A the energy transition on capital markets

A continuous debate takes place between some environmental
organizations and powerful companies, which are accused to have large reserves
of coal, oil and gas. The organizations argue that it is morally wrong to earn
money from extracting fossil fuels, which lead to global warming. Another
interesting perspective comes from the independent British think tank Carbon Tracker Initiative (CTI). The CTI
carries out analysis on the impact of the energy transition on capital markets
and the potential investment in high-cost, carbon-intensive fossil fuels.

According to scientists, two thirds of the known
fossil fuel reserves must remain in the ground, if the global warming is to
stay below 2 degrees, as almost all countries in the world have agreed to. The
CTI’s research concludes that these companies own twice the reserves that can
be burnt, in order to stay in the proposed limits. The founder of CTI suggest
that investing in new project for extraction is worthless.. CTI has among other
things published analyses of the risk for financial investors of coal mines, of
the risk of a range of concrete oil projects, and of how exposed individual oil
companies are.

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CTI claims that investors play a key role in
persuading the companies not to invest in expensive extraction projects, that
require a very high oil price to break even. These kind of projects cannot be
profitable, if the two degree scenario leads to severe measurements and
restrictions. In other words, due to no lack of fossil fuels, the companies
have to invest in new and promising projects which will pay them of in the long
run and will attract investors. In fact, some companies have took action and have
already postponed or canceled new expensive projects in oil extraction from tar
sands, deep water or in the Arctic.

On the contrary, speaking for the coal supplies, the
Financial Times wrote that the stocks of coal producers globally have lost two
thirds of their value since 2011, forcing the investors to get rid of their

An useful
example can be the Danish pension fund, PKA, which manages pension payments for
about 260,000 people, mainly in the health sector. It has over the last years
built a portfolio of 12-13 billion kroner (~1,4 billion GBP) in investments
such as sea wind power and solar panels, and its attention is focused on investments
of coal which could be profitable. The PKA’s further plans include collaborations
with other companies which are running these kinds of investments.

In conclusion, according to CTI, the green investments
are the future and can be quite profitable, even though the investments in fossil
fuels should not completely stop. It is of high importance that investors and pension
funds trust this kind of investments and secure their capital.