Fossil fuel investments ‘risky’, says Ed Davey

Energy and climate change secretary Ed Davey has supported the fossil fuel divestment movement, stating that such investments are set to becoming increasingly “risky” in the decades ahead.

Recent research suggests that as much as 85% of current coal reserves must stay in the ground if dangerous levels of climate change is to be avoided.

Speaking to the Guardian, Davey said, “If you invest in a lot of coal assets you may be overexposed but is up to you to make that decision and for government to ensure the information is available. The 82% […] is quite a number, it seems to me to be relatively realistic.

“We are going to need a lot of oil and gas over the next two or three decades but increasingly over time I think these oil and gas assets will look risky as the world makes climate change treaties, as it will do, as carbon pricing becomes more ubiquitous and companies cut down on fossil fuel use, far quicker than you expect and therefore this argument is really, really significant.”

The comments come as the Guardian launched a campaign, in partnership with 350.org, asking the two largest charitable foundations in the world, the Bill and Melinda Gates Foundation and the Wellcome Trust, to move their investment outs of fossil fuel companies on Monday. By Tuesday the campaign has already gained over 72,000 signatures, reflecting the wider divestment movement.

The fossil fuel divestment movement began in the US, but has since spread to other countries. Over the last three years, institutions, from universities to pension funds, representing over $50 billion (£32bn) in assets have committed to divesting.

In a comment piece for the newspaper, Davey noted that coal investments “look especially risky”, adding, “Even carbon capture and storage won’t save many coal investments”. Gas and oil, he explained, would take longer to be phases out as technology for replacing oil in transport and gas in heating are less developed.

Davey continued, “We must shift away from fossil fuel investments into clean energy over the next two decades. Government policy here and abroad must facilitate that with strong regulations – particularly on transparency and disclosure, with new reporting requirements on firms and financial institutions about their fossil fuel assets.

“Don’t underestimate how powerful this would be. When global fund managers react to fuller information about the carbon risks they are holding using normal hedging techniques, modest adjustments of investors’ portfolios will releases several trillion dollars into the low-carbon economy.”

Photo: Greg Goebel via Flickr

Further reading:

UN backing fossil fuel divestment campaign

Oxford University defers divestment decision

London assembly backs fossil fuel divestment

University of Edinburgh academics call for divestment

Fossil fuel divestment campaigns can help ‘stigmatise’ industry