The Dáil is due to debate the Fossil Fuel divestment bill on Thursday night, just hours before Donald Trump is inaugurated as the next US President. The legislation was introduced as a Private Members Bill by TD Thomas Pringle and, if passed, it would instruct the NTMA to divest the Strategic Investment Fund from all current fossil fuel investments, and would prohibit any future investments in the industry.
TDs will be addressed on the matter today by Sian Ferguson, Trust Executive of a number of the Sainsbury Family Charitable Trusts. Ms Ferguson has said that divesting from such stocks would in fact protect the Strategic Investment Fund from potential losses from fossil fuel stocks as we move towards a cleaner, greener economy.
"There are three strong arguments here. The Irish government has signed up to the Paris Agreement to limit climate change to less than 2 degrees. That means that 80% of fossil fuel reserves have to stay in the ground. If they can't be used, companies lose their value," she stated.
"There is a revolution towards a clean economy. The renewable sector is overtaking fossil fuels every day and those renewable sources have far more capacity. Fossil fuels are a twilight industry operating at the edge of profitability. The industry is indebted to the tune of $3 trillion," she argued.
Ms Ferguson dismissed suggestions that the NTMA could make a short term gain on energy stocks given that oil prices are on the way up. "We're likely to see increasing volatility in the oil and gas sector. Many investors are failing to take account of changes on the horizon. It's forecast by car executives that we will see car sales dominated by electric cars by 2025. That will trigger a drop in demand for oil in the medium term," she said.
Sian Ferguson explained that several sovereign wealth funds in Sweden and Norway had moved in this direction as well as city pension funds. The amount committed to this scheme is estimated to be of the order of $5.2 trillion across 76 institutions.
She said she believed that the election of Donald Trump as US President and the introduction of a climate change sceptical cabinet there would only strengthen the resolve of all signatories to the Paris Agreement. "The state of California has said if Donald Trump pulled out of the Paris Agreement, they would sign up as the sixth largest economy alone. If we exceed that 2 degrees target, we will wipe value off stocks across the world. The financial costs of doing nothing will outweigh the costs of taking action now," she concluded.
MORNING BRIEFS - Sterling is hovering at near 30 year lows again and is back testing the $1.20 point. It comes ahead of that major speech from Prime Minister Theresa May today in which she is expected to lay out the 12 priorities for Brexit negotiations. Control over immigration will be the likely central pillar of the strategy, but that will come at the cost of Britain leaving the Single Market and perhaps the customs union. Some believe currency traders have priced that into their calculations at this stage and that any further hits to sterling might be limited.
*** One person who appears to be a bit perplexed at the way British consumers have taken Brexit in their stride is the governor of the Bank of England. Speaking at the London School of Economics last night, Mark Carney said consumers appear to have entirely looked through Brexit related uncertainties. Mr Carney came in for much criticism for predicting dire economic consequences if Britain voted to leave the EU. However, he is not abandoning his concerns and said that the UK economy is too reliant on consumer spending at the moment which doesn't bode well for the future. He also sounded a cautionary note on the growth in household debt.
*** The World Economic Forum kicks of in Davos in Switzerland today. PwC surveyed more than 1,300 CEOs ahead of the annual event and about four in ten are confident about prospects. That is up marginally on last year, despite uncertainties around Brexit and the incoming US administration. About three in ten believe global economic growth will pick up in the year ahead. Irish businesses are a little more cautious than a year ago, however. About three quarters of businesses here expect revenue growth in 2017, that is down from 88% last year.