Demand for the vessels is set to shrink a third by 2050, as fossil fuel use declines under a scenario in which global warming is limited to 1.5C, according to analysis by consultancy Maritime Strategies International (MSI) for the European Climate Foundation.

“The implications are pretty bleak,” author Stuart Nicoll told Climate Home News. If finance backs too much shipping capacity, a global shift to cleaner energy “is going to wipe out a large amount of capital”.

Dry bulk carriers will also be hit by a predicted halving of the seaborne coal trade, but can switch to carrying other commodities such as grain. While there may be some growth opportunities in transporting wood pellets or biofuels, most renewable energy sources do not require fuel supplies.

Investors should target their money towards the most efficient ships and consider divesting from big carbon carriers, the report advised.

Shipping: climate advocates split over speed limits at sea

Scientists have warned that staying within 1.5C would require an unprecedented shift in political will, finance flows and behaviour. A study in Nature this month warned that existing fossil fuel infrastructure, if operated in line with past trends, would burn through the 1.5C carbon budget.

MSI also considered a pathway consistent with holding global temperature rise to 2C, the upper limit agreed in Paris. “There clearly are a range of outcomes,” said Nicoll, but “the concept of steady, constant growth in cargo, which has kind of been the bedrock of the industry… whatever scenario, they have to accept that is not going to happen.”

Campaigners have urged banks, pension funds and other major lenders to divest from shipping companies dependent on the trade in fossil fuels.

Share Action in May recommended drawing the line at shippers getting 30% of revenue or more from coal, which applies to most listed firms specialising in dry bulk.

“Due to the long operational life of ships, the low-carbon transition poses a very real threat to shipping companies reliant on fossil fuel transportation,” said the campaign group’s Christian Wilson in response to the MSI report.

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Eleven major banks last month signed up to the Poseidon Principles, which set standards for the climate performance of shipping fleets. The framework does not address the environmental or financial risks associated with the carbon content of their cargo, however.

Johannah Christensen, managing director of the Global Maritime Forum, said in a statement that the transition to a low carbon future would “inevitably impact” the industry.

“Sober assessments of the implications of this energy transition on shipping are tremendously important to industry leaders and investors making long term strategic investment decisions, that will allow global shipping to continue to serve the needs of global trade and society at large,” she said.

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With a combined $15 trillion of assets under management, the global investment companies said they would support the implementation of a Macron-backed initiative to pressure companies to become more climate-friendly.

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Blackrock, Goldman Sachs, BNP Paribas, HSBC, Natixis, Amundi, State Street and Northern Trust committed to form a coalition and work with six sovereign wealth funds to consider the climate-risks of large financial assets following a meeting with Macron on Wednesday, the Elysée confirmed.

The coalition said it would reconvene during the climate action summit organised by UN secretary general António Guterres in September to update Macron on the progress of its initiatives for climate-resilient investments.

The summit will engage a host of different stakeholders, including countries, business leaders, researchers and youth activists to present meaningful initiatives to deepen and quicken the pace of decarbonisation.

The meeting is being prepared through nine workstreams led by different countries with France together with Jamaica leading the track on climate finance. Only the most high-impact initiatives are due to be presented on stage with countries expected to compete for the spotlight.

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“Finance will be green or it won’t be. It will help to finance the ecological transition or it won’t be,” declared France’s finance minister Bruno Le Maire, welcoming the coalition of investors.

The announcement comes after Macron gathered six sovereign wealth funds managing more than $3 trillion of assets at the Elysée Palace last July to come up with a pro-environment investment framework.

The guidelines aim to help the funds put pressure on companies they invest in to meet the same pro-environment standards and encourage other large asset managers to follow suit.

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On 10 September, California governor Jerry Brown signed a bill which would require 100% of the state electricity’s to come from carbon-free sources.

That would have no immediate effect on most gas generators, according to a report by Standard & Poor’s (S&P) analyst Michael Ferguson this month. However, he said: “We believe that over the long term, with the growth of renewable energy, these utilities face a significant threat to their market position, finances, and credit stability.”

Within a fortnight of the California bill, S&P had revised its ratings outlook for Middle River Power, an equity firm backing a natural gas-fired plant providing electricity for 500,000 people in San Bernadino, from stable to negative. On top of increased competition from renewables, the credit agency cited “a more challenging (…) regulatory environment for natural gas-fired assets over the long term because of aggressive renewable energy goal”.

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“This gas plant is going to have to be refinanced,” Ferguson told Climate Home News, “and it’s going to get more and more difficult to refinance over the long-term because they are going to be facing increasing renewable penetration… Longer-term the prospects for [all] gas generation are going to be weaker.”

S&P’s report largely echoes an assessment by its rival Moody’s, released in September. According to Moody’s, the state’s new legislation was “credit negative” for companies Calpine Corporation, NRG Energy, Pacific Gas & Electric Company (PG&E), Southern California Edison Company, Los Angeles Department of Water and Power.

CHN contacted the above companies for comment, only PG&E responded. A spokesperson told CHN the company had concerns about the affordability and reliability of sourcing 100% electricity from renewables. Battery capacity, in particular, may need have to increase 200-fold to meet the 100% goal, according to the S&P report.

Gas generators could become carbon neutral if fitted with carbon capture and storage (CCS) technology. But little research had been carried out into CCS up to date and it was unlikely to become commercially successful in California, said Ferguson.

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Henrik Jeppesen from Carbon Tracker, a think tank focusing on the financial impact of the global energy transition, said fossil fuel generators risked becoming stranded assets. Most new energy infrastructure has a lifetime of 40 to 50 years. With a hard date of 2045 for all gas generation to end, that would mean companies would be left with plants that “can not be utilized to the full and they will not be able to generate a financial return on the asset,” he said.

“The companies prioritising an energy mix from coal and gas will have the greatest difficulty figuring how they want to structure their business going forward,” Jeppesen said.

Renewables account for roughly 44% of the state’s power, with gas producing 33%. Coal generation in-state is negligible, although some electricity imports are coal-fuelled. California’s last nuclear power plant, Diablo Canyon, is set to shut in 2024. As older plants languish and face closure, some California gas companies have already ditched plans for new generation capacity.

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Shareholders Guy and Kim Abrahams allege the Commonwealth Bank of Australia failed to disclose risks it faces that relate to climate change.

Represented by law firm Environmental Justice Australia, they will argue in the federal court that the bank’s 2016 directors’ report withheld material information. If successful, the claim would force the bank to provide more detailed climate risk analysis.

