How to avoid the carbon bubble

carbon proofing mezz report coverScreening out fossil fuels from ASX cover

5 March 2014

Want to kick fossil fuel companies out of your investments but don’t know how? Worried that excluding fossil fuel companies might harm your financial health?

Worry no more.

Market Forces and commissioned The Australia Institute to study how people and institutions holding stocks can divest from fossil fuels.

Read the full report here and the summary report here.

The results included a “screening” exercise by the US based fund manager Aperio, that removed fossil fuel companies from the ASX 200 including Woodside Petroleum, Origin Energy and Whitehaven Coal, and found that this fossil fuel free scenario performed almost exactly the same as the ASX 200 itself. The key findings of the report were:

  • When held over a full business cycle, a diversified equities portfolio which excludes fossil fuel producing companies could perform on par with a fossil fuel inclusive portfolio.
  • The report categorises ASX-listed companies by their level of fossil fuel exposure. Woodside Petroleum, Origin Energy and Whitehaven Coal are amongst those most at risk of stock devaluation due to climate change, and therefore primary divestment candidates.
  • Unburnable carbon poses a substantial financial risk to investors holding shares in fossil fuel exposed companies. Balance sheet valuations of reserves held by coal, oil and gas companies are based on the assumption they can extract over three times more carbon than is compatible with the internationally agreed two degree global warming limit.
  • Fossil fuel valuations are at risk from global regulatory efforts to reduce carbon emissions, a trend towards reduction in subsidies for fossil fuel extraction companies and a growing international divestment movement which has won public support from the World Bank, President Obama and the UNFCC.
Mark Fulton (Carbon Tracker), Julien Vincent (Market Forces), Richard Denniss (The Australia Institute) and Blair Palese ( at the launch of "Climate proofing your investments".

L-R: Mark Fulton (Carbon Tracker), Julien Vincent (Market Forces), Richard Denniss (The Australia Institute) and Blair Palese ( at the launch of “Climate proofing your investments”.

The report comes as Norwegian pension fund Norges moved forward with its plans to divest from fossil fuel companies. Its a move that is making many coal, gas and oil companies in Australia nervous – BHP Billiton CEO Andrew McKenzie warning that divesting from fossil fuels would slow economic growth. He should probably read the report.

In addition to providing a scenario for those wanting to divest, the report also helps investors use their power as shareholders to influence companies connected to the fossil fuel industry.

“The next time an investor says that divesting from fossil fuels is all too hard, or is too risky financially, this report should set them straight”, said Market Forces Lead Campaigner Julien Vincent.

“As the fossil fuel divestment effort and movement grows in Australia, this report will be a great resources for anyone wanting to take action, from individuals to church groups, universities and even large fund managers.”

Bill McKibben, co-founder said “This report arms Australian investors and consumers with the knowledge that divestment stacks up financially as well as morally”.