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You can’t ignore $11 trillion

Investors should be aware of the world changing around them.

Sentiment is one of the most powerful forces in economics. When there is a rapid and significant shift in the way something is perceived, it can have material, and sometimes lasting, impacts.

A recent example is how the Argentinian peso lost almost a third of its value against in the dollar in just three days last month after the results of a presidential primary election. Nothing in the country actually changed in those 72 hours, but investors’ fears about the possible election of a populist leader into office saw heavy selling of Argentinian assets.

There is a similarly significant shift happening in the perception of the fossil fuels industry. This week 350.org, an international movement seeking to replace fossil fuels, noted that asset owners across the globe representing $11 trillion have committed to divesting from companies that operate in this space.

Read: Climate change will cripple economies regardless of countries’ wealth – report

What is noteworthy is that this divestment movement only began in 2011. That is when students at Swarthmore College campus in Pennsylvania called on their university endowment to pull their investments from coal. In just eight years, 350.org reports, over 1 110 institutions with $11 trillion under management have decided to withdraw their money from investments in these companies.

The threat

The change in sentiment has become so significant that in July the secretary-general of the Organisation of the Petroleum Exporting Countries (Opec), Mohammed Barkindo, called climate change campaigners “perhaps the greatest threat to our industry going forward”.

He added that it was “beginning to … dictate policies and corporate decisions, including investment in the industry”.

Regardless of their view of the climate change movement, this is something that investors cannot ignore. That is because all shareholders will be affected by the impact the divestment campaign is having.

A study earlier this year from the University of Waterloo in Canada concluded that:

“Divestment announcements can have both short-term impacts (through one-day intervals that capture causal effect) as well as longer-term impacts (through 10-day intervals that capture longer-term perceptions). Longer-term impacts are more prevalent in later events, suggesting a shift in investor perception as divestment announcements gained legitimacy.”

And it’s growing

In addition, the scale that the divestment campaign has achieved is encouraging continued activism. At the Financing The Future conference held in Cape Town this week, speakers argued for even more pressure to be placed on asset owners to pull investments from fossil fuels.

“If it’s wrong to wreck the climate, it is wrong to profit from that wreckage,” said reverend Henrik Grape, coordinator of the World Council of Churches working group on climate change. “There is no excuse for asset managers not to change.”

Read: Sustainable investing is becoming the new normal

What was additionally significant is that the climate crisis is increasingly being framed in different language.

“The challenge that we have is to change the narrative,” noted Kumi Naidoo, secretary-general of Amnesty International. “We should stop saying we have to save the planet because actually the planet does not need saving. If we continue on the path we are going, we will be gone, but the planet will still be here.

“When we are talking about climate change, it is in fact about human survival.”

In other words, climate change is being positioned as far more than an environmental issue. It is becoming a human rights issue.

Wider attraction

Earlier this week the Global Commission on Adaptation released a report noting that severe impacts of climate change are now inevitable. It estimated that an additional 100 million people could be driven into poverty by 2030 and five billion people could be short of water unless precautions are taken.

Read: The massive cost of not adapting to climate change

The significance of this reframing of the argument is that if it is seen as a broad human rights concern rather than simply an environmental one, it will attract even more, and more vociferous, support. The impetus is therefore only likely to increase.

Investors cannot ignore the impact this will have on fossil fuel assets.

Companies in this industry will also face additional sustainability challenges. For example, US insurance company Chubb announced in July that it will no longer sell insurance policies to companies that make more than 30% of their revenue from coal mining.

At the same time, investors have to be aware of the shift to alternative industries and the potential for returns in sectors such as renewable energy. As Dr Ellen Dorsey, executive director of the Wallace Global Fund, notes:

“We need to be building a just and equitable new energy economy. It’s not enough to divest from fossil fuels. We must advocate for a new energy economy.”

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“Committed” $11trn means nothing… companies will always invest where there is money to be made… regardless.

Look at BAT and ABInbev… smoking and alcohol and their market caps are massive… no chance of divestment anytime soon…

That headline is a bit misleading. It’s not $11 trillion invested in fossil fuels, it’s funds with AuM of $11tr that have “committed” to withdrawing from the sector (whatever committed means, to misquote Prince Charles).

Of course, withdrawing is just another word for ‘selling to someone else’. You don’t just hand in your shares at some investment window and get your money back.

It’s a noble sentiment, but why focus on just the producers of fossil fuels? How about the big users – the power utilities, the transport sector, car manufacturers, chemical companies, steel manufacturers and every other business relying on fuel and electricity to keep going? More “withdrawals’?

