Tag Archives: Investments

US investors show climate clout

FOR IMMEDIATE RELEASE American business and industry is coming under closer scrutiny from shareholders concerned to see how prepared companies are to respond to the financial pressures of a warming world. LONDON, 29 July – Shareholders in the US are showing growing concern about their investments in companies exposed to climate change-related risks, according to new data released by Ceres, a US organisation that promotes more sustainable business practices. The annual round of corporate shareholder meetings – referred to in the US as the proxy season – has recently ended. Ceres says that at those meetings a total of 110 shareholder climate change and environmental sustainability-related resolutions were filed with 94 US-based companies: issues covered by the resolutions included concerns about hydraulic fracturing, flaring and both the environmental and financial risks of further exploitation of fossil fuel reserves. Some of the US’s largest public pension funds were among those filing resolutions, including the California State Teachers’ Retirement System and the New York State and New York City Comptrollers’ Offices.  Ceres estimates that along with other large institutional investors these groups manage funds worth in excess of $500 bn in assets. “The strength of this year’s proxy season shows unwavering investor concern about how companies, especially energy companies, are managing the profound climate-related risks of fossil fuel production, including traditional and unconventional oil and gas extraction,” says Mindy Lubber, president of Ceres. “Investors saw especially important progress in tackling flaring, hydraulic fracturing and methane emission impacts, all key contributors to climate change.” A resolution questioning the activities of Continental Resources, a large oil producer, was withdrawn after the company agreed to reduce or eliminate flaring at its well sites. Similar resolutions filed with three companies involved in the booming hydraulic fracturing industry – EOG Resources, Ultra Petroleum and Cabot Oil & Gas – were also withdrawn after managements agreed to increase disclosure of their activities, including steps being taken to reduce the environmental risks of “fracking”.

Mounting concern

“Companies are responding to the growing calls for transparency and accountability,” says the head of a major investment fund. “Without qualitative reporting, shareholders cannot be assured that a company is taking real steps to minimize these risks and protect shareholder value.” According to Ceres data, the number of investor resolutions relating to climate change and environmental sustainability has increased significantly in recent years – from around 30 a decade ago to more than 100 last year. While some companies are responding to investor concerns on climate change and the environment, others are more hesitant. Shareholder resolutions asking two of the US’s biggest coal companies – CONSOL Energy and Alpha Natural Resources – to disclose how their extensive coal reserves might be affected by proposed new carbon regulations were defeated. Recent analyses have indicated that if targets to limit the rise in global temperature are to be met, then vast amounts of proven fossil fuel reserves need to remain unexploited. Such reserves can account for between 50 and 80% of the market value of coal, oil and gas companies: if regulations are brought in to support meeting targets on limiting global temperatures, those reserves could become “stranded” underground – having the knock-on effect of exposing companies and investors to significant financial risk. – Climate News Network

FOR IMMEDIATE RELEASE American business and industry is coming under closer scrutiny from shareholders concerned to see how prepared companies are to respond to the financial pressures of a warming world. LONDON, 29 July – Shareholders in the US are showing growing concern about their investments in companies exposed to climate change-related risks, according to new data released by Ceres, a US organisation that promotes more sustainable business practices. The annual round of corporate shareholder meetings – referred to in the US as the proxy season – has recently ended. Ceres says that at those meetings a total of 110 shareholder climate change and environmental sustainability-related resolutions were filed with 94 US-based companies: issues covered by the resolutions included concerns about hydraulic fracturing, flaring and both the environmental and financial risks of further exploitation of fossil fuel reserves. Some of the US’s largest public pension funds were among those filing resolutions, including the California State Teachers’ Retirement System and the New York State and New York City Comptrollers’ Offices.  Ceres estimates that along with other large institutional investors these groups manage funds worth in excess of $500 bn in assets. “The strength of this year’s proxy season shows unwavering investor concern about how companies, especially energy companies, are managing the profound climate-related risks of fossil fuel production, including traditional and unconventional oil and gas extraction,” says Mindy Lubber, president of Ceres. “Investors saw especially important progress in tackling flaring, hydraulic fracturing and methane emission impacts, all key contributors to climate change.” A resolution questioning the activities of Continental Resources, a large oil producer, was withdrawn after the company agreed to reduce or eliminate flaring at its well sites. Similar resolutions filed with three companies involved in the booming hydraulic fracturing industry – EOG Resources, Ultra Petroleum and Cabot Oil & Gas – were also withdrawn after managements agreed to increase disclosure of their activities, including steps being taken to reduce the environmental risks of “fracking”.

