Connect with us

Hi, what are you looking for?

CleanTechnica

Clean Power

Fossil Free Indexes Outperformed S&P 500 By 1.5% In 2014

The Fossil Free Indexes US (FFIUS) had a banner year in 2014, and even managed to beat the S&P 500 by a pretty substantial margin — outperforming the benchmark by 1.5%.

Considering how volatile the year was with regards to fossil fuel markets, I wouldn’t say that I’m surprised by this — certainly an interesting and notable trend, though.

Sunset over solar panels

With such trends likely to continue — albeit in a stair-step fashion, as many phenomena of failure/decline do — the FFIUS does seem to have some things going for it. That’s if you’re willing to bet on the continued health of the markets, of course — there does seem to be something of the smell of recession in the air lately… but always hard to say with certainty.

Here’s some thought on the trends of 2014 via Barry Schachter at Fossil Free Indexes:

This outperformance illustrates the value of an investment strategy that is carbon-aware. The reason it does so is not because stranded asset risk is the primary reason for the outperformance by the FFIUS in 2014. The outperformance story is told rather in the slowing of global economic growth, the continuing dramatic increase in shale oil production in the United States and OPEC’s decision not to prop up oil prices with production cuts on the day following the US Thanksgiving holiday.

The story inside the story is the information we can glean about the extreme sensitivity of fossil fuel prices to factors affecting supply and demand. An imbalance between the quantities available to supply and the quantities demanded always requires price to adjust. The shocking information we received is that the required adjustment process involved a dramatic impact on prices.

As a result of the price drop, the current value of underground reserves has fallen dramatically. It is important to realize that it doesn’t matter (so much) how the quantities demanded and supplied get out of balance. We can infer from this year’s price volatility that future policy moves to reduce demand for fossil fuels can induce a dramatic reduction in the value of underground reserves.

Good commentary.

As also noted by Schachter, the real takeaway of 2014 was that if you’re investing in something that’s only profitable if a whole lot of contingents all come together perfectly (fracking, cough, cough), that you might get stranded (and screwed) when those contingents are no longer there.

Image Credit: Sunset via Shutterstock

 

Advertisement
 
Appreciate CleanTechnica’s originality? Consider becoming a CleanTechnica Member, Supporter, Technician, or Ambassador — or a patron on Patreon.
 
Have a tip for CleanTechnica, want to advertise, or want to suggest a guest for our CleanTech Talk podcast? Contact us here.

Written By

James Ayre's background is predominantly in geopolitics and history, but he has an obsessive interest in pretty much everything. After an early life spent in the Imperial Free City of Dortmund, James followed the river Ruhr to Cofbuokheim, where he attended the University of Astnide. And where he also briefly considered entering the coal mining business. He currently writes for a living, on a broad variety of subjects, ranging from science, to politics, to military history, to renewable energy.

Comments

You May Also Like

Green Economy

We know that cleantech and renewable energy are the way of the future. But does that mean we should invest in them now?

Oil

Most people who are all familiar with the stock market know the S&P 500 is an important index. According to Wikipedia, it is a...

Clean Power

Goldman Sachs, which has reportedly made $100 million off of Tesla trades this year, has pointed out that Tesla's S&P 500 entry could "spark...

Clean Power

The S&P Global Dow Jones media center just announced that Tesla (TSLA) will be added to the S&P 500 on Monday, December 21. Due...

Copyright © 2021 CleanTechnica. The content produced by this site is for entertainment purposes only. Opinions and comments published on this site may not be sanctioned by and do not necessarily represent the views of CleanTechnica, its owners, sponsors, affiliates, or subsidiaries.