Ironically, some of the fossil fuel producers are also at the forefront of investing in alternative energies. For all the virtue-signalling, there are no simple solutions here.

Great comment. For all our disdain of fossil fuels we cannot survive without them, nor would 7bn of us be here absent fossil fuels.

So watching the green new deal etc play out is going to watch the penny drop when we all realise that renewables can’t power industrial societies.

I’m all for protecting our future. But it must be based on real evidence. There is climate change, no doubt. But is it the fault of human activities.
I am not so sure.

https://medium.com/@graham100200/global-warming-scientist-loses-lawsuit-against-79-year-old-canadian-climatologist-dr-tim-ball-9efdaf8d2933

It suits government budgets to tax carbon emisions. That’s their motivation to blame us. The earth has been as warm as now in the past.
Was it then also due to humans?

climate change (if so) cannot be man-made

it is impossible

snap out of your denial

once you have accepted that, if the oceans are getting warmer, it is caused by earth’s core temperature heating up,

THEN we can move forward … … …

Not this nonsense again…
The earths crust heats 100mW/m2
The sun heats 340W/m2

If you had physics in highschool this would be all you would needed to know to make the conclusion that the earths crust can’t even lift the temperature at the polar seas above -2C

PJJ, you say “the sun heats up the ocean in orders of magnitude more than the magma at the bottom of the ocean”

That is IMPOSSIBLE!

The rays of the sun can only penetrate the oceans 1km deep, AND heat travels UP, not DOWN.

PJJ, you missed my last comment in another thread:

You say “the sun heats up the ocean in orders of magnitude more than the magma at the bottom of the ocean”

That is IMPOSSIBLE!

The rays of the sun can only penetrate the oceans 1km deep, AND heat travels UP, not DOWN.

The heat from the bottom rises up 24/7/365,
the sun only shines 8 hours per day, excluding overcasting.

cannot compare!!!!!!!!!!!

I will use a phrase you seem to like:
“That is IMPOSSIBLE”

Do you know how much energy is required to lift 1kg of water by 1C?
419kJ/kg
That is 116Wh (watt hour)
At 100mW per m2 to heat JUST one liter of water would take the entire 1m2 surface area a staggering 116000Wh / 100mW = 1160 hours!
TO HEAT 1KG of water.

Sorry I made a mistake here:
“419kJ/kg
That is 116Wh (watt hour)”

I should proof read, that is the energy required to lift 1Kg of water from 0-100.
its 4.19kJ for 1C.
1.16Wh / 100mW =
1160mwH / 100mW = 11.6 hours per m2 to heat 1Kg of water by 1C

PJJ, you should proofread all your theories … … …

and also apply common sense to see why i use the word impossible.

@MJ

Well clearly you do understand basic physics, but that ok, science doesn’t care about your feelings or whether you feel something is impossible.

If you applied your mind for 1 min to the math I have given you, you would quickly deduce that ITS IMPOSSIBLE!

It would take the earths crust 11 600 hours (483 days) in a closed system with 0 losses to heat a minuscule 1 square meter a measly 1C.

“heat travels UP, not DOWN.” That is only true for convection – not for radiation or conduction. Heat does travel from a higher temperature to a lower temperature.

For your theory about magma being the main source of heating the oceans to be true the average temperature in the ocean would have to increase with depth. It clearly gets colder as you go deeper.

https://www.windows2universe.org/earth/Water/temp.html&edu=elem

@MJ

“the sun only shines 8 hours per day, excluding overcasting.”

Please enlighten us: Where does the sun go the other 16 hours of the day, when it is not shining? (when it is night, I suppose?)

Regarding my comment held for moderation. Paraphrasing Ayn Rand “You can ignore reality, but you cannot ignore the consequences of ignoring reality”

The main issue I see here is that man made climate change is seen by the author, having drunk the Koolaid, as a given. The science is certainly not settled but then who on the left cares? There is only one question that counts in the end and that is “what is the sensitivity of the climate to CO2 (doubling)”. Estimates range from 0K to 7K. Certainly the science is not settled. The evidence, being the basis of science, is that the sensitivity is about 1K. Not catastrophic by any means. The effect of CO2 is essentially almost saturated in the wavelengths in which it absorbs infrared. CO2 on its own cannot do much. The models require water vapour feedback to be strongly positive but the upper atmospheric tropospheric “hotspot” thus predicted provably absent. There is not enough water vapour to drive this feedback.