Mounting concern

“Companies are responding to the growing calls for transparency and accountability,” says the head of a major investment fund. “Without qualitative reporting, shareholders cannot be assured that a company is taking real steps to minimize these risks and protect shareholder value.” According to Ceres data, the number of investor resolutions relating to climate change and environmental sustainability has increased significantly in recent years – from around 30 a decade ago to more than 100 last year. While some companies are responding to investor concerns on climate change and the environment, others are more hesitant. Shareholder resolutions asking two of the US’s biggest coal companies – CONSOL Energy and Alpha Natural Resources – to disclose how their extensive coal reserves might be affected by proposed new carbon regulations were defeated. Recent analyses have indicated that if targets to limit the rise in global temperature are to be met, then vast amounts of proven fossil fuel reserves need to remain unexploited. Such reserves can account for between 50 and 80% of the market value of coal, oil and gas companies: if regulations are brought in to support meeting targets on limiting global temperatures, those reserves could become “stranded” underground – having the knock-on effect of exposing companies and investors to significant financial risk. – Climate News Network

Fossil fuels 'risk being wasted assets'

EMBARGOED until 2301 GMT on Thursday 18 April
Investors should beware of backing companies involved in the exploitation of fossil fuels, analysts say – because climate change means there is a strong risk they will be wasted assets which will have to be left in the ground.

LONDON, 19 April – The first problem is this: most climate scientists agree that we cannot afford to burn the huge reserves of fossil fuel we have if we want any chance of preventing global average temperatures rising by more than 2°C.

The second problem: last year the world spent $674 billion finding and developing more fossil fuel.

If this continues unabated for ten more years, a report by an influential group of economists and scientists says, there will be a third problem: economies will have wasted more than $6 trillion of capital in pursuit of assets which are literally unburnable (and legally so too, if there are internationally agreed limits on fossil fuel emissions by 2023).

The research is published in a report, Unburnable Carbon: Avoiding wasted capital and stranded assets, produced by the Carbon Tracker Initiative and the Grantham Research Institute on Climate Change and the Environment at the London School of Economics.

The report says 60-80% of coal, oil and gas reserves of publicly listed companies could be classified as unburnable if the world is to cut emissions with an 80% probability of not exceeding global warming of 2°C.

This is a widely accepted limit aimed at avoiding dangerous climate change, though many scientists and some policy-makers now believe there is little chance of staying below it.

The research says the 200 listed companies analysed in the study own 762 billion tonnes of carbon dioxide (CO2) through their reserves of coal, oil and gas. This supports share value of $4 trillion and services of $1.5 trillion in outstanding corporate debt.

“Smart investors can already see that most fossil fuel reserves are essentially unburnable”

To cut greenhouse emissions so as to have an 80% chance of achieving the 2°C target, the fossil fuel reserves of these companies would probably be able to emit no more than about 125–275 billion tonnes of CO2 – around a quarter of the reserves they own.

Some policy-makers pin their hopes on carbon capture and storage (CCS), a technology still to be proven to work commercially. But the report says most of the companies’ reserves will remain unburnable unless there is a dramatic development of CCS.

It concludes that even a less ambitious goal, like a 3°C rise in average global temperature or more, which would pose significantly greater risks for the world and its economy, would still imply significant constraints on the use of fossil fuel reserves between now and 2050.

Yet companies in the oil, gas and coal sectors are seeking to develop further resources which could double the level of potential CO2 emissions to 1,541 billion tonnes.

The authors say current extractives sector business models are based on assumptions that there are no emissions limits, a strategy incompatible with a carbon-constrained economy.

The study says financial regulators should require companies to disclose the potential CO2 emissions that are embedded in fossil fuel reserves.

Finance ministers should initiate an international process to incorporate climate change into the assessment and management of systemic risk in capital markets.

And investors should challenge the strategies of companies which are using shareholder funds to develop high-cost fossil fuel projects.

“Start deflating the carbon bubble before it pops… Jump, before you are pushed.”

