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Coal hard facts for religious investors

  • 11 February 2014

The international movement to divest from investment in fossil fuels is gathering momentum. Investors are starting to realise the dangers associated with the problem of stranded assets; that is, as governments act to restrain fossil fuel consumption in an effort to address climate change, fossil fuel companies will find their assets being written down. It is of no value to have millions of tons of coal in the ground if carbon taxes or emission trading schemes prevent you from ever digging it up.

A recent article in The Conversation by Tom Swann and Richard Denniss from ANU documented the growing concern among investors as the politics and economics of climate change begin to bite. At the recent World Economic Forum in Davos, World Bank President Jim Yong Kim argued that investment firms, especially those in pension funds, have a fiduciary duty to review their investments in fossil fuels. He also called on governments to push both divestment and taxes to make fossil fuels less attractive investment options for the future.

In line with this, the World Bank is pulling back from providing development funding for coal fired power stations. This is a significant move. The World Bank is hardly the stronghold of 'weak-minded liberals' or 'greenies'. This is an institution which, together with the IMF, oversaw the most draconian economic reforms in third world economies in the name of economic rationalism and trade liberalisation. They were, and remain, primarily driven by economic concerns, and the economic costs of climate change are starting to mount.

As Jim Yong Kim notes, continued reliance on fossil fuels and the resultant climate impacts 'threatens development gains [made] over the last 20 years'. This echoes concerns raised by international aid agencies that the present effects of global warming are undoing decades of progress in the poorest parts of the world.

Other groups of investors and philanthropic organisations are taking similar action. Development banks in the US and Europe are pulling back from funding coal fired power stations, while a major US philanthropic group with combined assets of over $1.8 billion is divesting from fossils fuels and investing in renewable energy. 'The magnitude of the climate crisis requires that we no longer conduct business as usual,' the Wallace Global Fund’s executive director Ellen Dorsey has told reporters. 'If we own fossil fuels, we own climate change.'

These concerns are particularly pertinent to the Australian context. Australia is the second largest coal