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 (NYSE: ANR) and CONSOL Energy (CNX 0.25%) 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 (EQNR -0.57%) to be the worst affected, with approximately 17% of its market capitalization at risk. HSBC also calculated that 6% of BP's (BP -0.38%) reserves are at risk, along with 5% of Total's (TTE 1.10%).
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.
