Climate Change – The Mother of All Market Signals?
I agree with Greg Ip that pain and disruption comes when investors put their faith in beliefs that are proven wrong (“Behind the Pain: Misplaced Faith”, January 14, 2016, (p.A1). But his list of erroneous beliefs of the past decade omits an important one: the belief that oil prices and markets generally have nothing to do with climate change. My fear is that investors who believe that they can understand oil markets WITHOUT factoring in climate change will be proven wrong.
Actor Mark Ruffalo has called the Paris Climate Agreement: “the mother of all market signals”. What if the drop in oil prices is ushering in a transition to a clean energy future where oil deposits will be left in the ground becoming stranded assets, estimated by Citigroup analysts to be valued at $US100 trillion? What if investors divest from fossil fuel companies and reinvest in carbon-free assets? No wonder investors are ditching money managers when those managers fail to even consider the rising tide of investment strategies that take the risks of climate change seriously.
Trudy Heller, Ph.D.
Philadelphia, PA USA