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Divestiture and Fossil Fuels

Divestiture and Fossil Fuels: A total of 436 institutions plus hundreds of family offices, together representing $2.6 trillion in assets have committed to divest themselves from fossil fuel companies as of September 2015. Twelve months ago, those numbers were 181 institutions and $50 billion. With this staggering growth, the divestment movement can no longer be referred to as a fringe movement. Nonetheless, both sides of the divestiture argument are deploying blunt nosed instruments to address what really is a far more nuanced question of risk and return. Eighteen months ago, we sat down with two of the largest pension systems in the U.S. and walked them through our thoughts based upon the

Fossils on the Beach (Part II)

Continued from part I, previously posted Differing prospects for Rising U.S. Oil Production The world energy organization (IEA) is actually taking a fairly conservative view with respect to just how much U.S. tight oil production will be able to fill declines elsewhere around the world oil markets (a view that the U.S. EIA seems to largely support). Yet, history would suggest that both are bullish in their assessment with the EIA even more so than the IEA (based upon historic downward revisions). Note also that EIA includes not only conventional and tight oil, but also natural gas plant liquids and ‘other” products in its forecasts. It takes just 35 rigs operating in conventional fields in

Fossils on the Beach (Part I)

Fossils on the Beach: Risks Relating to Ongoing Investment Reliance on Fossil Fuels We rely heavily on fossil fuels to power today’s global economy. Coal, but even more so, oil and gas are energy-dense, transportable and can be used in transport and to produce electricity. Our heavy reliance on coal dates back to the 1890s, but by 1970 we had already transitioned most of that from coal to oil and gas. As the following chart shows, we are capable of making fairly rapid shifts in our overall energy mix when newer energy forms prove themselves cheaper or better. In fact, history would suggest that we are within a decade or two of making another fundamental shift in our energy mix. But why

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