Investors should write down the value of fossil fuel assets because of the environmental risks associated with hydrocarbon energy, even though there is no current viable replacement, Jason Stevens, director, energy equity and credit research at Morningstar, said at a CFA Institute financial analysts seminar in Chicago.
“If we just took reserves on the SEC books and burned them, the carbon dioxide impact would be just clearly catastrophic,” Mr. Stevens said.
“We clearly cannot burn all the carbon people are claiming as economic assets currently. … But at the same time, I don’t see us as a society, or even activist investors as individuals, not going on airplanes, not driving, not eating food, not heating their houses.
“So there is a lot of push and pull we’ve got to figure out before I or … (the) industry or markets are willing to write off hydrocarbon assets in the ground.
“Is it appropriate to recognize them at full face value? I think that is increasingly questionable. But in the absence of a clear way forward, I don’t know if we have another choice. I don’t think markets are very good at discounting wildly different scenarios.”