The authors say the report raises serious questions about 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, author of the Stern Review Report on the Economics of Climate Change and chair of the Grantham Research Institute, said: “Smart investors can already see that most fossil fuel reserves are essentially unburnable… They can see that investing in companies that rely solely or heavily on constantly replenishing reserves of fossil fuels is becoming a very risky decision.

“But I hope this report will mean that regulators also take note, because much of the embedded risk from these potentially toxic carbon assets is not openly recognized through current reporting requirements.”

Jeremy Leggett of Carbon Tracker said: “The pooled message to regulators is clear. Do your job. Start requiring recognition of stranded carbon-asset risk in capital-markets processes. Start deflating the carbon bubble before it pops.

“The message to all the players across the financial chain… is also obvious. If the regulators won’t do their job, do it for them. Jump, before you are pushed.”

ShareAction (formerly Fair Pensions) has launched an online tool for pension savers to urge their funds to address the dangers of a global carbon bubble. – Climate News Network

EMBARGOED until 2301 GMT on Thursday 18 April
Investors should beware of backing companies involved in the exploitation of fossil fuels, analysts say – because climate change means there is a strong risk they will be wasted assets which will have to be left in the ground.

LONDON, 19 April – The first problem is this: most climate scientists agree that we cannot afford to burn the huge reserves of fossil fuel we have if we want any chance of preventing global average temperatures rising by more than 2°C.

The second problem: last year the world spent $674 billion finding and developing more fossil fuel.

If this continues unabated for ten more years, a report by an influential group of economists and scientists says, there will be a third problem: economies will have wasted more than $6 trillion of capital in pursuit of assets which are literally unburnable (and legally so too, if there are internationally agreed limits on fossil fuel emissions by 2023).

The research is published in a report, Unburnable Carbon: Avoiding wasted capital and stranded assets, produced by the Carbon Tracker Initiative and the Grantham Research Institute on Climate Change and the Environment at the London School of Economics.

The report says 60-80% of coal, oil and gas reserves of publicly listed companies could be classified as unburnable if the world is to cut emissions with an 80% probability of not exceeding global warming of 2°C.

This is a widely accepted limit aimed at avoiding dangerous climate change, though many scientists and some policy-makers now believe there is little chance of staying below it.

The research says the 200 listed companies analysed in the study own 762 billion tonnes of carbon dioxide (CO2) through their reserves of coal, oil and gas. This supports share value of $4 trillion and services of $1.5 trillion in outstanding corporate debt.

“Smart investors can already see that most fossil fuel reserves are essentially unburnable”

To cut greenhouse emissions so as to have an 80% chance of achieving the 2°C target, the fossil fuel reserves of these companies would probably be able to emit no more than about 125–275 billion tonnes of CO2 – around a quarter of the reserves they own.

Some policy-makers pin their hopes on carbon capture and storage (CCS), a technology still to be proven to work commercially. But the report says most of the companies’ reserves will remain unburnable unless there is a dramatic development of CCS.

It concludes that even a less ambitious goal, like a 3°C rise in average global temperature or more, which would pose significantly greater risks for the world and its economy, would still imply significant constraints on the use of fossil fuel reserves between now and 2050.

Yet companies in the oil, gas and coal sectors are seeking to develop further resources which could double the level of potential CO2 emissions to 1,541 billion tonnes.

The authors say current extractives sector business models are based on assumptions that there are no emissions limits, a strategy incompatible with a carbon-constrained economy.

The study says financial regulators should require companies to disclose the potential CO2 emissions that are embedded in fossil fuel reserves.

Finance ministers should initiate an international process to incorporate climate change into the assessment and management of systemic risk in capital markets.

And investors should challenge the strategies of companies which are using shareholder funds to develop high-cost fossil fuel projects.

“Start deflating the carbon bubble before it pops… Jump, before you are pushed.”

The authors say the report raises serious questions about 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, author of the Stern Review Report on the Economics of Climate Change and chair of the Grantham Research Institute, said: “Smart investors can already see that most fossil fuel reserves are essentially unburnable… They can see that investing in companies that rely solely or heavily on constantly replenishing reserves of fossil fuels is becoming a very risky decision.

“But I hope this report will mean that regulators also take note, because much of the embedded risk from these potentially toxic carbon assets is not openly recognized through current reporting requirements.”

