As policies around the globe continue to pressure integrated energy companies to increasingly curb their greenhouse-gas (GHG) emissions, large-scale fossil-fuel divestments by institutional investors won’t be easy.

In the past two years, dozens of public and private institutions have announced plans to divest their fossil-fuel holdings because of environmental concerns, ethical investment strategies or worries that assets might become “stranded” by emission regulations, a recent white paper from Bloomberg New Energy Finance (BNEF) has concluded.

Oil, natural gas and coal firms currently make up one of the world’s largest liquid-asset classes, BNEF noted, with a combined stock market valuation of nearly $5 trillion.

In the paper, BNEF observed how oil and gas stocks in particular are at the heart of institutional investor portfolios. ExxonMobil Corp., the world’s largest oil and gas firm, has a market capitalization of $425 billion; BlackRock, the largest investor in oil and gas stocks, holds $140 billion just in its top 25 holdings, according to BNEF.

Governments such as China, Russia and India are also major strategic investors in fossil fuels, the research noted.

In contrast to oil and gas, the report makes the point that because the market capitalization of coal companies is much smaller, divesting from coal alone is much easier than divesting from oil and gas. The report states that “coal equities are less than 5% the total value of oil and gas equities, and have already trended down nearly 50% in the past five years … as a result, divesting from coal would be much easier then divesting from oil and gas.”

Nathaniel Bullard, author of the BNEF white paper, said in a statement: “Fossil fuels are investor favorites for a reason. Very few other investments offer the scale, liquidity, growth and yield of these century-old businesses with economy-wide demand for their products. Given their scale and performance, oil and gas companies are attractive to institutional investors. Coal firms, smaller and recently underperforming wider markets, are less of a focus for institutions.”

BNEF analyzed seven other stock market sectors that could accept divested capital, ranging from information technology (IT) to real estate. Companies in these sectors have many of the same investment attributes as fossil fuels firms, but not all of them in one package, according to the analysis.

For example, IT is a $7 trillion sector and its biggest firm, Apple, is nearly 40% larger than ExxonMobil but, as a group, IT companies offer relatively low yields, either because their shares are highly rated or because they pay modest dividends as a proportion of post-tax profits.

Real-estate investment trusts (REITs) are only $1.4 trillion in total market capitalization, although they do have dividend yields of 4% or more, BNEF highlighted in the report.

Out with the old, in with the new?

For some motivated investors, clean energy (or “cleantech”) might be the logical destination for their money after divesting from fossil fuels, but BNEF argues in the report that clean energy currently doesn’t yet approach the necessary scale as an investable asset class for private and/or public finance institutions.

While BNEF forecasts $5.5 trillion in clean-energy investment from now to 2030, pension funds or institutional asset managers may not integrate clean energy into their portfolios based on the risk-return and liquidity characteristics of projects.

Clean-energy equities, as captured by the Wilderhill New Energy Global Innovation Index, or NEX, have a free float of $220 billion, according to BNEF.

The issuance of green bonds is projected to top $40 billion this year, but that would still be less than 3% of the new corporate debt issued in the U.S., BNEF’s research showed.

Meanwhile, “yield-cos,” also increasingly popular for investors wanting to get exposure to clean-energy assets, have a total market capitalization of less than $20 billion, BNEF noted.

“The $5.5 trillion needed to build out clean energy through 2030 will offer many new opportunities for investors, but a major switch into that and out of fossil fuels would require a massive scale-up of new investment vehicles,” Bullard said.