Companies involved in the extraction of fossil fuels, the largest of which were responsible for around two-thirds of global carbon dioxide emissions in 2013, are now facing a growing movement to divest from their businesses. . The promoters of this global initiative, born in 2010 on American campuses, aim to fight against global warming by compressing financial flows to the fossil fuel industry.
This movement, now relayed by numerous non-governmental organizations (NGOs), philanthropic and religious institutions, large banking conglomerates, but also by pension funds, aims to encourage investors to abandon their investments in the fossil fuel industry. The number of institutions committing to withdraw their capital has grown from 50 in 2013 to around 1,500 today, making it the fastest growing divestment movement in the history of financial markets, after the divestment movement linked to apartheid policies in South Africa.
Among the financial institutions that have undertaken to separate from their investments in companies producing fossil fuels, we find in particular international leaders such as BlackRock, JPMorgan, Société Générale and Deutsche Bank.
## Unexpected stock market influence
Intuitively, we would expect this move to stigmatize the fossil fuel industry to lead to reduced investor demand for the securities of companies involved in coal, oil and gas extraction, which should good weaken their stock market profits. However, our research recently published in The Energy Diary shows the opposite.
Indeed, it appears from our estimates that the attention of investors for the movement of divestment from fossil fuels does not exert an influence on the returns of the assets targeted by the. Even more surprisingly, and contrary to what might have been expected, the effect appears to be positive.
This result a priori This counter-intuitive argument is consistent with research findings on “vice” stocks (casinos, tobacco, alcohol and pornography) which tend to show that stocks disadvantaged by a portion of investors for moral reasons exhibit stock market advantages greater than the average.
Read also: Why does the rise of “green finance” have no effect on the increase in CO₂ emissions?
One of the possible explanations is that the attention given to the movement of stigmatization of the companies of the fossil energy industry harms their reputation and increases the risk of a proposed regulatory evolution, which leads the investor to demand a level higher profitability to bear the risk that has become more substantial on this type of asset.
Effectiveness yet to be determined
From a purely stock market point of view, the conclusions of our study seem to indicate that efforts aimed at discriminating against the fossil fuel industry have an effect contrary to that proposed, by driving up the profitability of the securities of the companies concerned.
However, we are not prepared to conclude definitively that this movement is ineffective as a persuasive mechanism against the extraction and exploitation of coal, gas and oil reserves. Indeed, the divestment movement and the stigmatization that it could potentially serve to intensify other types of constraints that weigh on companies involved in the extraction of fossil fuels.
For example, what is the effect of such a movement on the cost of bank debt of these companies? Moreover, what about its influence on their environmental policies? Elements of answers to these few questions seem necessary to appreciate, in a more global perspective, the real impact of the movement of divestment from fossil fuels.
The original version of this article was published on The Conversation, a nonprofit news site dedicated to sharing ideas between experts and mainstream scholars.
Read more :