1. The carbon bubble is bursting

Investors in fossil fuels are sitting on a carbon bubble, which has already burst for the coal sector, leading to billions of dollars in losses. Small shifts in demand have big financial impacts. The coal industry saw widespread bankruptcies when demand was just 2% off its all-time peak. The same factors that have enabled the transition from coal – the falling cost of other energy sources, policy, and social stigma – are now at play in the oil and gas sector. The prudent investor is getting out now and finding opportunities offered by a clean economy.

3. Regulatory and legal risks escalating

Policy and regulation are accelerating the transition, with governments committed to meet the Paris Agreement to keep temperature rises to well below 2˚C, and to address the serious health impacts of burning fossil fuels.

Regulation and litigation risk against fossil fuels is now a serious financial risk for investors. In its 2016 year-end financial report, Chevron became the first company to acknowledge the risk: “Increasing attention to climate change risks has resulted in an increased possibility of governmental investigations and, potentially, private litigation against the company”.

In contrast, policies in support of climate solutions are unstoppable.

Countries including UK, France, Norway, Netherlands, India, China have pledged to end petrol cars by 2030-2040. Key growth markets are rushing to adopt renewables. India has set a target to install renewable energy capacity of 175GW by 2022. By May 2017 it had installed renewable capacity of 57GW, double the amount of four years before. In 2016, it shelved 82GW of planned coal capacity. China too has seen phenomenal growth. In 2015, China invested $102.9bn in renewable energy and installed half of the world’s new wind power. It added 35GW of solar in 2016 alone; equal to Germany’s total capacity. In 2016, it spent a record $32bn on renewable projects abroad.

5. Financial opportunities from the transition

The opportunities from the sustainable energy transition, with more favourable policies and more mature technologies, are significant. As more investors publicly commit to DivestInvest, the policy and financial environment become even more favourable in a virtuous cycle of supply and demand.

The finance sector is responding to investor demand, creating new fossil fuel free products to make the process of divesting and investing easier and cheaper. In 2015, global investment in renewables was double that of fossil fuels.