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It is time to sell your investments in fossil fuels?

by , 21 November 2014

There's growing pressure across the world to cut carbon emissions in an attempt to keep a lid on global warming.

The South African government may not be listening too much to this as it nears the completion of two enormous coal-powered power plants, but there are hints that things are changing elsewhere.

So where does this leave fossil fuels? And companies that specialise in those very resources?

Let's take a closer look…

Are companies specialising in fossil fuels ultimately doomed?

When it comes to energy, things are changing, thanks to climate change.

The worry now is that big energy companies, which rely on fossil fuels, are actually overvalued – by a long shot. This is because the market isn’t pricing in the chance that governments across the world will make changes because of climate change.

There are a couple of issues that could have a big change on companies that are dependent on fossil fuels…

  • There are regulatory changes about using fossil fuels;
  • Renewable energy continues to drop in price and becomes cheaper than fossil fuels.

What could this mean for companies dependent on fossil fuels?

This could leave companies reliant on fossil fuels for their business with trillions of dollars’ worth of stranded assets, Simon Wilson in Money Week explains. In other words, massive reserves of fossil fuels that they can never extract.

At the end of September, the Rockefeller Brothers Fund, which is run on behalf of the heirs to the Rockefeller Standard Oil fortune, divested its own investments from fossil fuels.

If other big names follow suit with and divest out of oil and other fossil fuel products and companies, these firms could start to feel the effects.

It’s a bit early to make any decisions about what lies in store. But with many governments starting to think about climate change, big changes could be on the cards for companies that rely on fossil fuels.

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It is time to sell your investments in fossil fuels?
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