Gas producers snub investor warning

Gas producers have snubbed a group of big-hitting institutional investors who have written to them warning that tightening global carbon emission limits could strand fossil fuel investments and “gut” their share prices unless they take defensive action.

Environmental consultancy Ceres organised 70 institutional investors, representing about £2 trillion in assets, to write to 45 major oil and gas producers warning them of the threat to fossil fuel investments from tightening global restrictions on carbon emissions. The investors wanted to know how aware the oil and gas producers were of the risks and what measures they were taking to address them – for example, making alternative investments.

Ceres director Andrew Logan claimed responses had been “encouraging so far” but conceded a few companies had “dismissed the issue out of hand.”

The letter from a group including investors from the US, Britain and Austrailia highlights the possibility that national and global agreements to limit carbon emissions would force fossil fuel companies to leave large oil and coal deposits in the ground. “If national or global policies require steep cuts in the use of fossil fuels, they could gut the value of those companies that get stuck with unburnable resources they can’t cash in,” said Logan.

The letter cites research findings by investment bank HSBC that conclude carbon constraints could wipe up to 60 per cent off the market value of oil and gas companies, “because a portion of their proven reserves would become stranded assets.”

The investors point to findings by the International Energy Agency that the internationally agreed 2°C cap on global warming requires that no more than 30 per cent of proven fossil fuel reserves can be used before 2050 unless carbon capture and storage is deployed widely.