Energy efficiency and “disruptive” clean energy technologies increase the risk that “economically non-viable” fossil fuel reserves will become stranded assets, banking giant HSBC warned investors in a private report revealed by Newsweek last week.
“The speed of the collapse in energy prices over the past three quarters has taken the fossil fuel industry by surprise, in our view,” HSBC wrote. “As rigs are dismantled, capex [capital expenditure] is cut, and operating assets quickly become unprofitable, stranding risks have become much more urgent for investors to address, including shorter-term investors.”
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The authors say investors who hold onto their fossil fuel stocks “may one day be seen to be late movers, on ‘the wrong side of history,’” Newsweek reports.
“The paper proposes three options for investors—divesting completely from fossil fuels; shedding the highest-risk investments such as coal and oil; or staying the course and engaging with fossil fuel companies as an investor.”
“It’s incredibly important that a mainstream financial institution is effectively taking our narrative on the carbon bubble, analyzing it, and then producing a research report that reinforces our conclusions,” said Climate Tracker CEO Anthony Hobley. “We are at the beginning of a very important reframing of this issue, and of climate risk being understood by the mainstream financial markets.”
