As more institutional investors realise the potential risks around investing in fossil fuels, while the world moves towards a low carbon economy, research argues they face a challenge when it comes to finding alternative destinations for their money.
Over the last few years the fossil fuel divestment campaign has gathered pace, with institutions making the decision to divest based on both moral and financial factors. Representatives from universities, religious originations, councils and pension funds have all pledged to cut fossil fuels from their portfolios and review investment strategies.
But now, a white paper from Bloomberg New Energy Finance argues that larger-scale movement would be “far from easy”. Traditionally oil, gas and coal companies, which have a combined stock market valuation of almost $5 trillion (£3tn), have played an important role in institutional investor portfolios.
The study states that whilst there are emerging opportunities within the clean energy sector, a logical destination for investors’ money after committing to divesting from fossil fuels, the area currently does not yet approach the necessary scale as an investable asset class for institutions.
The research company forecasts $5.5 trillion (£3.3tn) in clean energy investment from now to 2030. However, institutional investors, including pension funds, may not integrate the sector into their portfolios based on the risk-return and liquidity characteristics of projects, it adds.
This leaves investors with the challenge of finding viable alternative destinations for their money.
Nathaniel Bullard, author of the paper, said, “Fossil fuels are investor favourites for a reason. Very few other investments offer the scale, liquidity, growth and yield of these century-old businesses with economy-wide demand for their products. Given their scale and performance, oil and gas companies are attractive to institutional investors.”
He added, “The $3.5 trillion (£2.1tn) needed to build out clean energy through 2030 will offer many new opportunities for investors, but a major switch into that and out of fossil fuels would require a massive scale-up of new investment vehicles.”
Previous reports have labelled investing in fossil fuels as “very risky”. Research from the Carbon Tracker and the London School of Economics’ Grantham Research Institute warned that some 60-80% of oil, gas and coal reserves owned by firms listed on stock exchange might need to be left in the ground if the world is to tackle climate change.
Photo: David J via Flickr
Like our Facebook Page
How to Find an Eco-Friendly Termite Control Service Provider in Malaysia
Eco-Friendly Vegans Win Most Battles Not the War
3 Iconic Chicago Billboards Eco-Friendly Advertisers Can Learn from
EnviroSolar’s Abe Issa Discusses Success in Green Entrepreneurship
How Sports Could Be Impacted by Climate Change
What Eco-Friendly Patients Should Know about Online Therapy
6 Reasons Why Meal Delivery Services are Eco-Friendly
The Path for Retail’s Sustainable Future
4 Eco-Friendly Ways to Treat a Sinus Infection
4 Strategies for Eco-Friendly Real Estate Investors to Find Properties
How Managed Print Services Helps to Reduce Paper Waste
Why Scientists Are Concerned About ‘Forever Chemicals’ In Drinking Water
Meat Farming Is Only Getting Smarter, Easier & Eco-Friendlier
What is Eco-Friendly Homesteading and How Does it Affect Your Insurance?
Importance of Using a Water Purifier in an Area with High Pollution
Alternative Financing Ideas for Green Businesses that Shun Banks
Tencel Material Demand Shows Britain Is More Eco-Friendlier Than Ireland
How To Invest in Clean Energy Stocks in Only Five Easy Steps!
How To Secure Funding As An Eco-Entrepreneur?
4 Amazing Eco-Friendly Businesses Worth Starting in 2021
- Features8 months ago
Seven Health and Safety Tips for Eco-Friendly Products in a Green Home
- Energy9 months ago
Eco-Friendly Homeowners Lower Carbon Footprints through Greater Air Conditioner Efficiency
- Features8 months ago
Essential Guidelines for Eco-friendly Moving into new Home
- Invest10 months ago
The Eco-Friendly Evolution of Bitcoin Over the Years