Earlier this year, Harvard University announced that its $50 billion-plus endowment no longer invests directly in fossil fuels. And it doesn’t plan to, ever again. The stance against investing in fossil fuels goes something like this… First, fossil fuels, or “brown assets,” are bad for the planet. And second, it’s virtually certain that green energy will replace them. In other words, fossil fuels will go the way of the buggy whip. And their stocks will sink to zero. Let’s get one thing out of the way—I’m not going to tell you whether fossil fuels are good or bad. That’s not the point of Smart Money Monday. But I will say that fossil fuels are not disappearing anytime soon. And the companies that produce them can still deliver impressive gains to shareholders. As I’ve mentioned before, 83% of the world’s energy supply comes from fossil fuels. That figure has barely budged since 2009. Sure, natural gas has taken some share away from coal. But by and large, fossil fuel use has not changed, as you can see in the chart below. Will this continue? I think it will. Duke University Professor Alon Brav and his coauthor J.B. Heaton summed up the situation well in a recent paper: “Brown assets could turn out to be highly valuable if the world fails to transition out of the high-carbon economy.”

Frankly, many countries are in no rush to go green. A zero-carbon world would require massive cooperation from countries like China, Russia, and Saudi Arabia. Together, they account for 27% of global oil production. And China alone accounts for 14% of its consumption. These countries do not plan to evolve. As Saudi Energy Minister Prince Abdulaziz bin Salman recently said: “We are still going to be the last man standing, and every molecule of hydrocarbon will come out.” That doesn’t sound like someone racing to turn off the oil spigot.

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