The bankruptcy of Peabody Energy, the world’s largest publicly traded coal company, shows just how hard it is for coal firms and their backers to make money in a world transitioning to cleaner fuels.
But it’s not just coal that faces an existential crisis. Eventually, all fossil fuel firms will face the same pressure that brought down Peabody.
The Rockefeller Brothers Fund used to invest in fossil fuel. Created by the grandsons of Standard Oil founder John D. Rockefeller, fossil fuel was a familiar space.
Yet we’ve recently decided to sell all our shares in fossil fuel companies — not just coal, as has been fashionable of late — but oil and gas as well.
For us, it’s not just a moral imperative, but it makes good financial sense.
Getting out of coal was easy. Mining coal leaves mountains with no tops, pits of contaminated waste, and streams so acidic that no fish can live. Burning it is one of the single greatest contributors to greenhouse gases. Plus, it poisons our people. Each year pollution from coal-fired power plants kills an estimated 13,000 Americans.
Dumping coal stocks also saves money. Nowhere is this more apparent than Peabody. In 2011, the company’s stock was worth over $1,000 a share. Now it’s worth nothing.
It’s not just Peabody. Market Vectors Coal ETF — a basket of coal company stocks — has lost 85% over the same period. Selling coal was a smart financial decision.
Now a similar situation is playing out for oil and gas. The same forces that helped curtail coal use are now aligning against the other fossil fuels, even as natural gas makes a bid to replace coal as the nation’s dominant fuel for making electricity.
Just as concerned citizens packed utility board hearings, wrote countless letters to local politicians, and organized community opposition to dirty coal plants, they’ll do the same to oil and gas. They’ve already blocked the Keystone Pipeline expansion and helped persuade the Obama administration to take large parts of the Atlantic Coast off the table for drilling. It’s getting harder and harder to persuade the public to allow more dirty energy infrastructure.
And just as mercury regulations helped close all those coal plants, new regulations to cut carbon pollution will curtail the use of oil and gas. If the world wants to keep global warming in check, there’s no way those companies will be allowed to burn all the reserves currently baked into their share prices. Even at today’s depressed prices, oil and gas companies are overvalued.
But most importantly, just as coal was driven from the market by cheaper, cleaner burning natural gas, so, too, will oil and gas be driven away by renewables.
For generating electricity, wind and solar are cleaner and quickly becoming cheaper than even natural gas.
For vehicles, one needs to look no further than the amazing sales of Tesla’s $35,000 Model 3. Over 325,000 cars worth $11.4 billion were ordered in the first week alone, the single biggest one-week launch of any product ever, according to Tesla.
It’s easy to see why. Electric vehicles are faster than conventional ones. They’re also quieter and more comfortable, and they break down less. Quite simply, they are a better product.
We are in the midst of one of the largest transitions history — the transition from dirty energy to clean. There’s a lot of money to be made, and a lot of money to be lost. As the head of a foundation that supports social change, I’m happy we’ve divested fossil fuels stocks to help the planet and its people. As an investor, we’re moving out of fossil fuel stocks to make sure our money is on the side that wins.
