Ethical investments?

I just got around to joining the superannuation program offered by my employer in the UK and so I thought I’d investigate fossil fuel divestment. After all, I don’t want my, er, £364 going into the pockets of fossil fuel companies. I’m sure fossil fuel companies are shivering with fear just at the thought of losing my business right now 🙂

But my paltry sum is beside the point. The bigger issue is that we can only emit another 500 gigatons, or thereabouts, of carbon dioxide if we are to stay below 2°C of warming. The Trillionth Tonne website has a good interactive counter which demonstrates how much time we’ve got and it’s not very much:

screenshot.

What is really frightening though is that fossil fuel companies have enough carbon in their reserves to emit about 2,795 gigatons of carbon dioxide. Even more concerning is that these reserves are reflected in their share price. They are effectively betting on being able to burn the whole lot. If we accept that we must tackle climate change then these companies are overvalued and we now have what many refer to as a carbon bubble. An organisation that is monitoring this carbon bubble is The Carbon Tracker. They say:

Currently financial markets have an unlimited capacity to treat fossil fuel reserves
as assets. As governments move to control carbon emissions, this market
failure is creating systemic risks for institutional investors, notably the
threat of fossil fuel assets becoming stranded as the shift to a low-carbon
economy accelerates.

This afternoon I logged into my newborn superannuation account to switch assets. Ethically I don’t want to invest in fossil fuels but it also seems like a risky asset to invest in anyway. I began by searching for ethical funds and there are quite a few of them. It’s not always obvious what they mean by ethical so you really need to dig a bit to see where they put their money. What I found was quite surprising. Every single fund which described itself as ethical, still has investments in fossil fuel companies. How is this ethical investing? If they consider investments in oil and gas ethical, then what exactly is their definition of ethical? I have a cynical idea that it might mean good corporate governance and sound business practices which as far as I’m concerned ought to be a part of every publicly listed company and not just those which describe themselves as ethical.