Jeremy Leggett of Carbon Tracker said: “The pooled message to regulators is clear. Do your job. Start requiring recognition of stranded carbon-asset risk in capital-markets processes. Start deflating the carbon bubble before it pops.

“The message to all the players across the financial chain… is also obvious. If the regulators won’t do their job, do it for them. Jump, before you are pushed.”

ShareAction (formerly Fair Pensions) has launched an online tool for pension savers to urge their funds to address the dangers of a global carbon bubble. – Climate News Network

Fossil fuels ‘risk being wasted assets’

EMBARGOED until 2301 GMT on Thursday 18 April Investors should beware of backing companies involved in the exploitation of fossil fuels, analysts say – because climate change means there is a strong risk they will be wasted assets which will have to be left in the ground. LONDON, 19 April – The first problem is this: most climate scientists agree that we cannot afford to burn the huge reserves of fossil fuel we have if we want any chance of preventing global average temperatures rising by more than 2°C. The second problem: last year the world spent $674 billion finding and developing more fossil fuel. If this continues unabated for ten more years, a report by an influential group of economists and scientists says, there will be a third problem: economies will have wasted more than $6 trillion of capital in pursuit of assets which are literally unburnable (and legally so too, if there are internationally agreed limits on fossil fuel emissions by 2023). The research is published in a report, Unburnable Carbon: Avoiding wasted capital and stranded assets, produced by the Carbon Tracker Initiative and the Grantham Research Institute on Climate Change and the Environment at the London School of Economics. The report says 60-80% of coal, oil and gas reserves of publicly listed companies could be classified as unburnable if the world is to cut emissions with an 80% probability of not exceeding global warming of 2°C. This is a widely accepted limit aimed at avoiding dangerous climate change, though many scientists and some policy-makers now believe there is little chance of staying below it. The research says the 200 listed companies analysed in the study own 762 billion tonnes of carbon dioxide (CO2) through their reserves of coal, oil and gas. This supports share value of $4 trillion and services of $1.5 trillion in outstanding corporate debt.

“Smart investors can already see that most fossil fuel reserves are essentially unburnable”

To cut greenhouse emissions so as to have an 80% chance of achieving the 2°C target, the fossil fuel reserves of these companies would probably be able to emit no more than about 125–275 billion tonnes of CO2 – around a quarter of the reserves they own. Some policy-makers pin their hopes on carbon capture and storage (CCS), a technology still to be proven to work commercially. But the report says most of the companies’ reserves will remain unburnable unless there is a dramatic development of CCS. It concludes that even a less ambitious goal, like a 3°C rise in average global temperature or more, which would pose significantly greater risks for the world and its economy, would still imply significant constraints on the use of fossil fuel reserves between now and 2050. Yet companies in the oil, gas and coal sectors are seeking to develop further resources which could double the level of potential CO2 emissions to 1,541 billion tonnes. The authors say current extractives sector business models are based on assumptions that there are no emissions limits, a strategy incompatible with a carbon-constrained economy. The study says financial regulators should require companies to disclose the potential CO2 emissions that are embedded in fossil fuel reserves. Finance ministers should initiate an international process to incorporate climate change into the assessment and management of systemic risk in capital markets. And investors should challenge the strategies of companies which are using shareholder funds to develop high-cost fossil fuel projects.

“Start deflating the carbon bubble before it pops… Jump, before you are pushed.”

The authors say the report raises serious questions about 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, author of the Stern Review Report on the Economics of Climate Change and chair of the Grantham Research Institute, said: “Smart investors can already see that most fossil fuel reserves are essentially unburnable… They can see that investing in companies that rely solely or heavily on constantly replenishing reserves of fossil fuels is becoming a very risky decision. “But I hope this report will mean that regulators also take note, because much of the embedded risk from these potentially toxic carbon assets is not openly recognized through current reporting requirements.” Jeremy Leggett of Carbon Tracker said: “The pooled message to regulators is clear. Do your job. Start requiring recognition of stranded carbon-asset risk in capital-markets processes. Start deflating the carbon bubble before it pops. “The message to all the players across the financial chain… is also obvious. If the regulators won’t do their job, do it for them. Jump, before you are pushed.” ShareAction (formerly Fair Pensions) has launched an online tool for pension savers to urge their funds to address the dangers of a global carbon bubble. – Climate News Network

