The reputations of companies linked to fossil fuels are at immediate risk from a fast-growing divestment campaign, one of Europe’s biggest asset managers has warned.

Only a quarter of existing, exploitable fossil fuel reserves are burnable if global warming is not to exceed dangerous levels, according to recent analyses. Campaigners have called for divestment on moral grounds but, if governments fulfil their pledges to curb climate change, trillions of dollars of coal, oil and gas held by investors would become worthless.

“[That] climate risk is becoming synonymous with reputation risk,” said Luisa Florez, senior responsible investment analyst at Axa Investment Managers, which manages over €600bn (£459bn) of assets. “Undoubtedly, there are a number of factors behind the recent decline in oil prices, such as shale gas development. Nevertheless, moral issues are also playing a growing role, with the divestment movement steadily gaining traction amongst investors across the globe.”

Florez said the fossil fuel divestment campaign has echoes of the anti-apartheid divestment movement of the 1980s which targeted South Africa. She said the new campaign had already led, for example, to the big four Australian banks losing AU$400m (£216m) worth of fossil-fuel business.

“It is often said that climate and carbon themes are not financially material risk factors in the short to medium term. [But] we believe that climate risk should not be neglected in the investment decisions that investors are making today,” Florez said. “It should also be considered as an investment opportunity, with the potential to offer good financial returns.”

“The opportunity now exists to consider the low-carbon-economy theme, thanks to economies of scale in the renewable sector,” she said. The plummeting cost of solar energy led to a surge in green energy investment in 2014.

Florez said there were now “proven pathways to invest in attractive names offering green and energy efficient products through green bonds”, issues of which tripled to $37bn in 2014.



Axa IM’s warning comes as a flurry of reports suggesting a gloomy future for coal, the most polluting of all fossil fuels and heavily represented on London stock exchanges.



The rapid expansion of renewable energy combined with weakening electricity demand are driving a “structural decline” in coal markets, particularly coal exported to power stations, according to the Institute for Energy Economics and Financial Analysis (IEEFA), a US research group.

The IEEFA report concluded India cannot afford to continue importing coal, with its finance minister considering ending imports entirely within two to three years. China’s demand for coal will peak permanently by 2016, with imports falling by 11% in 2014; US coal exports fell 20% in 2014, the group said.

“Coal companies’ underperformance against the global equity market is unprecedented,” said the IEEFA’s Tim Buckley. “A more than 50% decline in coal prices has seen most listed coal companies globally lose 80-90% of their equity market value in the last four years. While the sun will undoubtedly rise for renewable energy in 2015, for coal, there remains a lot further to fall.”

In the European Union, power sector carbon emissions fell by 8% in 2014, according to official data analysed by the London-based thinktank Sandbag. The bulk of the decline resulted from reduced coal burning as electricity consumption fell. A separate analysis, by Carbon Brief, found that in 2015 the UK’s coal use is set to fall to levels not seen since the 1850s, having fallen 20% in 2014.