Stranded Assets: Why The World Must Leave Fossil Fuels Behind

Far be it for any fossil fuel organisation to care about public health and the environment., They’ve even stopped worrying about making sound investments. Entering on stage left, one of the many things we now have to worry about because of the climate crisis: ‘stranded assets’. 

Some governments have slowly been introducing legislation and regulations to reduce fossil fuel production and use. Banning coal fired plants, building larger electrical grids and focusing on electric transport infrastructure is all great. As time goes on, and as the Net-Zero future grows closer, we’re (allegedly) using fossil fuels less and less. 

So, what does that mean for the investments and funding that our dearest and nearest banks are giving to the fossil fuel industry? What does it mean for the new gas-fired power plant, or even that fancy new petrol-powered car you’ve bought?  

Well, to be blunt, it means that in about ten years it’s going to be worthless. These are what we call ‘stranded assets’ and they’re about to be a huge problem. 

Investing in Our Future...Collapse 

Banks use our money to invest into pretty much anything they believe will get a return. Unfortunately for us, banks have a serious eye-sight problem. They can only see up until their next shareholder meeting. This means they need to show increasing profits, or the poor, tragic millionaire who leads the company might have to leave, practically penniless (except for that multi-million dollar golden parachute). It’s a real bummer, we know. 

But what it actually means is that they’re investing in what’s profitable immediately, and don’t much care for what the future might hold.  As we can see from the 14 financial disasters in the USA from the 1920’s onwards, our financial institutions also have a loose grasp on morals, dignity and common sense. Thankfully, public money has always been there to plug the gap. 

In 2008, creative financing in the form of sub-prime mortgages and pure greed led to what was practically a worldwide collapse in the global economy. Banks held far too much of what was for them an insanely profitable venture, until suddenly it wasn’t. Banks crashed, taking your money with them, or banks were propped up by the government, taking your money with them.  

With banks eagerly investing and funding projects with a lifespan of no more than a decade or two, you’d think they might have noticed a problem. Billions upon billions of your money tied up in investments, assets and portfolios with reduced or no worth at all? Why, what ever could go wrong? 

Another financial crash? Surely not. 

Government Pilfering and ‘Redistribution’ of Wealth 

Further investment into the fossil fuels industry at this stage of the climate crisis is pointless and damaging, and not only to the environment. According to limits set by our own politicians, we’ll hit Net Zero by 2050. With this ‘hard’ limit in mind, governments will have to commit to a set of regulations blocking new fossil fuel expansion or exploration. Or the increasing pace of renewable energy development will continue to make fossil fuels more expensive than renewables, and possibly even obsolete. Either way, these investments are quickly becoming worthless. 

Here at Bank.Green, we wouldn’t want to suggest that various world governments have been completely inept at solving the climate crisis. However, thanks to the ‘donations’ and the lobbying efforts of the fossil fuel industry, politicians have clearly been in no hurry to enact actual, urgently needed change. Thanks to this, banks have been funding entirely worthless and extremely damaging projects for years, all with your money. 

With the amazing political masterminds of our generation focusing on the yet again brilliant strategy of ‘kick the can down the road’, future generations can look forward to $1.4 trillion dollars worth of stranded assets. Who will pay for this rapid and ‘unexpected’ devaluing of the fossil fuel industry? If we’re to judge by past experiences, it’ll be us.  

Have a pension fund? Maybe some investments for your retirement? That’s unfortunate, because those funds are urgently needed to fix an ‘unexpected and unforeseeable’ problem, in the form of stranded assets. People in the UK and the US stand to lose around $756bn. 

Save Your Pension, if Not the Environment 

Your pension, whether public or private, is undoubtedly held by or controlled by a bank or other financial institution. Almost all of the big ones are up to their necks in funding the fossil fuel industry, in an entirely un-shocking display of sickening greed and selfishness. 

