Written By: Emma Websdale
Discussing the financial and investment implications of counting fossil fuels as valuable assets, Gore has urged individuals, investment funds, and institutions to divest from fossil fuel companies, citing global scientific community findings to support his conclusions.
In an interview leading up to Al Gore’s Climate Reality Project, a live-streaming multimedia event, Gore discusses the economic impact of climate change, cautioning that investors should divest from fossil fuel companies before the “carbon bubble” bursts.
“There are $7 trillion worth [of] carbon assets on the books of multinational energy companies today. There are another $14 trillion owned by sovereigns [such as] governments in the Persian Gulf region. But [to consider only] the public companies: The valuation of those companies and their assets is now based on the assumption that all of those carbon assets are going to be sold and burned. And they are not”, warns Gore.
He adds, “The global scientific community has just reaffirmed that no more than one-third [of the carbon assets] can ever possibly be burned without destroying the future.”
Al Gore, an investor and co-founder of Generation Investment Management and a senior partner at the investment firm Kleiner Perkins, warns about the risks of a looming “carbon bubble”.
“’Bubbles’ by definition involve [many] asset owners and investors who don’t see what, in retrospect, becomes blindingly obvious. And this carbon bubble is going to burst.”
According to Gore, carbon assets (oil and gas reserves controlled by publicly traded energy companies), are today’s equivalent of subprime mortgages—artificial valuations based on the assumption that people who couldn’t make a down payment would never default on a loan.
“People can make short-term profits playing the psychology of the markets”, said Gore. “But if you’re a long-term investor and you do not take into account the stranded-assets potential [of] carbon-based equities and debt instruments, in my view, you’re making a mistake.”
With a recent study from Oxford University warning that a current divestment campaign is damaging the reputations of fossil fuel companies coupled with new report from Ecofys concluding that phasing out greenhouse gas emissions by 2050 is “technically and economically feasible” with the use of renewable energy, Gore’s recommendations on fossil fuel divestment come at a time of rapidly increasingly public discussion on the topic.