“We bought Commonwealth Bank shares more than 20 years ago as an investment in our children’s future,” said Guy Abrahams, art consultant and co-founder of non-profit Climarte, in a statement.

“We are deeply concerned about the serious risks that climate change poses to the environment and society. The bank should tell investors about the risks climate change will have on its business.”

His wife Kim, a medical practitioner, added: “The Commonwealth Bank is Australia’s biggest company and should be a leader in responding to climate change and accurately reporting the risks to shareholders.”

Guy and Kim Abrahams want Commonwealth Bank to take a lead on climate risk

Report: Trump lawyers try ‘extraordinary trick’ to quash youth climate case

The case reflects mounting concern about the potential impact on the financial sector of climate change and the transition to a clean economy.

In particular, disruptive clean technology and climate policies are turning once blue-chip energy investments into a risky bet. A significant portion of listed coal, oil and gas assets are to be rendered worthless by the international effort to hold global warming below 2C.

According to campaign group Market Forces, CommBank has loaned $6bn to fossil fuel projects since world leaders agreed the Paris climate pact in December 2015. The investments have a lifetime carbon footprint of 2.8bn tonnes of CO2, the most polluting portfolio of Australia’s “big four”.

In June, a heavyweight task force led by businessman and former New York mayor Michael Bloomberg issued detailed guidelines to corporations on measuring and reporting climate risk.

While voluntary, the guidelines have been widely endorsed by climate campaigners, financial regulators and business leaders.

Report: Exxon shareholders win ‘historic’ climate vote against board’s advice

Geoff Summerhayes of Australian Prudential Regulatory Authority has said “climate risks will become an important and explicit part of our thinking”.

This is not just an environmental concern for the future, he stressed: “Some climate risks are distinctly ‘financial’ in nature. Many of these risks are foreseeable, material and actionable now.”

Called to give evidence to a parliamentary committee in March, CommBank chief executive Ian Narev could not say whether its portfolio was aligned with the 2C limit.

In another public statement, the bank said it had not been approached to fund controversial coal mining ventures in Queensland’s Galilee Basin, but did not rule out involvement.

Environmental Justice Australia lawyer David Barnden said the case would set “an important precedent” for other companies on climate risk disclosure.

That could extend beyond Australia, added Daniel Wiseman, an Australian-qualified lawyer at London-based firm Client Earth. “Many other countries already have similar disclosure requirements to Australia.

“In the UK, the Bank of England and other financial regulators have now made clear that financial institutions like banks and insurers must consider climate risk.

“To limit exposure to this sort of litigation, business leaders need to get acquainted, and quickly, with their legal duties and with emerging industry standards.”

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If countries are serious about the Paris Agreement aspiration of limiting the long-term world temperature rise to 1.5C, then many of the proposals to increase gas production and distribution will be unnecessary. New terminals and pipelines will never be fully used and will become stranded assets.

Conversely, if they go ahead with these investments, it risks locking in levels of fossil fuel use that will blow the climate target.

The report, Foot off the Gas, is published by Climate Action Tracker (CAT), an independent science-based assessment which tracks countries’ emission commitments and actions.

CAT’s members are Climate Analytics, Ecofys and NewClimate Institute, with the Potsdam Institute for Climate Impact Research as a collaborator.

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The report says part of the problem is that governments, guided by projections from the International Energy Agency (IEA), are overestimating the need for natural gas, both to replace coal and to act as emergency back-up when supplies from intermittent renewables falter.

IEA annual reports have consistently underestimated the speed of growth of renewables and failed to grasp the increasing role of other technologies like bio-gas, battery storage and hydrogen to even out any intermittency in supplies of electricity from solar and wind, it says.

“One example is China, where in 2016 the IEA projected renewables would rise to 7.2% of the power supply by 2020 – but by the end of 2016 they had already reached 8%. Additionally, India and the Middle East are also seeing renewables rising much faster than mainstream projections,” said Niklas Höhne from NewClimate Institute.

Changes in the way grids are organised are already happening in Europe, together with the building of long-distance connectors between countries that exchange renewable energy  when one has a surplus. These developments cut the need for generation from gas.

Report: Trump-era climate resistance, from a beachside in Rhode Island

The best-known example is hydro-electricity from Norway being used to boost wind energy supply in Denmark, and the reverse happening when there is a surplus of wind energy in Denmark and Germany.

Already many of the very expensive pipelines for transporting gas are under-utilised, and expensive ports and facilities to export liquid petroleum gas will never be used at full capacity, the report claims.

For example, utilisation rates of US natural gas infrastructure are at 54%, and are even lower in Europe, at 25%.

“This over-investment in natural gas infrastructure is likely to lead to either emissions overshooting the Paris Agreement’s 1.5C and 2C goals – or a large number of stranded assets as the shift to cheaper renewables takes place, “ said Andrzej Ancygier of Climate Analytics.

The report sees a dwindling role for natural gas towards the middle of the century because of increasing competition from renewables that continue to get cheaper.

This is contrary to the official line that gas consumption will continue to rise and is an important “bridging fuel” towards a carbon-free world.

“Natural gas is often perceived as a ‘clean’ source of energy that complements variable renewable technologies. However, there are persistent issues with fugitive emissions during gas extraction and transport that show that gas is not as ‘clean’ as often thought,” said Bill Hare of Climate Analytics.

“Natural gas will disappear from the power sector in a Paris Agreement-compatible world, where emissions need to be around zero by mid-century.”

Doubt is also cast on the possibility that gas can be used along with carbon capture and storage. Although the report says that some gains can be made, it is an expensive technology  – and even more costly if it is going to be a reliable way of reducing emissions by nearly 100%. Currently too many greenhouse gases still escape into the atmosphere at various stages of the process.

This article was produced by Climate News Network

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At ExxonMobil’s AGM in Dallas, Texas on Wednesday, 62% of shareholders voted in favour of a climate change resolution, against the board’s advice, according to a preliminary count. While detailed data is not yet available, the convincing majority suggests some major funds joined sustainable investment activists after the same proposal won 38% of the vote last year.

Coming amid reports president Donald Trump plans to withdraw the US from the Paris climate deal, it signalled that concern about climate change is stronger than ever in financial circles.

“Investors voting against management at Exxon is a powerful rebuke to the climate denialist policies of this White House,” said Raj Thamotheram, head of thinktank Preventable Surprises. “Markets are moving and corporate America would be foolish to bet so much on the protection from this regime.”

