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Web campaign targeting pension funds on ‘stranded’ assets follows unburnable carbon report update

Report says market ignoring $674bn of potentially stranded carbon assets every year.

An on-line campaign encouraging pension savers to e-mail their pension funds to respond to the financial risks of potentially ‘stranded’ fossil fuel assets was launched today. The web activism by ShareAction, the shareholder NGO, accompanies a separate report claiming that the market continues to recklessly ignore hundreds of billions of dollars in annual spending by oil and extractives companies on developing fossil fuels that will be ‘stranded’ should regulation be introduced to stop them being burned to keep global warming below the scientifically recommended threshold of 2°C. The updated research by the London-based Carbon Tracker Initiative and the Grantham Research Institute on Climate Change and the Environment at London School of Economics and Political Science, says oil, gas an coal companies are spending approximately $674bn per annum – set to rise to a cumulative $6trillion over the next decade – on sourcing potentially ‘unburnable’ carbon assets. This means investor valuations on resources companies values could be hugely mis-priced, it argues.
The Carbon Tracker Initiative’s first version of the updated report, titled ‘Unburnable Carbon’, which came out in March, 2012, influenced a campaign on US university campaigns by 350.org, the environmental advocacy group, to lobby endowment and pension funds to divest from coal, oil and gas stocks.
The newly launched UK campaign where savers can lobby their pension funds is at the following site: Link
The Unburnable Carbon report update says company valuation and credit ratings methodologies still do not typically inform investors whether they have exposure to these potentially stranded assets. Its own research analyses 200 listed companies, which together own 762bn tonnes of carbon dioxide (CO2)
through their reserves of coal, oil and gas. This, it says, is equal to a share value of $4trillion and services $1.5trillion in outstanding corporate debt.The report says that to achieve emissions reductions consistent with an 80% chance of achieving the 2°C target agreed by many governments the fossil fuel reserves of these listed companies would likely have to comply with a budget of about 125 – 275 billion tonnes of CO2, or a quarter share of the reserves they own.The report says that even a less ambitious climate goal such as a 3°C rise in average global temperature would still imply significant constraints on burning fossil fuels between now and 2050. However, it says oil, gas and coal companies are seeking to develop further resources that could double the level of potential CO2 emissions on the world’s stock exchanges to 1,541 billion tonnes. The report says: “Current extractives sector business models are based on assumptions that there are no limits to emissions. This strategy is not compatible with a carbon-constrained economy.” Even if Carbon Capture and Storage (CCS) is deployed in line with an optimistic scenario by 2050, the report says fossil fuel carbon budgets would only be extended by 125GtCO2, allowing the equivalent to 4% of current global reserves to be burned as long as their emissions are captured and stored. Professor Lord Stern of Brentford, Chair of the Grantham Research Institute on Climate Change and the Environment, said: “Smart investors can already see that most fossil fuel reserves are essentially unburnable because of the need to reduce emissions in line with the global agreement by governments to avoid global warming of more than 2°C. 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.”
Link to report