Environmentally focused investors often consider climate risks. But research suggests carbon-intensive industries’ share prices may not reflect potential liabilities for damages from all associated hazards. Other climate-related challenges could include sea-level rise, storm surges, droughts, wildfires, and extreme heat. Beyond performance, many investors recognise the problems of global warming and social issues, extending ethical considerations into broader aspects of their lives, including selecting portfolio assets.
Fossil fuel companies’ activities are the major contributors to carbon dioxide emissions leading to global warming. In response, many investors have chosen to ‘divest’ – to sell assets in these industries – arguing the carbon in those fuels must stay locked below ground to avoid further warming. At P1 Investment Management, we have also taken the decision to divest from fossil fuels.
Q G Rayer and P Walton (2019), Divesting from fossil fuel firms can send a message on climate change, Citywire New Model Adviser®, issue 620, p21, 14 January 2019.