EMBARGOED until 2301 GMT on Thursday 18 April Investors should beware of backing companies involved in the exploitation of fossil fuels, analysts say – because climate change means there is a strong risk they will be wasted assets which will have to be left in the ground. LONDON, 19 April – The first problem is this: most climate scientists agree that we cannot afford to burn the huge reserves of fossil fuel we have if we want any chance of preventing global average temperatures rising by more than 2°C. The second problem: last year the world spent $674 billion finding and developing more fossil fuel. If this continues unabated for ten more years, a report by an influential group of economists and scientists says, there will be a third problem: economies will have wasted more than $6 trillion of capital in pursuit of assets which are literally unburnable (and legally so too, if there are internationally agreed limits on fossil fuel emissions by 2023). The research is published in a report, Unburnable Carbon: Avoiding wasted capital and stranded assets, produced by the Carbon Tracker Initiative and the Grantham Research Institute on Climate Change and the Environment at the London School of Economics. The report says 60-80% of coal, oil and gas reserves of publicly listed companies could be classified as unburnable if the world is to cut emissions with an 80% probability of not exceeding global warming of 2°C. This is a widely accepted limit aimed at avoiding dangerous climate change, though many scientists and some policy-makers now believe there is little chance of staying below it. The research says the 200 listed companies analysed in the study own 762 billion tonnes of carbon dioxide (CO2) through their reserves of coal, oil and gas. This supports share value of $4 trillion and services of $1.5 trillion in outstanding corporate debt.

“Smart investors can already see that most fossil fuel reserves are essentially unburnable”

To cut greenhouse emissions so as to have an 80% chance of achieving the 2°C target, the fossil fuel reserves of these companies would probably be able to emit no more than about 125–275 billion tonnes of CO2 – around a quarter of the reserves they own. Some policy-makers pin their hopes on carbon capture and storage (CCS), a technology still to be proven to work commercially. But the report says most of the companies’ reserves will remain unburnable unless there is a dramatic development of CCS. It concludes that even a less ambitious goal, like a 3°C rise in average global temperature or more, which would pose significantly greater risks for the world and its economy, would still imply significant constraints on the use of fossil fuel reserves between now and 2050. Yet companies in the oil, gas and coal sectors are seeking to develop further resources which could double the level of potential CO2 emissions to 1,541 billion tonnes. The authors say current extractives sector business models are based on assumptions that there are no emissions limits, a strategy incompatible with a carbon-constrained economy. The study says financial regulators should require companies to disclose the potential CO2 emissions that are embedded in fossil fuel reserves. Finance ministers should initiate an international process to incorporate climate change into the assessment and management of systemic risk in capital markets. And investors should challenge the strategies of companies which are using shareholder funds to develop high-cost fossil fuel projects.

“Start deflating the carbon bubble before it pops… Jump, before you are pushed.”

The authors say the report raises serious questions about 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, author of the Stern Review Report on the Economics of Climate Change and chair of the Grantham Research Institute, said: “Smart investors can already see that most fossil fuel reserves are essentially unburnable… They can see that investing in companies that rely solely or heavily on constantly replenishing reserves of fossil fuels is becoming a very risky decision. “But I hope this report will mean that regulators also take note, because much of the embedded risk from these potentially toxic carbon assets is not openly recognized through current reporting requirements.” Jeremy Leggett of Carbon Tracker said: “The pooled message to regulators is clear. Do your job. Start requiring recognition of stranded carbon-asset risk in capital-markets processes. Start deflating the carbon bubble before it pops. “The message to all the players across the financial chain… is also obvious. If the regulators won’t do their job, do it for them. Jump, before you are pushed.” ShareAction (formerly Fair Pensions) has launched an online tool for pension savers to urge their funds to address the dangers of a global carbon bubble. – Climate News Network

Fossil fuels 'may prove worthless'

EMBARGOED until 0001 GMT on Friday 15 February
A leading UK university is launching a research programme to help businesses and policy-makers to protect themselves from investments which could be left worthless by climate change.

LONDON, 15 February – The University of Oxford has begun a programme of research to identify high-carbon sectors and assets that could be devalued or written off if the world takes resolute action to limit emissions of greenhouse gases.

It seeks to help investors to avoid sinking money in potentially useless assets that might ultimately lose their entire value, turning into what are known as “stranded assets”.

