Institutions like Carbon Tracker have proved that reframing collective action arguments in dollar cost terms can be highly effective at mobilising the world’s top asset holders to take action.
In the case of climate change, asset holders took note when the associated risks were presented as a carbon bubble threat on the basis that fossil fuel assets aren’t really wealth if they can never be burned (at least not if we’re to spare the planet from life-threatening climate change) .
But, it turns out, there may be another equally effective way of framing the argument. Read more
It was Climate Finance Day in Paris last week, a conference convened under the auspices of UNEP and the UNPRI to address the specific challenges and issues of redirecting capital towards a resilient low-carbon global economy ahead of the United Nations Climate Change Conference also to be held in Paris, in December.
The big takeaway was consensus is shifting, especially among asset managers and real money investors who no longer view environmental sustainability as a fringe theme. Climate is a bona fide risk for beneficiaries which professional investors must guard against to fulfil their fiduciary duties. To do nothing, essentially, is to encourage a disorderly capital transition and, potentially, a financial panic.
As example, Axa’s chief executive pledged the insurer would divest €500m of coal assets between now and the end of the year. Read more
We know central banks have the power to support asset classes and to move markets, and do so frequently in the name of financial stability.
But are there other social threats that could be stabilised or mitigated by central banks in a similar way?
For example, should central bank monetary policy be charged with a green agenda? Should central banks take it upon themselves to encourage and support the formation of liquid environmentally-focused markets? Read more
So writes the FT’s Martin Wolf in his column today, which starts out noting that atmospheric carbon dioxide concentrations exceeded 400 parts per million last week, the highest level in 4.5m years.
As he says, if we take a prudential view of public finances, then surely a similar approach to something irreversible and much costlier” is warranted.< Read more
How much of the oil and gas sector’s asset valuations could be at risk from climate mitigation policy?
The International Energy Agency’s latest annual World Energy Outlook, released in November, followed the popular practice in long-term forecasts of using several scenarios. One involves global policymakers moving to limit atmospheric CO2 concentration to 450 parts per million, in order to limit to 50 per cent the probability of average temperatures rising 2 degrees or more.
The problem for fossil fuel companies is that could limit their ability to utilise all their reserves. Read more
This is the most awesome chart we’ve seen since Lisa’s Starbucks tax graphic: Goldman Sachs comparing the attention given to climate change, the eurozone crisis, and Justin Bieber. Read more
There is dystopian financial innovation and there is financial innovation for dystopia.
Here’s an idea from an Asian Development Bank study into dealing with costs from climate-induced migration (H/T Artemis). The future costs of millions moving from affected areas, infrastructure damage estimates, etc, remain highly uncertain. So…
A global climate deal to extend the life of the Kyoto treaty and establish the parameters for negotiating a new pact by 2015 will provide a fresh stimulus to the world’s floundering carbon markets, according to bankers and analysts, reports the FT. Carbon prices have plunged to record lows in recent weeks as Europe’s emissions trading scheme, the world’s largest, has been hit by eurozone uncertainties and fears of an oversupply of carbon credits. Other carbon market analysts welcomed the salvaging of the Kyoto treaty, noting that some countries in Durban had threatened to try to kill off the carbon offset market created under the treaty if the conference rejected its extension. Negotiators agreed to new market mechanisms to put a price on carbon, though many details were left undecided, and it is far from certain the agreement to agree will amount to anything, explains the Guardian.
The US, backed by Saudi Arabia, is refusing to sign off on a flagship global climate fund, the FT reports, days ahead of an important UN climate summit. The fund is one of the few measures to emerge from seven years of talks on how countries should share the burden of cutting greenhouse gas emissions, which risk raising global temperatures to dangerous levels. At the same time, the price of carbon permits in the European Union, whose members are virtually the only wealthy countries willing to offer conditional backing for a new phase of the Kyoto pact in Durban, crashed to record lows of €7.80 on Thursday, — in part due to eurozone debt crisis, but a UBS report claiming the schem was not working also unnerved investors.
International scientists have presented fresh evidence into the debate over global warming, saying that climate change is “undeniable”, in the first major piece of research since the “Climategate” controversy, the FT says. The research, headed by the US National Oceans and Atmospheric Administration, is based on new data not available for the UN’s Intergovernmental Panel on Climate Change report of 2007, which has been attacked by critics.
Forget equities, forex and even fixed income, emissions trading is where it’s at currently.
As a bid battle rage for EcoSecurities, the Intercontinental Exchange has just picked up a 4.8 per cent holding in Climate Exchange, the dominant carbon trading exchange in Europe. Read more
As if things couldn’t get much worse, the banking crisis is also exacerbating global warming.
The below chart, from the European Climate Exchange (via Hellasious at Sudden Debt), shows how. Read more