KLP’s Grimsby: the energy transition won’t happen without the ‘carrot and stick’ approach. During London Climate Action Week, investors call for greater government policy action to accelerate the energy transition.
https://www.netzeroinvestor.net/news-and-views/klps-grimsby-the-energy-transition-will-not-happen-without-using-the-carrot-and-stick-approach
by coolbern
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Long term investors like pension funds and endowments are “universal investors” with diversified holdings across the entire global economy. They can’t afford to ignore the future. They can’t count on harvesting short-term profits, year after year, if climate change degrades production possibilities stochastically, but relentlessly. For example, they would not want to invest in uninsurable real estate assets. But insurance is impossible when losses exceed any bearable premium. That means that “self-insurance” is also an illusion for owners with diversified holdings. It is a poor gamble. Wishes and prayers will not stop flood and fire and drought and extreme winds. We are already reaching days when extreme heat is a killer: [Death Valley will hit 130 degrees and could break world record amid blistering heat wave](https://www.nbcnews.com/news/weather/death-valley-will-hit-130-degrees-break-world-record-blistering-heatwa-rcna160401) That’s why investors with a horizon longer than day-traders have an interest in advocating for the very policies that fossil fuel companies and their lobbyists have been so successful in thwarting.
The reason for divestment from the fossil fuel industry is because they are the #1 enemy of climate survival. Staying in for current dividends is a buy-in to the value of these assets, which incorporates the assumed worth of their reserves and fossil-fuel-specific capital investments. As soon as policies and legislation are adopted that would render these assets worthless, the resulting capital loss would more than outweigh any differential dividend or short-term capital gains from holding onto these companies.
You can’t hold onto fossil fuel assets without losing all credibility in the fight to make them obsolete. That fight is immediate and urgent if fund managers (and all of us) want to save everything else that is of value from climate devastation.