There is an incompatibility between current stock market valuation of the fossil fuel industry, which is based on known and projected fuel reserves, and governmental commitments to prevent a rise in global average temperature of more than 2°C above pre-industrial levels.
They share Carbon Tracker and Nicholas Stern's concern about the fortunes of investors:
[F]ossil fuel reserves already far exceed the carbon budget to avoid global warming of 2°C, but in spite of this, [energy firms] spent $674 billion last year to find and develop new potentially stranded assets.
“Smart investors can see that investing in companies that rely solely or heavily on constantly replenishing reserves of fossil fuels is becoming a very risky decision. The report [Unburnable carbon 2013: Wasted capital and stranded assets] raises serious questions as to the ability of the financial system to act on industry-wide long term risk, since currently the only measure of risk is performance against industry benchmarks.” Professor Lord Stern.
So Stern, Carbon Tracker and Sutherland and coauthors are worried that non-smart investors dominate the valuation of stock and bonds of energy companies, and that future political regulation of emissions will bankrupt them.
But there is another way to view the incompatibility between current stock valuation and future emission cuts. The fact that investors - the people who put their money where their mouth is - are betting on the value of fossil fuel reserves "raises serious questions as to" the willingness of voters to substantially reduce their emissions.