OPINION: Former US vice president Al Gore has warned that a $22 trillion “sub-prime carbon bubble” is developing and fossil fuel investors are at risk of serious losses.
Speaking to the BBC during the COP26 climate talks in Glasgow, Gore said he believes this bubble is much larger than the mortgage crisis that triggered the great recession of 2007 and 2008.
"The economists who are best at analysing this say we have approximately $22 trillion worth of sub-prime carbon assets that are valued at present on the absurd assumption that they are all going to be put to their intended use and burned. And they will not be,” he said, adding that "the fossil fuel sector is in terminal decline".
These are strong words from Gore, co-founder of sustainable investment firm Generation Investment Management who is credited with revitalising the environmental movement with his 2006 documentary, An Inconvenient Truth.
But is anyone in the oil and gas industry listening?
Many investors who are still making sizable profits from oil and gas are no doubt dismissing or ignoring what Gore has to say.
But that feels like a dangerous tactic.
Even if he is only partially right, the fossil fuel business certainly has plenty to worry about.
There are numerous signs of money already flowing away from the sector. And that trend seems likely to increase.
This week the investment arm of French insurer AXA vowed to be “brave and bold” by placing greater scrutiny on its oil and gas company investments and by 2025 to sell out of any it believes are not doing enough to reduce emissions.
And pension fund ABP recently said it would divest $17.5 billion of investments in fossil fuel producers by 2023.
A loud message coming from COP26 was that companies that do transition quickly and successfully are likely to be best placed to reap the rewards.
The sector would therefore do well to heed Gore’s words, even if for many they are yet another “inconvenient truth”.
(This is an Upstream Opinion article.)