Last week, a statement by Mervin King caught some interest in the media about Fossil Fuels Being Subprime - I finally got a chance over the weekend to read it properly, and digest what it meant.
So in short, if 5 of the top ten companies in the FTSE are very carbon intensive, and are valued on the basis of being able to exploit resources that they will not be able to exploit, then there's a gaping chasm in the valuations of the actual these companies, and their actual values.
Cue quote from insurance giant Aviva:
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,"
Another from HSBC (you may have heard of them):
at least one-half of fossil fuel assets will have to be left in the ground,”.... “We’re still pricing [companies in the extractives sector] as if they are all going to be exploited.”
So this begs the question - if everything is totally mispriced, what SHOULD they be priced at?
Real people have real pensions invested in them, and they've already been hit once by irresponsible lending during the first sub-prime crisis, and now it looks like there' another one on the horizon here.
And if I have a pension of 100k saved up ( I don't), how much would it really be worth?
Wouldn't it be worth knowing about before time?
In the space of a weekend, would it be possible to create a prototype FTSE 100 listing, where the valuations are adjusted for these factors, or a calculator build to show you what a pension of say, 100k would really be worth?
Let me know if you'd be interested in looking at this, as I think it would make for a fascinating hack.