May/June Briefing – Fossil Fuel Stocks



Why now is the time to sell fossil fuel stocks.  

Fossil fuel stocks used to be in the large cap category of stocks intended to bring stability and reliable returns to a portfolio. For the past 10 years, fossil fuel stocks haven’t performed in this manner and no longer fit their intended investment category.  They have become very volatile for a variety of reasons. Most recently their prices have soared because of the impact of COVID and the war in Ukraine.  As a result, this would be the perfect time for the SBI to request its asset managers to begin shifting investments out of fossil fuel stocks.  

A recent article in the Guardian examined the vulnerability of fossil fuel investments based on research from the University of Massachusetts.  The researchers found that “estimated existing oil and gas projects worth $1.4tn would lose their value if the world moved decisively to cut carbon emissions and limit global heating to 2C. By tracking many thousands of projects through 1.8m companies to their ultimate owners, the team found most of the losses would be borne by individual people through their pensions, investment funds and share holdings. 

The analysis also found that financial institutions have $681bn of these potentially worthless assets on their balance sheets, more than the estimated $250-500bn of mispriced sub-prime housing assets that triggered the 2007-08 financial crisis.”

Europe is rapidly moving towards phasing out fossil fuel-based electricity which will contribute to a reduction in demand for fossil fuels. The United States must follow suit. The SBI’s asset managers must heed the dangers of continuing to enable fossil fuel companies to fuel climate catastrophe. Future pension holders need a stable pension and a stable climate.