Climate conscious financial products are heating up! Last week, results from a survey of Socially Responsible Investment (SRI) professionals showed that 51 percent of these financial experts are offering portfolios completely void of fossil fuel extraction companies, a substantial increase from the 22 percent of survey respondents three years ago.
The fourth annual SRI Conference Fossil Fuels Divestment Survey also indicates that environmentally-minded finance professionals aren’t the only ones thinking about how their money impacts the environment or how market trends and environmental policies might impact their money.
Sixty-nine percent of the 391 SRI professionals surveyed said that individual investors are demanding carbon neutral investments, a two percent increase from last year’s survey. Perhaps more importantly, 68 percent of respondents said institutional investors (e.g. banks, hedge funds and other large financiers) are showing interest in fossil-free financial products, a 19 percent increase from the 2014 survey.
One of the reasons both small and large-scale investors are divesting from fossil fuels is because they fear these dirty investments will become obsolete and lose value. Sixty-eight percent of respondents are concerned that fossil fuel intensive investments will become stranded assets that won’t be usable or cost competitive. This fear is based on the possibility of environmental policies (such as a carbon tax) and improvements in renewable energies reducing the profitability of fossil fuels.
We are already seeing stranded assets in the coal industry. Companies that control over half the coal assets in the world are currently experiencing bankruptcy or financial trouble.
When we take our money out of fossil fuels, where should we move it? The SRI experts in this study are dispersing money throughout other existing investments, investing in renewable energy and clean technology companies.
Nearly half of respondents believe “the movement to divest from fossil fuel extraction companies is expanding to include companies that produce large… greenhouse gas emissions.”
It seems that now is the time to invest in sustainable companies. Over three-quarters of the financial experts surveyed said that 2016 is “the right time for investors to assess and perhaps alter” their holdings in carbon-intensive industries.