Talk to us about how you will play your part in a (clean energy) transition. Tell us the inspirational story of that transition, backed by your knowledge and experience and don’t tell us through crocodile tears that this will all take a long time. Tell us what you will do to hasten it.’

So in order to avoid climate change disaster, through following such a conservative approach, many argue the time to act is now! The Divestment campaign was launched last year in the US and now has 800 institutions committed. Among these is the Rockefeller Brothers Fund (RBF), which ironically is governed by direct descendants of John D Rockefeller- founder of the oil empire that eventually became ExxonMobil. The fund has pulled out of coal and tar sands, is gradually withdrawing from Oil and Gas, and has committed to invest 10% in clean energy!

• For more information on the Guardian’s ‘Keep it in the Ground’ campaign read the link below

        Guardian ‘Keep it in the Ground’

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