$3trn investor coalition writes to 40 energy companies on stranded asset risk

Major asset owners and fund firms back campaign

Seventy global investors representing $3trn (€2.17trn) in assets have written to 40 oil, gas and coal companies asking them to review their exposure to carbon asset risk and outline their plans for managing them.

The campaign, organised by US-based sustainability advocacy group Ceres and the non-profit Carbon Tracker initiative, is being seen as the first coordinated effort to get the world’s top fossil fuel companies to confront the likelihood of not being able to burn all of their reserves.

Major asset owners backing the call include California pension giants CalPERS and CalSTRS, the New York State Common Retirement Fund, the UK’s Railpen Investments, Universities Superannuation Scheme and Merseyside Pension Fund and Christian Super and Local Government Super of Australia.

The coalition features faith investors as well as asset managers like Aviva Investors, Walden Asset Management and Wespath Investment Management.

Also signed up to the campaign are the treasurers of the US states of Oregon, Vermont, Connecticut, Maryland and California.

It comes in the wake of the 350.org fossil fuel divestment campaign and recent reports from the International Energy Agency (IEA) and the Intergovernmental Panel onClimate Change (IPCC) which have raised the issue even higher up the agenda of institutional investors. The campaign is being launched today via a teleconference featuring, among others, Jack Ehnes, CEO of the California State Teachers’ Retirement System and Mark Fulton, the former head of research at Deutsche Bank’s DB Climate Change Advisors, who sits on the Advisory Board at Carbon Tracker.

As investors with long-term investment strategies, the investors say in a sample letter [to BP], that they seek information on how the company can manage the risks. Options include reducing the carbon intensity of its assets, divesting its most carbon-intensive assets, diversifying into lower-carbon energy sources – or “returning capital to shareholders”.

The targeted companies are being asked to conduct risk assessments under at least two main scenarios: 1) business-as-usual; 2) a low carbon scenario consistent with cutting emissions by 80% by 2050.

In the sample case of BP, addressed to CEO Bob Dudley, CFO Brian Gilvary and Chairman Carl-Henric Svanberg, the investors sought a full response in advance of its 2014 annual shareholder meeting, adding: “We realise that these are complex issues and welcome the opportunity to meet with you to discuss our requests in more detail.”