Are Fossil Fuel Investments Doomed?

New rules are to allow the UK's workplace pension schemes to pull out of investments in energy companies (oil, gas, coal for example) in order for them to take a moral stance on companies that may be contributing negatively to climate change.

Until recently, pension schemes have been required by law to seek the best returns for their members, irrespective of the way they are earned.

The government will now implement new rules that will enable pension schemes to take ethical concerns and environmental problems into account.

Approximately £87 Billion is invested in pension schemes in the UK each year, with much of that invested in energy companies such as BP & Shell (Patrick Collinson, The Guardian, December 2017).

However, as countries battle climate change, will fossil fuel investments become increasingly less attractive?

The fossil fuel divestment movement has been thrust into the mainstream by the fact that Norway's central bunk, which runs Norway's $1 Trillion sovereign wealth fund recommended that the wealth fund's current oil & gas investments should be reduced and that all future purchases should be cancelled. This is despite the fact that the fund itself was built as a result of Norway's oil and gas reserves.

In addition, French financial services firm AXA has announced that it will withdraw from coal related businesses and will end insurance cover for some of the more contentious oil pipelines in the United States.

More than 800 companies with $6 Trillion in investments have made the commitment to eliminate their exposure to fossil fuels.

However, many energy companies may in fact drive the change to renewables, making the movement moot according to John Belgrove of Aon: "If one looks at the big picture on fossil fuels, the biggest renewable energy developments are coming from the very same firms that extract fossil fuels".

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The value of investments and income from them may go down as well as up and you may not get back the original amount invested.

Information is based on our current understanding of taxation legislation and regulations which is subject to change.