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Why we should stop investing in fossil fuels


Simon Sheikh says there's an urgent need to pull our personal investments out of fossil fuels.

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By Simon Sheikh, founder of Australia's first 100 per cent fossil fuel free superannuation fund, Future Super.

In July this year, Australia became the first country in the world to repeal a price on pollution. Tony Abbott’s first act as Prime Minister was to abolish the independent Climate Commission. He has also vowed to scrap the Clean Energy Finance Corporation and the Climate Change Authority, and he didn’t bother to send a government minister to international climate negotiations earlier in the year.

The carbon price and clean energy package saw Australia’s emissions drop by 13 per cent and investment in renewables increase by 25 per cent. Australians are doing their bit as well: more than 2.5 million of us now live in solar-powered homes.

But given the inherent climate scepticism of our federal government, many are now questioning the next steps for climate action. Here’s one simple truth that should guide us as we consider our future: right now, our superannuation and bank accounts are inadvertently funding an unprecedented expansion of the fossil fuel industry in Australia and around the world.

Fossil fuel companies speak the language of money. They may have Tony Abbott in their pocket, but increasingly Australians are making investment choices with the future of our planet in mind.

Scientists tell us that two degrees of warming is the maximum increase in temperature that our planet can sustain before our climate passes a tipping point that means there’s no going back from catastrophic climate change. Two degrees is the reddest of red lines for the conditions that allow life on Earth to flourish.

But the Earth has already warmed by one degree Celsius. This means almost 80 per cent of fossil fuel assets on the ledgers of fossil fuel companies cannot be burned if we have any hope of staying below the two-degree target.

The numbers are simple. To stay below two degrees, we have a maximum carbon budget of 565 gigatons. Currently, there are 2,795 gigatons held in reserve by the fossil fuel industry – almost five times the safe amount.

The huge difference between the amount of polluting resources held in reserve by the fossil fuel industry and our Earth’s ability to cope is leading many prominent figures in the economic sphere to question our understanding of risk when it comes to carbon-intensive assets. The notion of a ‘carbon bubble’ is quickly gaining traction. The risk is that fossil fuel companies may see a significant reduction in their worth as the world takes action to limit carbon pollution and invest in renewables. As Al Gore recently said: “This is potentially the largest bubble ever. If investors look in a clear-eyed, traditional risk management way, they can be in time to avoid it.”

HSBC has warned companies such as BP and Shell that they could lose 60 per cent of their value if they don’t deal with the carbon bubble.

The process to switch from risky and ethically questionable investments is easy, and already thousands of Australians are joining what is known as the ‘divestment’ movement – switching their superannuation, banking and energy products so that their money is part of the solution, not the problem.

While each of our investments alone may not add up to much, together we have the power to disrupt the status quo. We can use our power as consumers to drive investments in clean energy, get our money out before the carbon bubble hits, and send a message to the big end of town that they must take climate risks seriously when they’re managing our money.

Simon Sheikh is the former National Director of GetUp!, and founder of Fossil Free, where you can sign up to switch your savings and investments to match your ethics, and Future Super, Australia's first 100 per cent fossil fuel-free superannuation fund. You can follow @SimonSheikh on Twitter for regular updates on fossil fuel investments in Australia.