Investment portfolios that have the best chance of diminishing planetary carbon emissions should go where the carbon is, reducing each company's carbon emissions rather than eliminating the polluters, Carlyle Group said in a soon-to be-released study.
Divestment increases oil and gas companies' cost of capital by limiting their access to the stock and bond market, and causing traditional energy companies to spend less on oil and gas development, the study said.
The impact has been that oil and gas prices have gone up because the demand is still there, said Jason Thomas, a managing director and head of global research at Carlyle and author of the study. Denying energy companies access to equity and bond markets has not resulted in reduction of fossil fuels, Mr. Thomas said in an interview.
"I think that this desire by some LPs (limited partners) and some asset managers to decarbonize their portfolios is very well intentioned," but it hasn't done much to reduce fossil fuels, he said.
Some 80% of economic life is still powered by fossil fuels, including 95% of all transportation in the U.S., the study said. Fifty-six percent of U.S. transportation is powered by gasoline, 24% by petroleum distillates, 9% by jet fuel, 5% biofuels, 4% natural gas and 2% other.
