Mark Campanale, Founder of the Carbon Tracker Initiative, interviewed by the Danish newspaper on the risks of extracting more oil, gas, and coal out of the ground.

Interview by Ellen. Ø. Andersen

coal politiken

Photo: Thomas Borberg

Listed companies have far larger reserves of coal, oil, and gas than we can allow ourselves to exploit, if the global warming is not to go haywire.

Therefore pension funds and other investors with a long time horizon should consider very well in relation to investment in these companies. They plainly have the risk of becoming a bad deal.

This is the message from the British think tank Carbon Tracker Initiative, which is founded by persons with broad experience in the finance sector.

Where environmental organisations argue that it is morally wrong to earn money from extracting fossil fuels, which lead to global warming, the arguments of CTI are financial.

They base their work on the word of scientists that two thirds of the known fossil fuel reserves must remain in the ground, if the global warming is to stay below 2 degrees, as almost all countries in the world have agreed to.

“Listed companies own twice the reserves that we can burn, if we are to stay below 2 degrees. Thus it makes no economic sense to spend money on new projects for extraction, “ says CTI executive Mark Campanale during a visit to Copenhagen. He founded Carbon Tracker Initiative in 2009 after having worked for 25 years with asset management. CTI has among other things published analyses of the risk for financial investors of coal mines, of the risk of a range of concrete oil projects, and of how exposed individual oil companies are.

Keep oil investment

CTI does not argue that pension funds and other investors should sell their stock in oil and gas companies. Instead they believe, that investors should exercise their influence to have the companies refrain from investing in expensive extraction projects, that require a very high oil price to break even. They have no prospect of ever becoming profitable, if the world takes the two degree scenario seriously.

“Because, there is no lack of fossil fuels. And if the companies refrain from investing in new projects, they can afford to pay out higher dividends to their investors based on existing projects,” say Mark Campanale.

It can thus be good business for the investors to have the oil companies drop their risky investments, he believes.

Some companies have already postponed or canceled new expensive projects in oil extraction from tar sands, deep water or in the Arctic. This also goes for Danish Maersk Oil, but this is because of the dramatic fall in oil price the last year, and it is yet unclear, whether the price drop is temporary or structural.

When it comes to coal, however, CTI does not believe, that pension funds and other investors should hesitate to get rid of their stock. Recently the Financial Times wrote, that the stock of coal producers globally have lost two thirds of their value since 2011.

“As asset manager this is a good argument for dropping investment in the industry. It is a sun set industry, an industry in decline. And as an asset manager du have a duty to protect your capital,” says Mark Campanale.

PKA considers dropping coal

The considerations are slowly beginning in Danish pension funds. PKA, which manages pension payments for about 260,000 people, mainly in the health sector, has over the last years built a portfolio of 12-13 billion kroner (~1,4 billion GBP) in “green” investments such as sea wind power and solar panels, and are now analyzing whether there are “black” investments, i. e. coal, that they can pull out of, says managing director Peter Damgaard Jensen.

“This is what leads to the largest CO2 emissions, and coal power plants are probably the first to be phased out, if one is to live up to the 2 degree goal. We are analyzing, how many companies in the area, that we are invested in, and what it would mean return and CO2 wise to pull out, such as Norwegian and Swedish investors have already done,” says Peter Damgaard Jensen.

He expects that PKA will make a decision in the spring. Next step will be to look into, how PKA can engage with companies, which have both “black” and “green” projects.

Even though Carbon Tracker Initative does not promote that investors just drop all investment in fossil fuels, the reports from the organization have nevertheless been the starting point for a global movement, seeking to pressure pension funds and other institutional investors to do exactly this. Domestically the campaign has especially been run by AnsvarligFremtid in relation to a number of pension funds of people with academic degrees.

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