A woman wears as mask while walking in a neighborhood next to a coal-fired power plant on Nov. 26, 2015, in Shanxi, China.
Kevin Frayer/Getty Images
The market is encouraging pension funds and institutions to jettison fossil fuels from their portfolios, waving a clear warning flag to investors about the financial future of oil and coal companies.
Fossil fuel stocks are performing poorly compared to the market as a whole -- and perhaps most importantly, compared to renewable energy stocks, said Michael Liebreich, chairman of Bloomberg New Energy Finance, at a summit on climate risk put on by the nonprofit sustainability advocacy group Ceres.
Referring to investors who won't divest and continue to own fossil fuel stocks, Liebreich pointedly said that the market was "divesting through value destruction" -- in other words, cutting their holdings in traditional, polluting energy companies by slashing their value.
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Renewable energy stocks have dramatically outperformed fossil fuels.
Bloomberg New Energy Finance
Over the last 10 years, the S&P 500 index is up just over 50 percent. Yet energy stocks over the same time period have risen only 1.3 percent.
For big investors to simply allow their holdings in big energy companies to fall toward a vanishing point of worthlessness is deeply irresponsible, observers say.
Indeed, former Vice President Al Gore, who shared the Nobel Peace Prize in 2007 for his work on climate change, compared the risk that some fossil fuel companies' assets will become worthless to the danger of mortgage-backed securities, whose collapse triggered the 2008 financial crisis.
The nonprofit research group Carbon Tracker estimates that if the world changes its energy sources to keep climate change below 2 degrees Celsius, $2 trillion in fossil fuel assets will be stranded -- that is, unusable, far less valuable, and in some cases, liabilities.
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Climate change seen from around the world
(01 of05)
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A boy whose house was destroyed by the cyclone watches an approaching storm, some 50 kilometres southwest of the township of Kunyangon. Further storms would complicate relief efforts and leave children increasingly vulnerable to disease. In May 2008 in Myanmar, an estimated 1.5 million people are struggling to survive under increasingly desperate conditions in the wake of Cyclone Nargis, which hit the southwestern coast on 3 May, killed some 100,000 people, and displaced 1 million across five states. Up to 5,000 square kilometres of the densely populated Irrawaddy Delta, which bore the brunt of the storm, remain underwater. (credit:Unicef)
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In 2003 in Djibouti, a girl collects water from the bottom of a well in a rural area in Padjourah District. Drought has depleted much of the water supply. (credit:Unicef)
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On Sept. 11, 2011, a man carries his daughter across an expanse of flood water in the city of Digri, in Sindh Province. By Sept. 26 in Pakistan, over 5.4 million people, including 2.7 million children, had been affected by monsoon rains and flooding, and this number was expected to rise. In Sindh Province, 824,000 people have been displaced and at least 248 killed. Many government schools have been turned into temporary shelters, and countless water sources have been contaminated. More than 1.8 million people are living in makeshift camps without proper sanitation or access to safe drinking water. Over 70 per cent of standing crops and nearly 14,000 livestock have been destroyed in affected areas, where 80 per cent of the population relies on agriculture for food and income. Affected communities are also threatened by measles, acute watery diarrhoea, hepatitis and other communicable diseases. The crisis comes one year after the country�s 2010 monsoon-related flooding disaster, which covered up to one fifth of the country in flood water and affected more than 18 million people, half of them children. Many families are still recovering from the earlier emergency, which aggravated levels of chronic malnutrition and adversely affected primary school attendance, sanitation access and other child protection issues. In response to this latest crisis, UNICEF is working with Government authorities and United Nations agencies and partners to provide relief. Thus far, UNICEF-supported programmes have immunized over 153,000 children and 14,000 women; provided nutritional screenings and treatments benefiting over 2,000 children; provided daily safe drinking water to 106,700 people; and constructed 400 latrines benefiting 35,000 people. Still, additional nutrition support and safe water and sanitation services are urgently needed. A joint United Nations Rapid Response Plan seeks US$356.7 million to address the needs of affected populations over the next six months. (credit:Unicef)
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A girl carries her baby sibling through a haze of dust in Sidi Village, in Kanem Region. She is taking him to be screened for malnutrition at a mobile outpatient centre for children, operated by one nurse and four nutrition workers. The programme is new to the area. Several months ago, most children suffering from severe malnutrition had to be transported to health centres in the town of Mundo, 12 kilometres away, or in the city of Mao, some 35 kilometres away. In April 2010 in Chad, droughts have devastated local agriculture, causing chronic food shortages and leaving 2 million people in urgent need of food aid. Due to poor rainfall and low agricultural yields, malnutrition rates have hovered above emergency thresholds for a decade. But the 2009 harvest was especially poor, with the production of staple crops declining by 20 percent to 30 percent. Food stocks have since dwindled, and around 30 percent of cattle in the region have died from lack of vegetation. (credit:Unicef)
(05 of05)
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A boy carries supplies through waist-high floodwater in Pasig City in Manila, the capital. On Sept. 30, 2009, in the Philippines, over half a million people are displaced by flooding caused by Tropical Storm Ketsana, which struck on Sept. 26. The storm dumped over a month's worth of rain on the island of Luzon in only 12 hours. The flooding has affected some 1.8 million people, and the death toll has climbed to 246. (credit:Unicef)