Why should you divest?
In addition to aligning your investments with your social and environmental values, divestment can make good financial sense for your portfolio. Over the long term, as the effects of climate change become more apparent, and as more and more governments adopt policies to limit carbon pollution, the carbon resources that fossil fuel companies currently count as assets could shift to liabilities.
Many analysts expect fossil fuel investments to underperform in the future. To meet all global carbon reduction commitments, significant fossil fuel reserves may not be burnable, resulting in the stranding of these assets. By divesting, people are reducing the ‘stranded asset’ investment risk from their portfolio.
The London School of Economics and the Aperio Group, report that fossil fuel companies may be overvalued by as much as 60 per cent. Financial analysts liken this to a “carbon bubble,” which may burst, much like a housing bubble.
Divestment now could protect your assets in the future. But what to do with the money you divest from the fossil fuel companies? Answer: Reinvest in companies leading the way to a clean energy future.