The resolution requires Exxon to disclose how the international goal to hold global warming below 2C – as agreed in Paris – could dampen future demand for its oil and gas.

Thinktank Carbon Tracker estimated in 2015 that Exxon was planning to sink $72 billion over the next decade into developing fuel reserves that would be surplus to the requirements of a 2C world.

Despite Trump’s apparent refusal to honour the Paris Agreement, advances in clean technology and policy action elsewhere have convinced some other oil majors to start adjusting their expectations.

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During the AGM, Exxon chief executive Darren Woods reiterated his company’s support for the Paris Agreement and call for a revenue-neutral carbon tax to meet climate goals. But management opposed shareholder demands for more transparency, insisting none of Exxon’s reserves would be “stranded” in the global shift to clean energy.

Woods promised to “step back and reflect” after the result was announced.

The Church of England and New York State public pension fund, which led the shareholder rebellion, described Wednesday’s victory as “historic” and “unprecedented”.

Edward Mason, head of responsible investment for Church Commissioners, said in a statement: “Despite strong opposition from the Board, the majority of Exxon’s shareholders have sent an unequivocal signal to the company that it must do much more to disclose the impact on its business of measures to combat climate change.”

“Climate change is one of the greatest long-term risks we face in our portfolio and has direct impact on the core business of ExxonMobil,” added New York State comptroller Thomas DiNapoli. “The burden is now on Exxon Mobil to respond swiftly and demonstrate that it takes shareholder concerns about climate risk seriously.”

It piles the pressure on Exxon at the same time as it faces multiple lawsuits over allegations it deliberately cast doubt on the scientific consensus around climate change, even as its internal research confirmed it.

Grassroots campaign network 350.org has consistently argued that engaging with Exxon is futile and shareholders should take their money elsewhere.

“Exxon’s climate lies are finally catching up with them,” said Jamie Henn, strategic communications director at 350, ahead of the vote.

“Any real climate risk assessment will show that Exxon’s drill-baby-drill business plan is incompatible with a liveable planet. Despite shareholder protests, they’re still doubling down on fossil fuels when the world is moving in the opposite direction. Exxon’s refusal to adapt their business model to a carbon constrained world should send investors running for the exits.”

But institutional investors like pension funds and insurance companies typically spread their money across all economic sectors and are unlikely to flee oil and gas in bulk.

Instead, investors with an interest in sustainability see analysis of the 2C goal as a first step towards getting energy companies to diversify into clean technology or return money to shareholders.

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Shareholder activists are hopeful of securing a majority for a climate change resolution that would require the oil major to publish annual assessments of how international efforts to hold global warming below 2C – as agreed in Paris in 2015 – affect its business.

Last year, the resolution was supported by 38% of Exxon’s shareholders. A similar proposal to Occidental Petroleum passed with 67% support earlier this month, the first of its kind to succeed against board advice.

Two of the world’s largest asset managers, BlackRock and Vanguard, which between them own around 12% of Exxon, are considering voting in favour, sources told the Wall Street Journal. BlackRock was accused of hypocrisy last year for opposing the motion despite rhetorically championing stronger disclosure of climate risk. This AGM season, it sided with activists against Occidental’s management.

A coalition of investors responsible for $4 trillion in assets, led by New York State and the Church of England, declared their support from the outset. Proxy advisory firms ISS and Glass Lewis, which sway a large chunk of smaller investors, are also on board.

“All of these pieces together create tremendous momentum and really favourable circumstances for a successful vote on the 31st,” said Sue Reid, vice president of climate and energy at sustainable investor network Ceres, which is coordinating efforts.

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For investors, the concern is that if oil companies are not aligned with the Paris climate goal, they could waste capital developing resources that will be “stranded” in the shift to clean energy. The money at stake includes ordinary people’s pension pots and insurance policies.

“This is not necessarily about putting major energy companies out of business, it is about preserving value,” Reid told Climate Home. “If [investors] don’t see companies responding to these very real concerns, that will beg some very serious questions about the value of continuing to invest in those entities.”

Exxon is resistant, insisting it already analyses the 2C threshold internally and the world still needs all its oil reserves. It is among the most bullish in the industry about future demand, foreseeing continued growth through 2040.

European players, which have started publishing 2C scenarios, are more cautious.

Report: Coal and oil demand ‘could peak in 2020’

Shell predicts oil demand will peak between 2025 and 2030. At its AGM in the Hague last Tuesday, 40 minutes were devoted to a detailed presentation on climate change. There, debate has shifted to how fast electric vehicles could eat into petroleum’s market share – and whether the company should set sustainability targets (it is not there yet).

French company Total has explicitly ruled out drilling in the Arctic and cut back on tar sands extraction, on the basis such ventures are not compatible with a 2C warming limit.

None of the oil majors on either side of the Atlantic consider it likely that governments will do what is necessary to meet the 2C goal, seeing a carbon price as the clearest indicator of commitment.

Some analysts warn that clean technology could disrupt the oil sector faster than any regulation, however. The Carbon Tracker Initiative and Grantham Institute argue a 2020 oil demand peak is plausible, based on dramatic cost reductions in car battery and solar technology.

Swiss bank UBS expects the cost of owning an electric car to draw level with the traditional petrol-burning variety as soon as next year in the EU, 2023 in China and 2025 in the US. Maintenance and running costs are significantly lower, while the upfront price is declining rapidly due to advances in battery manufacturing.

US to UN: jobs come before carbon cuts

Not all signs are in the activists’ favour. The election of US president Donald Trump on a platform of maximising US fossil fuel production gave Exxon political cover. Trump even appointed former Exxon chief Rex Tillerson as his top diplomat, putting him in a position to facilitate overseas oil deals.

But that has not assuaged investor concerns, said Ceres’ Reid: “It was very difficult to predict in advance how companies across the board and investors would react to the ‘Trump effect’. What we have seen is almost increased resolve… Companies and investors for the most part have stepped up like never before.”

Indeed, Trump’s determination to open up more blocks for oil drilling could actually increase uncertainty in the sector. It was the US shale oil and gas boom that triggered a global oil price slump in 2014, rendering many higher cost ventures uneconomic. Earlier this year, Exxon wiped 3.5 billion barrels of tar sands from its books that were no longer considered viable to exploit.

