Tuesday, March 10, 2015

Even the Bankers are Calling for Divestment

Last week the Bank of England expressed its concern to Britain's major insurance companies that their investment portfolios might be at risk from overvalued fossil-fuel stocks. Speaking to a conference of insurance executives, an official from the bank's prudential regulation authority suggested that large financial institutions could take a "huge hit" if major reserves of fossil fuel are left "stranded" by policies that reduce carbon emissions, whether by market regulation or legal injunction.

Last week's warning follows statements by BoE governor Mark Carney last fall, suggesting that "the vast majority" of fossil fuel assets "are unburnable" within sustainable climate policies. Former US Treasury secretary Henry Paulson made similar observations in a New York Times op-ed last summer, comparing the "carbon bubble" of overvalued energy stocks to the housing bubble of 2007, and the financial collapse it caused in 2008.

In short, financial leaders are coming to realize that "leave it in the ground" is not a wild-eyed slogan but the expression of a sane and inevitable truth. Not all: Shell oil executives are on record saying"We do not believe that any of our proven reserves will become stranded." That is, Shell intends to extract and burn regardless of the consequences. But Carney, Paulson, and other financial leaders are starting to assume that Shell, the Koch brothers, and other fossil fuel promoters can and will be restrained.

In effect, these leaders--as well as the conservative Financial Times--are making the case for fossil fuel divestment, though in different terms from movement activists. Unlike Naomi Klein, Paulson and the BoE believe the writing down of "stranded" fossil assets can happen in an orderly way within the capitalist model. Perhaps--though the resistance of Shell et al. suggests otherwise. It is nonetheless useful to know that the Davos crowd is no longer ignoring the fossil fuel dilemma but embracing it--for better or worse.

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