The value of share offerings of fossil fuel producers and related companies fell by $123 billion over the last 10 years in clear contrast to clean energy activities in initial public offerings (IPOs) which overtook carbon-heavy flotations globally for the first time in 2020, according to a new report from London-based think-tank Carbon Tracker on Wednesday.
Fossil fuel stocks as share offerings underperformed in the key world MSCI All Country World Index, or ACWI, by 52% while levels of new shares issued in the sector dropped sharply, the report, A Tale of Two Share Issues: How Fossil Fuel Equity Offerings Are Losing Investors Billions, said.
This trend showed that investors are shifting finance towards a low-carbon future as coal, and oil and gas sectors struggle, the report revealed.
Renewables issuance raised a record $11 billion from public equity offerings last year alone while fossil fuel issuance fell by 85% from $70 billion to $10 billion during the period analyzed from 2012 to 2020.
The report found that investors bought about $640 billion of equity issued by fossil fuel producers, fossil fuel-dependent utilities, pipelines and service companies over the last decade although their investments lost roughly 20% in value.
Fossil fuel-producing sub-industries with the highest exposure to the upstream oil and gas activity level delivered the worst performance, Carbon Tracker said.
However, although the equity raised by clean energy companies has been growing rapidly, it is still "trivial" in the context of what needs to be generated to finance a global energy transition, the report said.
Investments in clean energy infrastructure need to be in the order of $3 trillion to $3.5 trillion annually to limit global warming in line with the Paris Climate Agreement goals, according to the Intergovernmental Panel on Climate Change.
The report also calculated that of the total equity raised by companies on global markets, 10% was for fossil fuel producers and electric utility companies and only 1% was for renewables and clean technologies.
Nevertheless, share issuances in renewable energy raised $56 billion and investors gained $77 billion in value, according to the report.
Denmark’s Orsted, a fossil fuel company that transformed into an offshore wind developer, whose shares rose almost 520% was the biggest winner.
"It is astonishing that exchanges are still listing new fossil fuel companies intent on expanding production or developing new reserves in direct contravention of the Paris temperature goals," Mark Campanale, founder and executive director of Carbon Tracker, said. "But what this shows that confidence is really beginning to evaporate as incumbents struggle to access historically strong flows of finance."
By Nuran Erkul Kaya