It is not just a matter for individual companies. Analysts from the Carbon Tracker thinktank warn that if the industry is systemically underestimating climate risk, it could be creating a “carbon bubble” that will eventually burst, destabilising the whole financial system.

A task force for the G20 Financial Stability Board led by businessman and former New York mayor Michael Bloomberg has published guidelines for all companies to report on the financial risks associated with climate change and the solutions to it. These will be presented at the next G20 summit in July for leaders to endorse.

Report: G20 panel tells energy giants to come clean on climate risks

While the guidelines are voluntary, experts at a climate finance event run by the Financial Times in London last Tuesday expected them to be integrated into financial regulations.

“We are now in the voluntary phase,” said John Roome, climate change director at the World Bank. “In the future we may very well see standardised requirements coming from various regulatory authorities on the nature of reporting that needs to be done.”

Not if oil majors can help it. A report by analysis firm IHS Markit, supported by BP, Chevron, ConocoPhillips, and Total, criticised the proposal on the basis it would distort the market.

Antonia Bullard, IHS Markit vice president for energy-wide perspectives, said: “Singling out one type of risk for separate treatment would prevent financial markets from accurately assessing, comparing and pricing all risks and opportunities. That would undermine, not support, the goal of improving capital allocation decisions and market functioning.”

By publishing detailed assumptions about future scenarios, the report said oil companies could create “a false sense of certainty” and get sued if the world misses the 2C target and those risks do not materialise.

Report: Trump administration sued over climate change ‘censorship’

That is “completely bonkers,” according to Alice Garton, senior lawyer at Client Earth. There are multiple climate lawsuits arrayed against oil majors, not least from Client Earth, but following the industry best practice as set out by Bloomberg’s task force offers a legal defence, she said.

Companies are already obliged to disclose “material” risks to their business – that is, factors that could hit future returns. For oil majors, climate regulations and clean technology are material threats, said Garton: “The disclosure regimes that cover material risk apply equally to climate risk. The task force is a voluntary initiative but that can be used as a framework to comply with existing laws.”

Like Reid, Garton told Climate Home that if companies like Exxon do not engage with investor concerns, they could see shareholders flee to safer bets.

“The institutional investors, if they don’t start seeing real change at Exxon, there is increasing legal pressure on them to divest,” she said. “If they keep hitting their head against a brick wall, are they doing the best thing for their beneficiaries by holding the shares? Some questions need to be asked as to whether engagement is working at Exxon.”

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That’s rich. In the North Sea oil fields, Britain is propping up a dying industry. Multi-billion tax breaks, supplemented in the 2017 budget, are given at the expense of diversifying the economy towards lower-carbon energy sources. In 2016, the UK’s oil and gas industry not only failed to bring in any tax revenue, but generated a net cost of £396 million to the government.

May could learn a thing or two from the Saudis about the strategy behind sunsetting the petroleum sector.

As long ago as the 1970s Sheikh Zaki Yamani, Saudi Arabia’s oil minister and one of the OPEC masterminds said: “The stone age did not end for lack of stones, and the oil age will end long before the world runs out of oil.” Saudi Arabia’s leadership well understands the fundamental shift in energy markets due the plummeting cost of renewables and other innovations.

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The consequence is the “green paradox”, a phenomenon described by the German economist Hans-Werner Sinn. An anticipated transition away from fossil fuels provokes their producers to accelerate the extraction of oil, gas and coal. This is exactly what happened over 2015-2016 when Saudi Arabia, with its world’s lowest cost production, chose to flood the market with cheap oil in competition with Iran and US shale gas over market share.

In doing so, Saudi Arabia drained its tax revenues – and those of all other oil-producing nations from Iran to the UK. This led to an unprecedented budget deficit for the country, estimated at 12% of GDP in 2017.

Saudi Arabia took important steps and used the budget deficit as a context for phasing out fossil fuel consumer subsidies, estimated at $71.3 billion in 2014. For decades, Saudi Arabia’s consumer prices for energy were among the lowest in the world, distorting the level playing field for renewables and making them uncompetitive.

The new fiscal pressure created the sense of urgency for this much-needed change that would otherwise be stifled by the political economy. In 2015 Saudi Arabia raised retail gasoline prices by about 50% and is considering further price increases in 2017.

Into the abyss: oil states face turmoil as climate policies bite

Saudi Arabian leaders more and more frequently speak about “leaving oil behind” and diversifying into the new economic activities including new energy technologies, particularly solar. In 2016 Saudi Arabia launched its Vision 2030 and the National Transformation Programme that deserves praise for a focus on renewables.

Prime Minister May’s programme of meetings with King Salman and other counterparts in Riyadh included a pitch for Britain’s strategic role in advising Saudi Arabia on implementation of the Vision 2030 and “tax and privatisation standards” for the initial public offering (IPO) of Saudi Aramco, the world’s largest petroleum company.

It is not difficult to imagine what kind of tax advice can come from the UK experts: more tax breaks. Indeed, at the end of March 2017 Saudi Arabia cut the corporate income tax rate from 85% to 50% – which is estimated to have boosted Aramco’s capitalisation by roughly $1 trillion.

Whereas UK tax cuts have come in the context of falling revenues to government from oil and gas, the Saudi cut will allow the government to raise much more money (at least in the near term) from the IPO.

Report: Indian oil majors prepare for electric vehicle boom

Unfortunately, both types of subsidies to fossil fuel production unlock “zombie energy”, encouraging oil consumption worldwide and driving more emissions. A recent study by the International Institute for Sustainable Development and the Overseas Development Institute estimated that a complete removal of subsidies to fossil fuel production globally would reduce the world’s emissions by 37 Gt of CO2 over 2017-2050, equivalent to global aviation emissions over the same period.

It is high time the UK stops trying to export its “expertise” on subsidising oil and gas production around the globe and rethinks how to use public resources for the low carbon future. The question is not if the oil age will end, but when, and how disruptive this end can be.

A much more useful avenue for UK’s cooperation with Saudi Arabia and other petroleum-producing nations would be to agree on a plurilateral plan to manage the fossil fuel industry’s decline in a just, transparent and predictable way. The first step should be elimination of tax breaks for the petroleum industry and other fossil fuel subsidies.

Ivetta Gerasimchuk and Peter Wooders are energy experts at the International Institute for Sustainable Development and Shelagh Whitley leads the climate and energy programme at Overseas Development Institute

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That is the demand 38.2% of shareholders agreed with at the US oil giant’s AGM in 2016. It fell short of the majority needed to force the board’s hand.

