Nearly every country agreed at the UN Climate Change Conference to take action to reduce carbon emissions and limit global warming to under 2 degrees Celsius. However, this will mean that only 25% of known fossil fuel reserves can be burned, leaving the remaining 75% as "stranded assets" that will lose most of their value and cause $16 trillion to evaporate from energy company books. As governments implement policies to curb emissions, investments in fossil fuel companies face new risks that could affect retirement funds and portfolios. Financial institutions are warning clients about this emerging stranded asset risk.

1. Fossil fuels' investment impact
Sentinel & Enterprise
Updated:2016-03-30 04:33:34.867703
By Kerry Castonguay
Guest Columnist
If you're not one to accept the idea that global warming is being driven by human activity, it
still makes sense to protect the value of your investments as governments around the world
implement policies to curb the buildup of greenhouse gases in the atmosphere.
In December, at the United Nations Climate Change Conference in Paris, leaders of nearly
every country on Earth unanimously agreed to take action to reduce carbon emissions in an
effort to mitigate catastrophic climate change. To me, it's truly astonishing that 195 countries
were able to unanimously agree on anything at all.
Although advocates for the fossil-fuel industry are challenging recent carbon-emissions
regulations in the U.S. courts, the rest of the world is implementing policies designed to limit
greenhouse-gas emissions. Regardless of your personal beliefs, your retirement and
investment portfolios will likely be affected.
Many financial professionals argue that in a world dependent on fossil fuels, it will take
decades to transition to alternative energy sources. This argument suggests that demand for
energy is increasing as some of the world's largest populations become industrialized;
therefore fossil-fuel investments are safe. However, there are less obvious implications to
consider. The Paris Agreement is targeting a global-warming limit of less than 2 degrees
Celsius, the threshold scientists estimate would expose the world to catastrophic
consequences.
To accomplish that goal, only a quarter of known fossil-fuel reserves may be burned. The
remaining reserves, frequently referred to as "stranded assets," will likely lose most of their
value, causing $16 trillion to evaporate from the books of energy companies. Last April,
HSBC, the fifth-largest bank in the world, warned clients of emerging stranded-asset risk. In
the following months, Goldman Sachs and UBS issued similar warnings. Nobody knows
exactly how this will play out in the coming years, but the new elements of risk are
undeniable.
If you happen to agree with the majority of people who consider global warming to be a
serious threat, there's a moral aspect to consider. Pope Francis has been driving the point
that most of the Earth's inhabitants have not participated in the industrial revolution. As
such, they are the most vulnerable to climate-change consequences but have no
infrastructure or resources to protect themselves. Ironically, these populations have not
contributed to global warming. This begs the question: Is it morally acceptable for these

2. billions of people to suffer and perish so that industrialized nations can maintain a
comparatively wealthy lifestyle for a few more decades?
If you're involved with a nonprofit or a benevolent organization that has an endowment or
other investments, two more questions merit consideration: Does your organization accept
global-warming science? If so, is it ethical to profit from investment in fossil-fuel companies
that will ultimately cause suffering and destruction?
Hundreds of institutions have announced their plans to divest from fossil fuels. To
investigate whether divestment makes sense for your situation, you may want to consult with
a financial adviser who specializes in sustainable and responsible investment strategies. If
you make your own financial decisions, there are many online resources that can provide
guidance. A good start is www.fossilfreefunds.org.
Whether you believe global warming is a legitimate threat or a political hoax, your financial
well-being is at stake.
Kerry Castonguay is a resident of Leominster and a partner at Chestnut Hill Wealth
Management Group.
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