Investors are increasingly aware of climate risks and appreciate that fossil fuel companies are major emitters. Primary responses have been shareholder engagement or divestment. These actions impact fossil fuel companies, with pressures to halt the extraction and associated investment risk intensifying.
Future policy and technology developments could cost extractors an estimated $34trn of revenue. Changing investment policies may make fossil reserves unusable, leaving present market valuations misjudged. Some may argue that fossil fuel assets are increasingly uncompetitive, and their market share dropped from 29% of the S&P in 1980 to 5.3% by 2019.
One response from fossil fuel firms has been investment in carbon offsetting measures. Royal Dutch Shell plans a $300m reforestation scheme, planting more than five million trees, among other initiatives. Although it sounds impressive, climate aware investors remain cautious. Is this a genuine attempt to address problems, or about retaining societal legitimacy to continue their activities? Some think that such offsetting omits crucial details. This article explores why.
Download the Better than nothing…but so many ‘buts’
Read Dr. Quintin Rayer’s article talking with The Journal, Chartered Insurance Institute – https://thejournal.cii.co.uk/blog/better-than-nothing-but-so-many-buts/