This year, New York State and the Church of England are back with a bigger coalition. Investors worth US$4 trillion support their call for climate risk disclosure from the outset, compared to a $300bn club floating the 2016 resolution.

“As investors, we are concerned that, unlike many of its peers, Exxon has not taken the steps necessary to demonstrate its resilience in a lower carbon future,” said Thomas DiNapoli, comptroller of NY State’s retirement fund.

“We want to know what Exxon’s strategy is for continued profitability as governments around the world live up to their commitment to the Paris Agreement 2 degree scenario.”

BP’s energy outlook: reality check or PR bullshit?

Under the Paris Agreement, world leaders agreed to hold global warming “well below 2C”. That means ending reliance on fossil fuels.

A seminal analysis from UCL showed at least half of proven natural gas reserves and a third of oil are unburnable in a 2C world.

Oil companies all expect the climate accord to fail, based on the central scenarios in their annual energy outlooks. Some, like Shell and BP, have started to explore the possibility they might be wrong.

In response to investor pressure, Exxon appointed its first climate expert to the board this month: atmospheric scientist Susan Avery.

Edward Mason, head of responsible investment at the Church Commissioners, said there had been “positive” discussions with Exxon – but still no commitment to consider a 2C scenario. “We believe Exxon’s board can and should support our reasonable disclosure request,” he said.

2014: We warned Exxon it could waste $16bn on oil sands projects.

2017: Exxon writes off $16 bn from oil sands.https://t.co/EhsJ2zQzif pic.twitter.com/NGQMBHgZYY

— Carbon Tracker (@CarbonBubble) February 23, 2017

The statement came as Exxon scrubbed 3.5 billion barrels of tar sands from its books, saying low oil prices made them uneconomic to extract.

Costly ventures like Arctic drilling or tar sands are most exposed to sudden downturns in demand that could follow from a rapid shift to clean energy.

The Carbon Tracker Initiative warned in a recent report oil majors are underestimating the disruptive potential of solar power and electric vehicles, which could see oil demand peak as soon as 2020.

Profile: Mark Carney, the unlikely climate champion

As institutional investors ramp up pressure on the higher profile fossil fuel companies, a G20 taskforce is trying to establish a more systematic approach to climate risk.

The panel, set up by Financial Stability Board chair Mark Carney and led by Michael Bloomberg, has set out voluntary standards for companies to follow. A consultation on the findings closed last week.

Some campaigners argue that engaging with fossil fuel companies is futile and responsible investors should take their money elsewhere.

Betámia Coronel, US reinvestment coordinator at 350.org, said: “Instead of negotiating with rogue oil corporations, DiNapoli should be protecting New Yorkers. Exxon has proved time and time again it will never change its stripes.

“With Trump and his oil cronies putting profit before people and planet, New York has the potential to be a true beacon of safety and security, yet it continues to invest billions in the likes of Exxon. How many more Superstorm Sandy’s must New Yorkers endure before we finally take bold action?”

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That is the conclusion of a report by the Carbon Tracker Initiative and Grantham Institute published on Thursday.

Energy companies pursuing business as usual are in for a rude awakening, by this analysis, with many mines and oil fields likely to become surplus to requirements.

Based on dramatic cost reductions in recent years, the model foresees these two technologies taking a 10% chunk of market share from carbon majors in a decade. That may not sound like much, but was enough to devastate the US coal sector.

“If people are just waiting on policy to happen, they could get bitten by clean technology coming up behind them,” said James Leaton, an author of the report.

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Solar panel costs have fallen 85% in the past seven years and car battery costs 73%. Despite these advances, the traditional energy companies continue to forecast linear growth at best.

BP predicts electric cars will make up 6% of the market by 2035. Carbon Tracker reckons a third is feasible.

Exxon Mobil expects all renewables to supply 11% of electricity in 2040. Carbon Tracker says solar alone could produce 23%.

It is not enough to meet the Paris Agreement upper limit on global warming of 2C, but bends the curve to 2.4-2.7C, compared to 3-4C under industry scenarios. Policies targeting other sectors would bring the international climate goal within reach.

The post Coal and oil demand ‘could peak in 2020’ appeared first on Climate Home News.

Through the lobby and down the stairs – please hold onto the handrail, for your health and safety –the chief economist presents his 2017 energy outlook to a packed room.

It is Spencer Dale’s time to shine. He is relaxed and affable as he paints a future of robust oil demand and (oops) busted climate targets.

“Any single projection or forecast 20 years ahead will almost certainly be wrong,” he says, getting his disclaimer in early. “It is about understanding the uncertainty you face.”

Uncertainty for oil and gas demand is uncertainty for the climate. And this year more than ever, the narrative turns on climate action: not if the clean energy revolution will take off, but when.

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The conclusion is familiar: greenhouse gas emissions will slow but not peak early enough or fall fast enough to stay within the temperature limits 195 countries have committed to.

“You might not like it and you might not really agree, but basically energy companies are saying the Paris Agreement is not going to transform the energy sector sufficiently fast to achieve the 2C target,” says Jonathan Grant, a director in PwC’s sustainability unit.

In the detail, though, there are signs the landscape is shifting in the climate’s favour. Predictions for renewable energy and electric vehicles have been revised up again since last year; fuel demand and emissions revised down.

And a supplementary analysis offers a hint of how the electrification and automation of private transport could be more disruptive than BP dares imagine.

Illustrative scenarios show how electric vehicles and related technology could dent oil demand in 2035 (Source: BP Energy Outlook 2017)

In the base case, 100 million electric vehicles hit the market by 2035, accounting for 6% of the global fleet. “The impact of EVs on its own is relatively limited,” says Dale, reducing oil demand by 1.2 million barrels a day compared to business as usual – a drop in the ocean of 23Mbbl demand growth.

Disingenuously, though, he separates the volume of EVs from the way they are used. Self-driving technology, car sharing and ride pooling are likely to radically reduce the number of vehicles needed, in tandem with a shift away from the internal combustion engine.

Bloomberg New Energy Finance estimates as many as two thirds of cars on the road could be electric by 2030, as these trends combine.

“EVs are at such an early stage of market introduction, there is massive uncertainty,” says Greg Muttitt, analyst with Oil Change International. “But there are very realistic scenarios that have EVs being a much larger proportion of the market.”

