South Africa: Pension Funds At Risk As Tide Turns Against Carbon-Polluting Industries

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Will fossil fuel-intensive industries like Sasol still be a safe investment option by 2050, when pension funds mature into a global energy economy that has moved away from coal and oil, leaving today's high carbon-emitting industries with stranded assets and unable to tap into the remaining fossil fuel reserves that have to be left locked in the ground?

Pension fund managers were reminded in August 2019 of their fiduciary duty to warn shareholders of the financial risks associated with investing in industries that are likely to become casualties of the transition to lower-carbon energy economies globally. Given the restrictions likely to be placed on today's high-carbon polluting industries such as Sasol, as countries and companies are pressured to bring their emissions in line with the United Nations proposed carbon budget, there may not be any scope left for building new fossil fuel energy infrastructure, and existing infrastructure is at risk of becoming redundant, which will leave fossil fuel investments tied up in potentially worthless stranded assets.

This will put maturing pension funds at risk in the next two to three decades, says Tracey Davies, executive director of civil society divestment initiative Just Share.

During meetings in Cape Town and Johannesburg,...

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