Scientific Beta

Financial Investigator: "We illustrate the pitfalls of fossil fuel divestment by looking at the European Union’s regulated Paris Aligned Benchmarks (PAB). Investors should be aware of the explicit and implicit consequences of adopting the PAB-regulated fossil fuels requirements."

Financial Investigator 25/10/2022

 

By Erik Christiansen, ESG Investment Specialist at Scientific Beta

"(...) Withdrawing capital from companies that produce fossil fuels can be justified for two reasons: by the wish of investors to avoid exposure to stranding risk and by the goal of incentivising these companies to transform their business models by modifying their cost of capital. For both motivations, investors need to make clear distinctions between different types of fossil fuels as their stranding risk and the pace of their net zero consistent phase-out differs widely. We illustrate the pitfalls of fossil fuel divestment by looking at the European Union’s regulated Paris Aligned Benchmarks (PAB). Investors should be aware of the explicit and implicit consequences of adopting the PAB-regulated fossil fuels requirements. (...)".

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