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Mitigating the Carbon Risk

The bell is tolling for cheap carbon, and this could present a risk to companies with significant carbon reserves on their balance sheets. A small but growing movement is under way to divest from the world's most carbon-intensive companies.

This isn't just the province of a radical fringe. President Obama called for divestment -- among other things -- in his climate change speech this past June. Norway's state pension fund just announced that it would exclude major coal and tar sands companies from its holdings.

Shareholders who aren't divesting are getting active. In this year's proxy season, Alpha Natural Resources (NASDAQOTH: ANRZQ  ) and CONSOL Energy (NYSE: CNX  ) were forced to include shareholder resolutions on their ballots related to fossil fuel reserve valuation risks.

HSBC recently conducted an analysis of European oil majors' at-risk carbon reserves. The study found Norway's Statoil  (NYSE: STO  ) to be the worst affected, with approximately 17% of its market capitalization at risk. HSBC also calculated that 6% of BP's (NYSE: BP  ) reserves are at risk, along with 5% of Total's (NYSE: TOT  ) .

John Vechey of PopCap Games recently joined The Motley Fool for a climate change summit. Among his guests were Stu Dalheim, vice president of shareholder advocacy at Calvert Investments, and Todd Larsen, director of corporate responsibility for Green America. In the video below, Dalheim and Larsen consider the risks facing carbon and oil companies. How would they fare in a carbon-constrained environment? Change is likely to come, whether in the form of policy or climate events, and may be abrupt when it does.

With carbon at risk, lower-carbon fuels become a lot more attractive. One home-run investing opportunity has been slipping under Wall Street's radar for months. But it won't stay hidden much longer. Forward-thinking energy players like GE and Ford have already plowed sizable amounts of research capital into this little-known stock... because they know it holds the key to the explosive profit power of the coming "no choice fuel revolution". Luckily, there's still time for you to get on board if you act quickly. All the details are inside an exclusive report from The Motley Fool. Click here for the full story!

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  • Report this Comment On July 30, 2013, at 8:13 AM, EllenBrandtPhD wrote:

    Isn't this the exact same article posted two or three times before?

    So I repeat: Those who wish to trade or invest based on their Green political views are welcome to do so.

    But the - still misunderstood in North America - story for STO now not only has nothing to do with the focus of this biased article, nor - this is the important part - with traditional methods of trading based on earnings!

    STO needs to be seen now in light of CURRENCY and the UPCOMING NORWEGIAN ELECTION, only about 4 1/2 weeks away.

    To repeat the points I made in the comments stream on earlier articles:

    *** STO already moves with the NOK, the Norwegian Krone, on a day to day basis, in anticipation of the election. When the NOK weakens against the USD and EUR, STO is generally down. When the NOK strengthens against the USD and EUR, STO is generally up.

    *** In recent weeks, the NOK has rebounded very nicely off its annual lows, because the Norwegian election is closer and closer.

    *** Erna Solberg, the Christian Democrat, is leading the incumbent Social Democrat, Jens Stoltenberg, by as much as 30 points in many polls.

    *** Solberg wants a stronger NOK, possibly a much stronger NOK. Think of her as the Norwegian Angela Merkel.

    *** A Solberg election will bring in the most business friendly - and Statoil friendly - Norwegian government in over 50 years, perhaps 70 years.

    *** Solberg wants to slash business taxes, including STO taxes. With a decisive victory, she will have the mandate to do so.

    *** The main reason STO has lagged its European peers the past half year is because of the last round of highly confiscatory taxes imposed against it by the socialists and Stoltenberg.

    *** STO would have had a much better earnings quarter announced last week, if not for humongous derivatives trading losses totally linked to an abysmally low NOK against the EUR and USD.

    *** In addition to a Solberg victory bringing lower taxes for STO and a possibly much stronger NOK, Solberg has made it a campaign plank - a promise - to spin off a substantial share of the Norwegian government's stake in Statoil.

    *** Solberg has vowed to get a "very good price" - her words - for this spun-off stake, which most analysts who have commented on it believe would be at least 30 dollars in USD terms - maybe more.

    *** The stock is under 22 now. And the stake spinoff will start being a hot topic in earnest immediately upon Solberg's election next month.


  • Report this Comment On July 30, 2013, at 9:20 AM, EllenBrandtPhD wrote:

    By the way - this is Tuesday, pre-market - we are seeing the return of some very illogical, childish, silly, but disturbing Pairs Trading return in various sectors and subsectors based on nothing more than Jesus C. Cramer's "charitable trust" holdings and other stocks touted by various CNBC insiders plus, of course, the dastardly Bird Game led by Renaissance and Ameritrade's prop desk, mostly staffed by adolescents.

    This is not only not nice, it truly hurts most market participants levels of confidence in Wall Street and the financial services sector - something I don't think we really need right now.

    The US hasn't really had our very own Nick or Fabrice yet. Are we itching for one? (The closest we've come is the London Whale incident and US involvement in Barclay's.)

    But perhaps some of Da Boyz enjoy being detested.

  • Report this Comment On July 30, 2013, at 12:37 PM, moneytrail wrote:

    Sara –

    When you present Bozo the President’s call for divestiture as an example of the “non-radical” nature of Green calls for divestiture of hydro-carbon investments, you clearly establish your credentials as a low information investor who probably emanated from the Low Information Voters who re-elected a President who understands less about economic matters than any pres since Carter. Bozo the Pres IS a radical, which is demonstrated by his insistence on pursuing economic policies that are destroying the fabric of the shrinking American middle class, sadly, accelerating the number of Americans living below the poverty level, and unhinging with the US economy from its growth morings.

    Regarding divestiture based on Agenda Science, I encourage all who are blindly flailing at imagined demonic companies, such as those who produce energy to run the global economy and produce wealth and benefits for all who are touched by their products, sell away! There are many willing to gobble up these stocks at the depressed prices caused by selling based on Agenda Science.

    (f)ool on Sara!

  • Report this Comment On August 05, 2013, at 4:44 PM, EllenBrandtPhD wrote:

    (Mini) low-volume Bear Raid in STO today, explained by long piece in something called "Oil and Gas Financial Journal," which essentially makes the case for supporting the Socialists' vision of gutting Statoil and the energy sector in general.

    Hey - once again, fine with OUR "side."

    This is a major reason why Erna Solberg has a 30 point lead.

    I will repeat - and repeat - and repeat:

    If you believe Jens Stoltenberg and his "Green" credentials are going to prevail, you should be Short the Norwegian Krone and Short Statoil.

    If you think Erna Solberg is going to be elected - as every single poll does - by a landslide, you should be out of your mind Bullish on both the Norwegian Krone (NOK) and STO.

    I am very happy to have Statoil serve as a referendum.

    And it is also amazingly revealing, is it not, that the Script Bots on the Statoil Yahoo Finance board seem to be mostly pro-"Green" and anti-STO?

    Go ahead and show everyone, Fellas, just what side of the fence is on, when it comes to purchasing Yahoo Finance boards for fun and (baby) games.

    Bring it on!

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