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Investors are overlooking the long-term risks climate change poses to oil and gas infrastructure firms, which face tens of billion of dollars worth of stranded assets as the world transitions to greener energy, according to new analysis seen by AFP.
As the use of fossil fuels—the main source of planet warming greenhouse gases—comes under growing scrutiny, a number of funds are choosing to divest themselves of energy projects that may end up cancelled or mothballed as efforts grow to limit emissions.
Paris - Deal - Climate - Change - Nations
The 2015 Paris deal on climate change enjoins nations to limit the rise in global temperature to "well below" two degrees Celsius (3.6 Fahrenheit), something experts say is impossible without a rapid drawdown in fossil fuel use.
ATLAS, an investment fund specialising in long-term infrastructure projects, examined how the assets of five oil and gas infrastructure companies would fare as countries switch to renewables in line with the Paris targets.
Analysis - AFP - Firms—who - Share - Energy
The analysis, seen exclusively by AFP, shows that the firms—who together hold a roughly 10 percent share of the energy infrastructure market—risk losing more than $100 billion of their valuation.
"There's a very significant unspoken risk to the valuation of these companies," said executive chairman Charles Kirwan-Taylor.
Something - Account - Investment - Selections - People
"That's something we take account of in our investment selections and we think other people should too."
ATLAS said that the market was improperly valuing oil and gas infrastructure projects by not discounting the risks of declining hydrocarbon use.
Companies - Exposure - Market - Fluctuations - Contracts
Although companies involved often have no direct exposure to market fluctuations due to fixed-price contracts, the assets they own are exposed in the long term to changes in energy policy, fuel costs and shrinking demand.
Ben Caldecott, director of the Sustainable Finance Programme at Oxford University, said the analysis "brings to the fore the contrast between the market's short-term approach to...
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