BP still wedded to carbon pricing as best climate policy even though other policies have driven low carbon tech deployment to date #bpstats

— Jim Watson (@watsonjim2) January 25, 2017

Reflecting the oil majors’ preference for carbon pricing as the purest tool to curb emissions, there was barely a mention of regulation.

It is a striking omission, as cities around the world take drastic smog-busting measures. Delhi has banned diesel cars more than 10 years old. Beijing is subsidising electric cars and restricting registration of conventional models. Paris, Madrid, Athens and Mexico City plan to take diesel cars off the road by 2025.

What nonsense from #BPstats Climate change is greatest market failure in history. The market won’t fix it alone. https://t.co/mqwKL2KGoP

— Louise Rouse (@rouselouise) January 25, 2017

Dale says the primary purpose of the energy outlook is to inform BP strategy, due out next month. A climate-conscious oil major would rigorously limit exploration to low cost fields, avoiding frontier ventures like the Arctic. Let’s see.

These exercises – undertaken by every oil company – are also a key communications tool. “They create a fatalism among policymakers and investors, that of course the world is going to be dependent on fossil fuels for decades,” says Muttitt. “I think their aim is it becomes a self-fulfilling prophecy, because it plays down a sense of a transition being possible.”

Grant, who spent seven years working for Chevron, is more generous. “In my experience talking to people in BP, there is genuine and serious engagement on the low carbon transition,” he says.

At the least, there is a move towards transparency. Dale invites the audience to toggle the assumptions and send in their own scenarios. This is not the last word.

Walk out of BP Energy Outlook 2017 to this view. Can’t help feel they’ll be adjusting EV projections upwards once again next year…#bpstats pic.twitter.com/1GvQC21JUT

— Laurence Copson (@LaurenceCopson) January 25, 2017

This article has been corrected. Jonathan Grant used to work for Chevron, not Exxon. Sorry for the error

The post BP’s energy outlook: reality check or PR bullshit? appeared first on Climate Home News.

The challenges currently posed by climate change pale in significance compared with what might come. The far-sighted amongst you are anticipating broader global impacts on property, migration and political stability, as well as food and water security. So why isn’t more being done to address it?

He then appeared to answer the question he had just posed, highlighting ‘potentially huge’ investor exposure to action on climate change:

Take, for example, the International Panel on Climate Change’s estimate of a carbon budget that would likely limit global temperature rises to 2˚C above pre-industrial levels. That budget amounts to between a fifth and a third of the world’s proven reserves of oil, gas and coal. If that estimate is even approximately correct it would render the vast majority of reserves “stranded” – oil, gas and coal that will be literally unusable without expensive carbon-capture technology, which itself alters fossil fuel economics. The exposure of UK investors, including insurance companies, to these shifts is potentially huge.

 He warned also of the risks of short-term economic planning:

Climate change is the tragedy of the horizon … The horizon for monetary policy extends out to two to three years. For financial stability it is a bit longer, but typically only to the outer boundaries of the credit cycle – about a decade. In other words, once climate change becomes a defining issue for financial stability, it may already be too late.

It was during the 2015 Paris climate summit that Mr Carney announced the establishment of a Task Force on Climate-related Financial Disclosures under the chairmanship of Michael Bloomberg:

The FSB is asking the Task Force on Climate-related Financial Disclosures to make recommendations for consistent company disclosures that will help financial market participants understand their climate-related risks. Access to high quality financial information will allow market participants and policymakers to understand and better manage those risks, which are likely to grow with time. 

How would the Task Force navigate the Scylla and Charybdis of short-term and long-term investor protection? Would it propose a clear and consistent framework, encouraging companies and investors to:

• Confront the relationship between a company’s business model and the Paris Agreement’s ambitious temperature goal
• Contextualise the transition risks of climate change action within the immeasurably greater risks of inaction, and so
• Harness investment towards the temperature goal?

Or would it give companies the latitude to fudge the issue of Paris compliance and to duck questions of the economic dangers of non-compliance, tending to preserve the short-term status quo?

On 14 December 2016 the Task Force published its provisional answer, recommending something approximating to the latter approach. The good news, however, is that its Recommendations are currently subject to a public consultation; and with a few key revisions may yet steer capital investment away from the ‘tragedy of the horizon’.

Report: G20 panel tells energy giants to come clean on climate risks

The most obvious failing of the Recommendations is that they misrepresent the Paris Agreement temperature goal – ‘holding the increase in the global average temperature to well below 2C above pre-industrial levels and to pursue efforts to limit the temperature increase to 1.5C’.

The increased ambition of the temperature goal is, of course, one of the most heralded aspects of the Agreement. Following an extensive Structured Expert Dialogue, the governments of nearly 200 countries rejected a <2˚C scenario as posing unacceptable risks, in particular to climate vulnerable regions and populations.

So what has the Task Force recommended? That companies:

• Use the discredited 2C scenario to conduct risk assessments, and
• Treat that scenario as ‘aligned with’ the Paris Agreement.

This amounts to encouraging companies to operate as if the Paris Agreement had made no advance on the 2C goal.

No-one involved in the UN climate negotiations could underestimate the political significance of the 1.5C element of the Paris Agreement.

In more concrete terms the distinction between the Paris goal and the Task Force presentation of it equates to something close to a doubling of the carbon budget: according to IPCC figures, emitting 850 GtCo2 would give a 33% chance of limiting warming to <1.5C, whereas 1500 GtCO2 would produce a 33% chance of <2C.

The Task Force recommendations, in other words, would enable companies to present their business plans as being consistent with the Paris Agreement, even where that was manifestly not the case, in effect it proposes a ‘pick and mix’ approach to climate scenarios.

As the Task Force notes, ‘creditors and investors are increasingly demanding access to risk information that is consistent, comparable, reliable, and clear.’

This demand would start to be met if companies reported against the same set of scenarios, eg:

Scenario 1: fulfillment of Paris Temperature goal
Scenario 2: NDC-based temperature projection
Scenario 3: business-as-usual temperature projection.

Such an approach would enable investors to compare like with like. It would also facilitate expert, ongoing assessment of the relative probabilities of the different outcomes.

Instead the Task Force proposes precisely the opposite, encouraging companies to self-select a variety of scenarios ‘most relevant to their circumstances’ (as if the social and economic catastrophe consequent on 3C warming, for example, might be relevant to some but not others):

A critical aspect of scenario analysis is the selection of a set of scenarios (not just one) that covers a reasonable variety of future outcomes, both favourable and unfavourable.