People are welcome to divest their money from fossil fuels yet the vile hypocrites will jump in their cars or on an aircraft to go on holiday. It is they who create the demand. The net result will be fossil fuel companies will pay more for capital which will drive the price of these commodities up and untold suffering for those who depend on fossil fuels for transport and energy. R20/l petrol coming your way. R5/kwh for electricity. Returns of fossil fuel investment will rise giving the unshackled investor a windfall.

The left ruin everything by creating divisions (identity politics) and driving wedges between society. Politics, race relations, sexes, religion schooling, marriage.

You are very much correct we definitely have a hard time in determining how much a doubling of Co2 (from pre-industrial levels 280ppm, 410ppm now) would translate to since there are many feedback factors at play.

We are however on track to hit the doubling 560 ppm mark around 2070
So I guess if you don’t think 1.5-4C by then is significant then I guess the argument is moot, if I play my cards right I might still be around by then, so in a way I actually can’t for the result we are currently in a very big science experiment.

leftist policies won’t kill fossil fuels, economics will.
Bids for new utility scale PV projects are coming in between 19-37USD per MWh.
New wind projects are now bidding in the 18USD per MWh range.

Coal costs 45USD per ton just for the raw commodity(And its actually down 37% the past year), and that translates to around 2.4MWh so a cost per MWh just for the raw material works out to 18.75 USD per MWh, JUST for the commodity, no power station, no staff, no transport.

Of course the sun doesn’t shine all the time, so you would need some form of fossil fuel or nuclear power for base load, that is also only until we crack energy storage of below 10USD per kWh (which thermal storage can achieve just at lower efficiencies vs chemical storage)

And if anything renewables will continue their path downward and get even more competitive, fossil fuel where great, they pulled humanity forward in ways we can’t imagine, but just like horses their time has come.

Countries like Germany are now encouraging residential / small business battery storage along with residential solar generation via subsidies.

In the end the solution to the world’s energy requirements will be a mix of various technologies (large and small scale renewables plus nuclear, gas and coal) coupled by a smart grid. Eventually as storage technology improves the renewables will push out the rest on purely economic reasons. In the very long term nuclear fusion may progress to an extent to provide safer and cleaner large scale production.

You forgot to mention the resurgence of CSP+TS, concentrated solar power plus thermal storage.
We have already a few small units like Kathu and Bokpoort in the NC retaining heat=electricity up to 9 hrs in operation. In the latest rounds of REIPPs they came in at R 1.69/kWh, while wind and PV solar were between 70 and 96 cts/kWh.
Much larger CSP+TS plants have come online in the US, Chile, Spain and Australia that can retain heat=electricty up to 48 hrs and produce at R 70 to 100 cts/kWh. Basically a 24/7/365 operation. It is very unlikely that in the NC there are 3 or more completely cloudy, heavily overcast days in a row.
Hydro, pumped water schemes, and CSP+TS are ideal renewables to complement PV solar and wind, practically eliminating the need for coal.
Read this by Chris Yelland :www.ee.co.za/article/power-from-the-sun-an-overview-of-csp-in-south-africa.html
A 2016 CSIR report foresees that we can easily do without coal by 2040. 70% renewables plus natural gas and nuclear.
http://climatereality.co.za/wp-content/uploads/2016/12/20161124_Least-cost_electricity_mix_SA_CSIR.pdf

“If we continue on the path we are going, we will be gone, but the planet will still be here.”

Precisely … but with the African population doubling to some 2.6 billion by 2050, prepare for the Sixth Global extinction – the man made Anthropocene Extinction.

But perhaps we could be saved by the miracle electric battery mineral “Hazenile” from the “Congo Caves” which Gwede Mantashe proudly announced to the international mining conference in Perth a couple of weeks ago.

I thought that might be a sample in the photo ,,,, 🙂

Another compounding factor is the sustainability of this business model. Take cars for instance. People realise that the car standing in the garage is used on average daily for 50- 100kms.In the presence of alternatives, does it make sense to have something that is maybe used once a year what it has been designed for. All around us, business models adapt to pay per use. Efficient alternatives becomes available daily. A paradigm shift,impacting on the oil industry.

Wham! Overnight Pompeo blames Iran for a drone strike on the Saudi oil facilities and oil price surges 10%!

Oil has been strategically linked with the value of the dollar and US foreign policy since Woodrow Wilson got finance for his election campaign in 1909. Its called “The petrodollar”.

Without intimating false flags or reptilian agendas, it is clear that this dirty fossil fuel industry is not going to go down without an intense battle of supply/ demand dirty tricks which will “incorporate” their regular military-industrial (and usually inhumane) agendas and manipulations.

Forgive my cynicism for holding a little “self-insurance” against the idiocracy…

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