Assets become stranded if they are replaced by greener alternatives or new technologies, or are subject to new regulations or resource constraints.

In 2012 the International Energy Agency said the world was on course for average temperature rises of at least 4°C, double the limit agreed by world governments. So, it said, a significant part of the world’s known fossil fuel stores would have to stay in the ground to fulfil international climate commitments and reduce dangerous impacts.

The Potsdam Institute for Climate Impact Research has calculated that to reduce the chance of exceeding 2°C warming to 20%, the global carbon budget for 2000-50 is 886 gigatonnes of CO2. Discounting emissions from the first decade of this century leaves a budget of 565 gigatonnes for the remaining 40 years to mid-century.

However, the known fossil fuel reserves declared by energy and mining companies is equivalent to 2,795 gigatonnes of CO2. If the world wants to keep climate change to below 2°C, then, 80% of those reserves can never be burned: they are in fact valueless.

According to the Carbon Tracker Initiative, “this means that governments and global markets are currently treating as assets reserves equivalent to nearly five times the carbon budget for the next 40 years. The investment consequences of using only 20% of these reserves have not yet been assessed.’’

Safer homes for funds

 

Asset stranding is currently little understood, but the implications are potentially very significant. It could have a direct effect on millions of small savers too, as many universities and pension funds have big investments in hydrocarbon companies (and see our story on 1 February).

The researchers, from Oxford’s Smith School of Enterprise and the Environment, will try to find out which assets and sectors are most at risk and how to respond to the challenges.

The former MP John Gummer, now Lord Deben, chairs the Committee on Climate Change, an independent group which advises the UK Government. Speaking at the School, he stressed the need for businesses and policy makers to adapt to the new economic landscape.

He said: “Investors continue to deploy hundreds of billions of pounds into polluting and unsustainable sectors. In many cases these investments will not be worth what investors think.

“Climate change, scarcer resources and new disruptive technologies will reduce value and strand assets. If investors better understand the risks of investing in these assets they will be attracted to greener alternatives and see them as better business propositions and safer places for their funds.”

Professor Gordon Clark, director of the Smith School, said: “We are looking at how changes in regulation, pricing, technology, society and climate could be a risk to a range of polluting assets.. Our new programme is creating a critically important space for these issues to be understood and for appropriate responses to be developed.”

The four-year research programme’s first project is to focus on the international supply chain for the agricultural sector, examining methods of transport and production. Later projects will probably include transport, power generation, real estate and a range of commodities.

The researchers aim to create new tools to understand and manage the risks of asset stranding. They will also analyse  investor portfolios to learn about risk exposures and will compile case studies of best practice.

The programme is being supported by Aviva Investors, Bunge Ltd, Climate Change Capital Ltd and HSBC Holdings plc, with non-financial partners including the Carbon Tracker Initiative, Trucost and WWF-UK. – Climate News Network

EMBARGOED until 0001 GMT on Friday 15 February
A leading UK university is launching a research programme to help businesses and policy-makers to protect themselves from investments which could be left worthless by climate change.

LONDON, 15 February – The University of Oxford has begun a programme of research to identify high-carbon sectors and assets that could be devalued or written off if the world takes resolute action to limit emissions of greenhouse gases.

It seeks to help investors to avoid sinking money in potentially useless assets that might ultimately lose their entire value, turning into what are known as “stranded assets”.

Assets become stranded if they are replaced by greener alternatives or new technologies, or are subject to new regulations or resource constraints.

In 2012 the International Energy Agency said the world was on course for average temperature rises of at least 4°C, double the limit agreed by world governments. So, it said, a significant part of the world’s known fossil fuel stores would have to stay in the ground to fulfil international climate commitments and reduce dangerous impacts.

The Potsdam Institute for Climate Impact Research has calculated that to reduce the chance of exceeding 2°C warming to 20%, the global carbon budget for 2000-50 is 886 gigatonnes of CO2. Discounting emissions from the first decade of this century leaves a budget of 565 gigatonnes for the remaining 40 years to mid-century.

However, the known fossil fuel reserves declared by energy and mining companies is equivalent to 2,795 gigatonnes of CO2. If the world wants to keep climate change to below 2°C, then, 80% of those reserves can never be burned: they are in fact valueless.