In this regard, the Task Force recommends organisations use a 2C scenario in addition to two or three other scenarios most relevant to their circumstances, such as scenarios related to Nationally Determined Contributions (NDCs), business-as-usual scenarios, or other challenging scenarios. 

Understanding climate risk is a wickedly complex challenge for investors and creditors as it is. If different organisations report against different climate scenarios according to ‘their circumstances’ the overall picture will inevitably be:

• Inconsistent
• Difficult to compare
• Unclear and confusing.

Finally the Task Force risks causing substantial confusion with what may simply be loose drafting. The Task Force acknowledges that:

In most G20 jurisdictions, companies with public debt or equity have a legal obligation to disclose material risks in their financial filings-including material climate-related risks. 

Failing to analyse or disclose climate-related risks, leading to investors being misled, may be a criminal offence (indeed Exxon is currently subject to investigation by the US Securities and Exchange Commission for alleged failings in this regard).

Nevertheless the Task Force goes on to describe climate disclosure as if it were a voluntary exercise. Presumably what the Task Force means is that its proposed framework is voluntary. Their wording, however, creates a potentially costly confusion (for all concerned) and should be corrected.

Golden opportunity

The Task Force has a golden opportunity to encourage investors to better understand the climate stability upon which any long-term financial stability inevitably depends. This requires a clear and consistent global framework for the analysis, assessment and disclosure of their independently and collectively perceived climate risk.

To avoid compounding the existing confusion, the Task Force should therefore:

• Advance an accurate representation of the Paris climate goal
• With a set of emissions scenarios, as laid out in IPCC AR5, relative to that
• Advocate that companies assess and disclose their risk exposure relative to those scenarios, and finally
• Avoid any implication that such disclosure is voluntary.

A radical redirection of capital investment is key to the fulfillment of the Paris Agreement temperature goal and the avoidance of climate catastrophe. The stakes could hardly be higher.

There is a public consultation open to 12 February 2017. There is an online consultation consisting of set questions. It is also possible to submit free-standing sunmissions to tcfd2017@uk.pwc.com.

Tim Crosland is the Director of Plan B, a charity advancing legal action in support of the Paris Agreement temperature goal.

The post Carney climate taskforce ‘misrepresents’ Paris deal appeared first on Climate Home News.

On Tuesday, he was accused of sending conflicted messages on climate change after authorising construction of two pipelines for tar sands oil.

In the past year, the Trudeau administration has been one of the more vocal in calling for tougher global greenhouse gas cuts and joined a ‘high ambition’ group of countries backing climate action.

But green groups say Trudeau’s decision to back the pair of projects – which are valued at C$11.8 billion – runs counter to his claims that the world needs to move away from fossil fuels.

In a series of tweets on his official account the prime minister said pipelines would “protect the environment and grow the economy”, citing nearly 200 “binding conditions” on developers.

Trudeau reveals playbook for tackling Trump climate denial: https://t.co/MiDVrAcWQf pic.twitter.com/wHEBrr8tAT

— Climate Home News (@ClimateHome) November 29, 2016

“A clear message has emerged through our government’s extensive consultations with Canadians: the economy and the environment go hand in hand,” read an accompanying statement.

One pipeline will run from the tar sands heartlands of Alberta to British Columbia; the second will see an existing 1,000km pipeline from Alberta to Manitoba replaced.

Oil extracted from tar sands is one of the most carbon-intensive fuel stocks on the planet, and causes widespread environmental damage during extraction and refining.

According to the Natural Resources Defense Council (NRDC), the pipelines mean Alberta’s tar sands industry will be able to ship an extra 1.1 million barrels of oil per day.

A third proposed project was rejected on the grounds it was not in the public interest and would see an increase in oil tankers navigating sensitive ecosystems.

FULL STATEMENT from Vancouver Mayor Gregor Robertson on Kinder Morgan decision. pic.twitter.com/TLrdRz7xWo

— Kamil Karamali (@KamilKaramali) November 29, 2016

Limits to shipments of oil along British Columbia’s north coast were also announced, with legislation due in early 2017.

The announcement illustrates the delicate line Canada’s federal government is taking on climate change and oil exploration, reluctant to squeeze a multi-billion dollar industry that employs thousands.

Plans for a nationwide carbon price from 2018 and a promise to axe coal use by 2030 grabbed headlines, as did the province of Alberta’s landmark decision in 2015 to cap the emissions of its tar sands industry.

Still, the country is projected to miss its climate targets under the Paris Agreement: there the government pledged to cut emissions 30% on 2005 levels by 2030, but analysts at Climate Action Tracker say they are on track to rise 1-7%.

Under that agreement, signatory countries aim to reduce greenhouse gas emissions to net zero in the second half of the century and limit warming to “well below” 2C above pre industrialised levels.

Interview: Meet the woman who took on Canada’s tar sand barons

The decision means Canada “in one fell swoop” will not meet its targets under the UN climate agreement says Josh Axelrod, an analyst with NRDC Canada.

“Today’s announcement gives that industry decades worth of growth potential, a fact that will ensure soaring Canadian emissions for the foreseeable future.

“Indeed, the annual lifecycle emissions from the oil carried by these two pipelines could exceed 271 million metric tons, the same as 57 million passenger vehicles.”

Adam Scott from the campaign group Oil Change International said the move had “squandered” Trudeau’s climate credibility and moves to embrace indigenous communities.

“There is no need for any additional pipeline capacity. Oil Change International recently released a report showing how the Canadian Association of Petroleum Producers is misleading Canadians on the need for new pipelines,” he added.

“Vancouver will continue to raise concerns about Kinder Morgan’s massive expansion that could bring seven times the number of oil tankers to our waters,” said the city’s mayor Gregor Robertson.

“I – along with the tens of thousands of residents, local First Nations, and other Metro Vancouver cities who told the federal government a resounding ‘no’ to this project.”

The post Tar sand pipelines batter Canada’s climate leader tag appeared first on Climate Home News.

Agreed by 195 countries in the French capital last December, the Paris climate deal sets out a target of zero net emissions from fossil fuels and other sources in the second half of the century. It entered into legal force on Friday.

But speaking at an event in London hosted by Chatham House, Al-Naimi dismissed the notion this meant a slow but certain demise of the oil and gas sector, which underpins the Saudi economy.

“We need to work hard to eliminate emissions but there is nothing wrong with fossil fuels,” said the 81-year-old, who led the Saudi delegation at UN climate talks from 1995-2015.

