There is by now a library of evidence that fossil fuels have not been a good investment over the past decades. On top of this, future returns from the industry are highly likely to suffer due to an increasingly rapid decline in demand as renewables take over, and high risks of stranded assets as investors leave en masse at unpredictable tipping points. A summary of the evidence can be found in the article Why moving away from fossil fuels makes pure economic sense by Thomas Da Costa Vieira, a political economist at the London School of Economics and Political Science. (A more detailed version of the case can also be found in the document prepared for the legal case against USS – see here.). The key points of the argument are as follows:

• Diverse portfolios which exclude fossil fuel assets have historically matched or outperformed traditional portfolios containing fossil fuel assets.
• A joint Imperial College Business School and International Energy Agency report found that that since 2010, across all portfolios that were considered, ‘renewable power generated higher total returns relative to fossil fuels’. 
• Other studies in the US, Canada and the Eurozone have reached the same conclusions.
• The recent temporary energy crisis, which significantly improved fossil fuel returns, has also greatly accelerated the transition to renewables, prompted by their relative cheapness and by energy security concerns; this has amplified further the medium and long-term attractiveness of renewables.
• The overall demand for fossil fuels will soon reach a peak. This has already happened in China for oil, due to high electric vehicle use. Fossil fuel capital expenditure now will release further product when demand is falling, risking profits, disorderly exits from the sector, and stranded assets.

DIvestUSS

24^th October 2023