Investors should start engaging on the issue of unconventional oil technologies such as liquefied coal and oil shale, says investor coalition Ceres.
It recommends that investors “closely scrutinise” their portfolios for their exposure to the emerging technologies and pressure the companies involved to provide better disclosure on the risks and how they are being managed.
“There are costs that go along with the benefits of extracting and exploiting these unconventional fuel sources,” said New York State Comptroller Thomas DiNapoli, the trustee of the $132.8bn (€110.3bn) New York State Common Retirement Fund.
“Before investors can fully assess the benefits of developing oil shale and liquefied coal projects, we need full disclosure of the environmental, regulatory and technological risks surrounding these unproven reserves.
“Every investor has to take a strong look at these risks.”
Ceres pointed to a variety of risks involving water scarcity, regulation, technological uncertainty, and market risks that the emerging technology faces.And it called on investors to engage with oil companies, developers and users such as airlines.
It also called on investors to evaluate the potential risks in their fixed-income portfolios from the state and municipal bonds that support the projects.
More than 25 companies are involved in developing oil shale, which represent about 800bn barrels of recoverable reserves in the US. This is three times the size of Saudi Arabia’s proven reserves. Ceres cited estimates that liquefied coal production could rise from almost nil to some 91m barrels a year by 2035.
“Investors with holdings in companies involved in coal-to-liquids and oil shale projects should ask these companies to open their books and explain their strategies for managing these risky projects,” said Mindy Lubber, president of Ceres and director of the $9trn Investor Network on Climate Risk. She feared “diminishing returns for investors”.
Ceres has released a report it commissioned on the subject from climate consulting firm David Gardiner & Associates. Link