InvestorDaily - Video - David Macri, Australian Ethical chief investment officer, discusses the ramifications of the fossil fuel divestment movement, as well as the concept of 'stranded assets'. The fossil fuel divestment movement is happening on a global scale and the finance industry has a roll to play. We believe it is about redeploying capital in support of lower emission intensive industries and technologies. At Australian Ethical we take the view that emission intensive industries need to be curtailed because of their societal and environmental harm and we believe governments globally are increasingly sharing this view. &feature=share



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Nathan Lim

Hi Rod. I had to break my response into several parts to fit the 150 word limit at Livewire. PART 1/3 We will be the first to say that industry has to do better. Best practice drilling methods like green completions, seal monitoring/replacement, and proactive monitoring of pumps and other equipment are crucial to limiting fugitive emissions. We note that the US now mandates green completions (http://www.epa.gov/airquality/oilandgas/pdfs/20141219fs.pdf). Dealing with fugitive emissions from drilling also just makes economic sense as the captured gas represents revenue that was previously lost. I believe the 17% figure you are referring to was from a study that took air samples from an airplane near active fields as opposed to taking readings right from the wellhead. While I am not disagreeing with the results of the study, it did not control for naturally occurring seeps which also can be significant.

Nathan Lim

PART 3/3. We also direct your attention to a recent study from the CSIRO that took readings from wellheads and other equipment in Australia (http://www.environment.gov.au/system/files/resources/57e4.... Although we don't invest in CSG, the report did provide some encouragement that appropriate regulation and practices can control emissions i.e. by mandating equipment leakage elimination or capture. Ultimately, our view is grounded on the idea that conventional natural gas remains a transition fuel and a means to accelerate our energy complex towards being lower emissions intensive and more sustainable. Coal to natural gas switching would cause an immediate reduction in emissions (of all types) and create a highly dispatchable network of generators that could support the rapid and pervasive roll out of renewable sources like wind and solar.

Nathan Lim

PART 2/3. The IPCC have considered a wide range of fugitive emissions studies and in their 2014 reports have assessed that central emission estimates of recent analyses are 2%-3%.However the IPCC points out that more research is needed to better understand the variability of fugitive gas emissions. There is also much greater variability reported for unconventional gas compared to conventional gas. Conventional gas extraction does not create the same uncertainties about levels of leakage as is involved with unconventional gas, because conventional gas extraction typically does not involve hydraulic fracturing and does not require the large numbers of well heads needed for unconventional gas. This is one of the reasons that we see conventional gas as a transitional fuel, but not unconventional gas.