This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Why It Makes More Sense to Dump Your Fossil Fuel Stocks

NEW YORK ( TheStreet) -- Sure, fossil fuel companies such as ExxonMobil (XOM - Get Report), Chevron (CVX - Get Report) and Royal Dutch Shell (RDS.A - Get Report) have been smart investments for decades -- even for environmental groups who treat them like a secret addiction. But climate change is going to change that too.

In fact, it's divestment from fossil fuels that's the far smarter, safer move, according to a growing number of experts.

Late last month, Forbes featured an article that supported divestment in fossil fuel stocks not just as a viable financial strategy, but a necessary one. That's because though we have more than enough fossil fuel reserves worldwide to depend on for some time, it would come with a huge environmental cost.

Divestment hit the mainstream late last year when the environmental nonprofit 350.org, headed by writer and activist Bill McKibben, began advocating for it as a main angle of its climate campaign. In particular, 350.org touts divestment as a powerful tactic in urging fossil fuel companies to begin scaling back on extraction and replace their product with sustainable alternatives such as solar and wind power.

The scientific consensus is that we have to leave untouched 80% of our coal, oil and gas reserves to keep average global temperatures from rising more than 2 degrees Celsius (3.6 degrees Fahrenheit) -- the threshold for maintaining a stable climate. Yet according to the International Energy Agency, our emissions are already on a path that will increase average global temperatures between 3.6 and 5.3 Celsius (6.5 to 9.5 Fahrenheit) by the end of the century.

The threat of catastrophic climate change and its effects -- flooding, drought and sea level rises -- make continued investments in fossil fuel stocks risky at best. Current fossil fuel reserves may be estimated to be worth as much as $28 trillion dollars, but Forbes contributor Logan Yonavjak warns of a carbon bubble.

"Although they have been lucrative, fossil fuels are becoming increasingly risky investments, and the stakes have become too high to maintain a stable climate," Yonavjak writes.

Specifically, Yonavjak explains that a possible carbon tax could raise the price of carbon to an average of more than a $100 per metric ton. This market expense, coupled with the increased costs associated with climate change, could make fossil fuels stocks toxic.

In light of the evidence of the crippling impacts and expense climate change is expected to cause if fossil fuels continue to be burned at current rates, divestment has become a key word for environmentalists and savvy economists alike.

There are active divestment campaigns in more than 300 campuses and 100 cities and states in the United States, with six universities and 17 cities and towns already committing to divestment, including San Francisco, Seattle and Cambridge, Mass. Additionally, about a dozen religious congregations across the country have committed to divest.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
CVX $109.11 0.00%
RDS.A $62.74 0.00%
XOM $86.93 0.00%
AAPL $124.75 0.00%
FB $80.78 0.00%

Markets

DOW 17,826.30 -279.47 -1.54%
S&P 500 2,081.18 -23.81 -1.13%
NASDAQ 4,931.8150 -75.9760 -1.52%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs