However, in a more unprecedented move, Norwegian pensions and insurance giant Storebrand divested from 19 fossil fuel companies for purely economic reasons, citing the divestment was to “secure long term, stable returns for our clients” and that eventually those fossil fuel companies would be “worthless financially.
Storebrand reports that they have no socially responsible devoted funds, but rather a high standard that they hold their assets to, making this decision one based purely on financial rationale.
This move follows a series of reports, one by Carbon Tracker, which demonstrates that for the world to prevent the global temperature from rising 2 degrees Celsius, global CO2 emissions must be limited to under 565-1,075 Gt CO2 (billion of tons of CO2) until 2050.
This limit is only a fraction of the carbon embedded in the world’s fossil fuel reserves,which amounts to 2,860 Gt CO2, meaning that only around a third of fossil fuel reserves would be able to be burned before 2050. Compliance with these goals would waste close to $7 trillion in fossil fuel industry capital expenditure. These unusable reserves, and the equipment deployed to exploit them, known as stranded assets, could have large, negative implications for equity valuations.