Would you trust environmentalists with your money? That’s what fund managers must ask themselves when pressured to divest of fossil fuel stocks. There is an estimated $5 trillion worth of investments in fossil fuels. Moving these investments to environmentalists-approved industries would be quite a challenge. A new Bloomberg paper acknowledges the challenges while the “Skeptical Environmentalist” himself, Bjorn Lomberg says in a column:
Remember, we don’t burn fossil fuels to annoy environmentalists but because they power almost everything we like about modern life: they keep us warm, feed us, transport us, and likely provide the electricity you are using to read here on LinkedIn. Today, we get 81% of our energy from fossil fuels – and even in 2035, fossil fuels will provide 79% of a much higher energy consumption. Cheap power is an amazing way to improve living standards – over the past 30 years, China has lifted 680 million people out of poverty, not through inefficient wind turbines, but with lots of cheap (and polluting) coal.
Annoying environmentalists is always fun for its own sake, but Lomberg is right; fossil fuel powers modern life and will for many years to come. The divestiture movement will not change that. And what would happen to investors’ money if they did divest, particularly compared to the result had they kept their money in fossil fuels? The following chart from the same Lomberg piece says it all:
To paraphrase Margaret Thatcher’s famed comment about socialism, the problem with hedge funds, institutional investors or others divesting in fossil fuels and investing in “green” energy is that they will eventually run out of other people’s money (on top of their own).