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HSBC flags fossil fuel investment risks to investors

Date: 1 May 2015

Photo of oil pipeline

HSBC has warned of fossil fuel reserves becoming 'stranded assets' according to a private report reported by Newsweek. It says that fossil fuel companies may become 'economically unviable' as moves are taken away from carbon-based energy sources with the potential that this will mean some reserves of fossil fuels never have their financial value realised.

Disruptive clean technologies was cited as a factor - in the week that Elon Musk's Tesla launched a new home battery designed to maximise the potential for home renewable power generation. It was just the latest initiative that promises to continue the trend of making renewable energy more economical.

Other factors that affect the industry include the recent price plunge caused by short-term oversupply in the oil market, pointing to the considerable volatility of trading conditions.

The paper identifies three options, from divesting from the sector completely, shedding 'high risk' investments in coal and oil, or staying the course and hoping for the benefits of managed decline - whilst warning that the latter option may wind up on "the wrong side of history".

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