According to the Carbon Tracker Initiative, “this means that governments and global markets are currently treating as assets reserves equivalent to nearly five times the carbon budget for the next 40 years. The investment consequences of using only 20% of these reserves have not yet been assessed.’’

Safer homes for funds

 

Asset stranding is currently little understood, but the implications are potentially very significant. It could have a direct effect on millions of small savers too, as many universities and pension funds have big investments in hydrocarbon companies (and see our story on 1 February).

The researchers, from Oxford’s Smith School of Enterprise and the Environment, will try to find out which assets and sectors are most at risk and how to respond to the challenges.

The former MP John Gummer, now Lord Deben, chairs the Committee on Climate Change, an independent group which advises the UK Government. Speaking at the School, he stressed the need for businesses and policy makers to adapt to the new economic landscape.

He said: “Investors continue to deploy hundreds of billions of pounds into polluting and unsustainable sectors. In many cases these investments will not be worth what investors think.

“Climate change, scarcer resources and new disruptive technologies will reduce value and strand assets. If investors better understand the risks of investing in these assets they will be attracted to greener alternatives and see them as better business propositions and safer places for their funds.”

Professor Gordon Clark, director of the Smith School, said: “We are looking at how changes in regulation, pricing, technology, society and climate could be a risk to a range of polluting assets.. Our new programme is creating a critically important space for these issues to be understood and for appropriate responses to be developed.”

The four-year research programme’s first project is to focus on the international supply chain for the agricultural sector, examining methods of transport and production. Later projects will probably include transport, power generation, real estate and a range of commodities.

The researchers aim to create new tools to understand and manage the risks of asset stranding. They will also analyse  investor portfolios to learn about risk exposures and will compile case studies of best practice.

The programme is being supported by Aviva Investors, Bunge Ltd, Climate Change Capital Ltd and HSBC Holdings plc, with non-financial partners including the Carbon Tracker Initiative, Trucost and WWF-UK. – Climate News Network

Fossil fuels ‘may prove worthless’

EMBARGOED until 0001 GMT on Friday 15 February A leading UK university is launching a research programme to help businesses and policy-makers to protect themselves from investments which could be left worthless by climate change. LONDON, 15 February – The University of Oxford has begun a programme of research to identify high-carbon sectors and assets that could be devalued or written off if the world takes resolute action to limit emissions of greenhouse gases. It seeks to help investors to avoid sinking money in potentially useless assets that might ultimately lose their entire value, turning into what are known as “stranded assets”. Assets become stranded if they are replaced by greener alternatives or new technologies, or are subject to new regulations or resource constraints. In 2012 the International Energy Agency said the world was on course for average temperature rises of at least 4°C, double the limit agreed by world governments. So, it said, a significant part of the world’s known fossil fuel stores would have to stay in the ground to fulfil international climate commitments and reduce dangerous impacts. The Potsdam Institute for Climate Impact Research has calculated that to reduce the chance of exceeding 2°C warming to 20%, the global carbon budget for 2000-50 is 886 gigatonnes of CO2. Discounting emissions from the first decade of this century leaves a budget of 565 gigatonnes for the remaining 40 years to mid-century. However, the known fossil fuel reserves declared by energy and mining companies is equivalent to 2,795 gigatonnes of CO2. If the world wants to keep climate change to below 2°C, then, 80% of those reserves can never be burned: they are in fact valueless. According to the Carbon Tracker Initiative, “this means that governments and global markets are currently treating as assets reserves equivalent to nearly five times the carbon budget for the next 40 years. The investment consequences of using only 20% of these reserves have not yet been assessed.’’

