Sean McElwee and Lew Daly write about the disconnect between valuing oil and gas reserves and valuing the future of our planet:
A whopping two-thirds of reserves listed on markets are potentially worthless.
Steve Waygood, head of Sustainability Research at Aviva Investors, a global asset management company, sums up the conundrum: “Valuations of the oil and gas sector still assume that they will be able to take all proven and probable reserves out of the ground and burn them. Based on credible data we cannot be allowed to do that…” So in much the same way that pre-Great Recession housing prices were based on the assumption that their values would continue to rise and homeowners would pay off their mortgages, the valuation of oil and gas companies is based on the assumption that they will be able to extract resources that must remain in the ground.
Read their piece here.