It’s worth asking the question about what happens to your retirement savings once a bank collapses under the weight of its own incompetence. Once a financial institution has invested your money into a project with little or no value, and soon to be far less, you might as well consider your money lost. With little more than wishful thinking and an insatiable hunger for short-term profits, the big banks are essentially tossing your money into a black hole. 

Your specific pension may never have been invested in the fossil fuel industry, but if it’s controlled by an institution with ties to oil, gas, coal in any way, then it’s entirely possible it will be lost. Private pensions worldwide, such as the Superannuation pensions in Australia and New Zealand, the RRSP in Canada and the 401k in the USA are all linked to industry. If a large and heavily funded industry such as fossil fuels collapses, then it may very well take banks, and your pension with them. 

Killing Our Communities with Funding 

A huge number of our industries rely on fossil fuels to operate, meaning jobs and communities are at stake rather than just the profits of the omnipresent stakeholders. Fossil fuel intensive industries such as steelworks, plastic producers, and horticulture have begun to transition towards renewable energy, but some industries won’t be able to make that choice. 

Companies that focus solely on the oil, gas, and coal markets cannot transition without a drastic change of what the company actually is. They are unlikely to survive a complete and utter loss of value in their products and stock prices. 

We know this because it’s already happened. In the 1980s, the British government decided to move on from deep coal mining to more efficient fossil fuels such as natural gas, because coal mining simply wasn’t keeping up. It was unprofitable and required large government subsidies. In 1984, miners all across the United Kingdom went on strike demanding that the mines be kept open. Around 140,000 miners stopped working and a war against their own government ensued.  Unfortunately for the miners, Margaret Thatcher was not sympathetic to their cause and the strike was defeated in a year. Over the next 20 years, almost all the deep coal mines were shut. 

An estimated 222,000 miners lost their jobs from 1984 up to 2004. These areas still suffer from degradation and poverty today. Without any attempt to transition workers or older industries to newer methods and technologies, these jobs simply stopped existing. 

In many rural areas, communities are built around a single industry such as coal mining, factory production work or other fossil fuel dependent industries. Continuing to invest in these projects, far from securing the jobs and livelihoods of at danger communities, puts them at further risk. Many jobs in the purely fossil fuel industry probably won’t exist for very long. 

Now, for the big question. Who invests heavily in those purely fossil fuel industries? Why, it’s your neighbourhood bank, of course. 

What Could the Banks Possibly Do? 

In contrast to oil and petrochemical companies, banks have a much easier time transitioning away from creating stranded assets. After all, they could simply stop funding their creation. Now, we understand that this would be quite the moral turnaround for a bank, but life as we know it does hang in the balance. 

Putting a stop to funding fossil fuel organisations, whatever industry they might operate in, can put an end to a large amount of emissions, and these soon-to-be stranded assets. Putting the pressure on these companies to transition to renewable energies and environmentally friendly practices would do even more.  

After all, banks hold the purse strings for a great many companies and organisations. If they need money, they will do what they’re told to do. That’s where we come in. If we want our banks to dictate their terms to the fossil fuel industry, we need to dictate our terms to them. Never forget, it’s your money funding the climate crisis, against your own wishes. 

Changing Your Mindset 

We all love to see the word ‘investment’ coming from our governments, most of the time. It’s always great to see local investments, it can only mean good things to come. More jobs, more services, more everything.  

Reading a bit further along you might see the words ‘power plant’ or ‘gas-fired’ or ‘energy project’. More supply means cheaper supply, which is good for your pocket. 

But the next time you see these words, and you know they’re not green, we’d like you to start thinking differently. How about ‘massive waste of public resources for limited gain’ and ‘future financial crash in the making?’.  

It tends to put a different mood on these public announcements governments like to make, but it’s a lot more realistic. It’s time for banks to start putting our money where their mouth is and make up for all that green-tinged rhetoric on their websites. Time to change a ‘stranded’ asset into a real one, one that’ll have a serious impact in reducing the climate crisis. 

Bank green or make your bank green for you.