Safer homes for funds

  Asset stranding is currently little understood, but the implications are potentially very significant. It could have a direct effect on millions of small savers too, as many universities and pension funds have big investments in hydrocarbon companies (and see our story on 1 February). The researchers, from Oxford’s Smith School of Enterprise and the Environment, will try to find out which assets and sectors are most at risk and how to respond to the challenges. The former MP John Gummer, now Lord Deben, chairs the Committee on Climate Change, an independent group which advises the UK Government. Speaking at the School, he stressed the need for businesses and policy makers to adapt to the new economic landscape. He said: “Investors continue to deploy hundreds of billions of pounds into polluting and unsustainable sectors. In many cases these investments will not be worth what investors think. “Climate change, scarcer resources and new disruptive technologies will reduce value and strand assets. If investors better understand the risks of investing in these assets they will be attracted to greener alternatives and see them as better business propositions and safer places for their funds.” Professor Gordon Clark, director of the Smith School, said: “We are looking at how changes in regulation, pricing, technology, society and climate could be a risk to a range of polluting assets.. Our new programme is creating a critically important space for these issues to be understood and for appropriate responses to be developed.” The four-year research programme’s first project is to focus on the international supply chain for the agricultural sector, examining methods of transport and production. Later projects will probably include transport, power generation, real estate and a range of commodities. The researchers aim to create new tools to understand and manage the risks of asset stranding. They will also analyse  investor portfolios to learn about risk exposures and will compile case studies of best practice. The programme is being supported by Aviva Investors, Bunge Ltd, Climate Change Capital Ltd and HSBC Holdings plc, with non-financial partners including the Carbon Tracker Initiative, Trucost and WWF-UK. – Climate News Network

EMBARGOED until 0001 GMT on Friday 15 February A leading UK university is launching a research programme to help businesses and policy-makers to protect themselves from investments which could be left worthless by climate change. LONDON, 15 February – The University of Oxford has begun a programme of research to identify high-carbon sectors and assets that could be devalued or written off if the world takes resolute action to limit emissions of greenhouse gases. It seeks to help investors to avoid sinking money in potentially useless assets that might ultimately lose their entire value, turning into what are known as “stranded assets”. Assets become stranded if they are replaced by greener alternatives or new technologies, or are subject to new regulations or resource constraints. In 2012 the International Energy Agency said the world was on course for average temperature rises of at least 4°C, double the limit agreed by world governments. So, it said, a significant part of the world’s known fossil fuel stores would have to stay in the ground to fulfil international climate commitments and reduce dangerous impacts. The Potsdam Institute for Climate Impact Research has calculated that to reduce the chance of exceeding 2°C warming to 20%, the global carbon budget for 2000-50 is 886 gigatonnes of CO2. Discounting emissions from the first decade of this century leaves a budget of 565 gigatonnes for the remaining 40 years to mid-century. However, the known fossil fuel reserves declared by energy and mining companies is equivalent to 2,795 gigatonnes of CO2. If the world wants to keep climate change to below 2°C, then, 80% of those reserves can never be burned: they are in fact valueless. According to the Carbon Tracker Initiative, “this means that governments and global markets are currently treating as assets reserves equivalent to nearly five times the carbon budget for the next 40 years. The investment consequences of using only 20% of these reserves have not yet been assessed.’’

Safer homes for funds

  Asset stranding is currently little understood, but the implications are potentially very significant. It could have a direct effect on millions of small savers too, as many universities and pension funds have big investments in hydrocarbon companies (and see our story on 1 February). The researchers, from Oxford’s Smith School of Enterprise and the Environment, will try to find out which assets and sectors are most at risk and how to respond to the challenges. The former MP John Gummer, now Lord Deben, chairs the Committee on Climate Change, an independent group which advises the UK Government. Speaking at the School, he stressed the need for businesses and policy makers to adapt to the new economic landscape. He said: “Investors continue to deploy hundreds of billions of pounds into polluting and unsustainable sectors. In many cases these investments will not be worth what investors think. “Climate change, scarcer resources and new disruptive technologies will reduce value and strand assets. If investors better understand the risks of investing in these assets they will be attracted to greener alternatives and see them as better business propositions and safer places for their funds.” Professor Gordon Clark, director of the Smith School, said: “We are looking at how changes in regulation, pricing, technology, society and climate could be a risk to a range of polluting assets.. Our new programme is creating a critically important space for these issues to be understood and for appropriate responses to be developed.” The four-year research programme’s first project is to focus on the international supply chain for the agricultural sector, examining methods of transport and production. Later projects will probably include transport, power generation, real estate and a range of commodities. The researchers aim to create new tools to understand and manage the risks of asset stranding. They will also analyse  investor portfolios to learn about risk exposures and will compile case studies of best practice. The programme is being supported by Aviva Investors, Bunge Ltd, Climate Change Capital Ltd and HSBC Holdings plc, with non-financial partners including the Carbon Tracker Initiative, Trucost and WWF-UK. – Climate News Network