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RANDS
MEET
REASON
As the world finally embraces the moral and financial logic of decarbonisation,
South Africas fossil fuel intensive economy is a major hurdle for far-sighted and
progressive local investors, argues David le Page. The absence of easy new energy
investment opportunities remains a significant problem, but direct spend in the
built environment may be part of the solution.
OPINION:
DIVESTMENT IN
FOSSIL FUELS
LOCAL MOVEMENT
Here in South Africa, the Anglican Church and
the Desmond and Leah Tutu Legacy Foundation
have called on financial institutions to create
financial vehicles that will facilitate divestment.
The University of Cape Town, encouraged by Fossil
Free South Africa, has committed itself to some
form of ethical investment policy for its R4 billion
endowment and is looking into whether that policy
should include divestment.
THE CLINCHER
There is another great danger to being invested
in fossil fuels, and its one that might move even
the most hardened of climate sceptics. The fact
is that the worlds unburnable carbon represents
a huge economic resource, which many of us
are inadvertently gambling on, either directly or
indirectly, through savings and pension funds,
which banks and other supposedly trustworthy
financial service providers manage on our
behalf, investing via bonds and the stock market
in fossil fuels.
But the current market valuations of fossil
fuel companies are based on the assumption
that they will one day be able to burn their
declared reserves. This assumption, in a world
that is moving rapidly away from the use of
fossil fuels, is looking increasingly unlikely, and
these companies may be overvalued by as much
as 60%, according to Green America. (Indeed,
todays low oil prices are quite likely the results
of countries like Saudi Arabia rushing to sell
their oil reserves before everyone else does. In
the meantime, Saudi Arabia is also hastening to
move its economy beyond fossil fuels, having
just established a $2 trillion fund for the postoil era.)
This problem of so-called stranded assets is
a particularly relevant one for South Africans,
with our incredibly fossil fuel-dependent
economy. Already, analysis shows that a
portfolio based on the JSE Top 40 companies
would have done slightly better over the past
three years had fossil fuel-intensive stocks like
Sasol and Anglo Coal been excluded.
THE FLIPSIDE
Here enters the opportunity for those working
in the built environment and property sectors. A
number of US campuses have recently discovered
that investments in energy efficiency and oncampus renewable energy have been offering very
high effective rates of return on investment. The
University of Hawaii, for example, has invested
heavily in campus energy improvements. Cornell
University pulls energy from micro-hydro power.
On average, according to the US Green Building
Council, energy improvements yield a 19.2%
return on investments, a rate that is extremely
competitive with conventional market returns.
A local opportunity for such investment (albeit
on a very small scale) is being pioneered by the
Stellenbosch Waldorf School, which has created a
pioneering community energy cooperative offering
a likely 10% annual return on investment, launched
late last year on Indiegogo look them up at www.
thesunexchange.com.
We live in a moment of extraordinary combined
danger and opportunity. Embracing the moral and
practical logic of fossil fuel divestment and finding
the best opportunities to invest in the new energy
economy is now a vital step for us all, both as
societies and as individuals.
David Le Page is an
environmental journalist and
coordinator of Fossil Free
South Africa. He recently won
the 2015/16 Eco-Logic Award
in the Eco-Warrior category.