Al-Naimi pointed to Saudi investments in technologies that capture carbon dioxide and inject it into oil wells to extract more hydrocarbons as evidence the industry was adapting to a low-emission future.

There's only *1* link you'll need for #COP22. Bookmark it now https://t.co/2WQUKsX9aq #climate pic.twitter.com/2ysrLGJ0FP

— Climate Home News (@ClimateHome) October 30, 2016

The remarks underline the deep challenges facing governments as they prepare for a two-week UN climate summit in Marrakech next week, where implementing the deal is a priority.

Al-Naimi said the oil-rich kingdom supported last year’s Paris climate summit, but admitted he had to fight off “nonsensical” efforts to keep fossil fuels in the ground to prevent dangerous warming.

“Work on emissions but don’t talk about fossil fuels in ground, that would be a tragedy. We should eliminate emissions but if we [eliminate] fossil fuels we will go back to the stone age.”

“I am a believer in solar – I believe it is making great strides today and we are going to see major breakthroughs hopefully soon, but that doesn’t take away anything from fossil fuels,” he added. This year, Saudi Arabia cut its renewable energy targets from 50% to 10%, protecting demand for oil and gas.

Leading oil majors are expected to announce plans for a renewable energy fund and new efficiency measures at an event in London later on Friday.

Some are already making initial investments in clean energy technologies, although this week the CEO of Total Patrick Pouyanne told investors the solar sector was facing a “new winter” due to over-capacity and low demand.

The post Paris climate deal will not kill fossil fuels, says ex-Saudi oil chief appeared first on Climate Home News.

Exxon Mobil CEO Rex Tillerson was on bullish form in London on Wednesday, dismissing any concerns that the UN’s new climate treaty will limit near-term consumption of oil and gas.

His scenario would blow efforts to contain global warming to below the 2C danger zone sky high, unless nascent carbon capture technologies come online fast.

While greenhouse gas emissions in developed countries will likely peak in 2030, developing economies will struggle as they burn more fossil fuels, Tillerson told the Oil and Money conference.

Exxon's Rex Tillerson: CO2 emissions to peak around 2030; developing countries will meet Paris climate targets; harder for developed #OM2016 pic.twitter.com/zEDtbCRQJN

— Andrew Ward (@andrew_ward1) October 19, 2016

As a company Exxon “shares the view that addressing climate change is serious and warrants thoughtful action,” he said, citing projects on carbon capture, efficiency and waste heat conversion.

Tillerson also said he supports a price on carbon, noting that Exxon already operates with an average internal carbon cost of $80 per tonne, double that of Shell.

“We have long used a proxy cost of carbon… there’s a range depending on the country, depending on the tax that we think would be appropriate,” he said.

“We’re trying to influence and inform people and business on the choices they make.”

Analysis: Why the new climate math is a declaration of war

Exxon has come under intense pressure in the past year over evidence it ignored warnings from its own scientists of the dangers posed by burning fossil fuels way back in the 1980s.

Leaked internal documents clash with the company’s public position over the past decades and funding of lobbying to cast doubt on the veracity of climate science.

It is facing an inquiry from a coalition of Democrat attorney generals led by New York State’s Eric Schneiderman into what the company knew.

Tillerson avoided mentioning the issue, but insisted the company he has run since 2006 was committed to doing the “right thing the right way”.

“Integrity is in everything we do. It’s the foundation of trust and cooperation. A focus on integrity makes a corporations more effective,” he said.

The post Exxon CEO: world needs oil of five Saudi Arabias by 2040 appeared first on Climate Home News.

“The industry has a role in playing part of the solution and meeting the commitments required by COP21 [the 2015 UN climate summit],” the influential oil minister told a meeting of executives in London.

Agreed last December, the deal outlines a global zero net emissions target in the second half of the century, effectively ruling out widespread use of fossil fuels without as-yet-unproven carbon capture technologies.

But Al-Falih avoided listing any specific policies to cut greenhouse gas emissions from oil and gas production, referring to technology investments and efficiency.

And he predicted oil and gas would form the “core” of energy supply for decades to come, pointing to China and India’s growing middle classes.

“Oil demand is expending at a reasonably healthy rate – look at the car fleet expansion in China which proves this,” he said.

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Saudi Arabia has played a leading role among the OPEC group of oil-exporting countries in keeping output at all-time highs in an effort to protect its market share against the US and other new players.

The drive has seen a collapse in oil prices from well over US$100 in 2015 to the mid-30s through 2016.

Projections these could recover to $50-60 in 2017 were “logical” he said, citing rising demand and the prospect of greater supply control from OPEC members. “There is a healthy future ahead of oil and ample growth opportunities for individual oil enterprises.”

Al-Falih, a key member in the Saudi government and one of the driving forces behind Riyadh’s new 2030 strategy to diversify away from oil, added investment in renewables and nuclear would also rise.

Gas use across the country would double he said, supplying up to 70% of utilities, while solar and wind capacity would be boosted to 10 gigawatts, enough to meet 10% of peak consumption.

“Wind and solar are going to play a very significant part of our energy mix. We’re going to localise… talking to manufacturers of solar and wind,” he said.

The post Saudi Arabia says oil industry must meet climate goals appeared first on Climate Home News.

Writing in response to a report released by US NGO Oil Change International (OCI), McKibben and Monbiot echoed OCI’s conclusion that no new coal mines or oil or gas wells can be opened up, lest we exceed the carbon budget imposed on us by atmospheric physics.

In New Republic, McKibben had a characteristically elegant device to explain the findings. There are 942 gigatons of C02 stored in working mines and fields.

But the UN Intergovernmental Panel on Climate Change (IPCC) says that we can’t exceed 800 gigatons to stand a decent chance of staying within 2C. That’s the upper limit set by the Paris climate agreement.

Thus, said McKibben, the earth’s response to climate change would be henceforth governed by this inequation:

942>843

From this he concluded that no new extraction sites should be opened. To do so would be to fail the simplest of maths tests.

OCI founder Stephen Kretzmann put it this way: “Continued expansion of the fossil fuel industry is now quite clearly and quantifiably climate denial.”

A mathematician might write it like this:

942>843 ⇒ no new extraction

That symbol means ‘it logically follows’. But the logic is flawed. Critically, in reaching their final conclusion OCI made political and social choices that bear examination.

A year ago, Carbon Tracker Initiative looked at the same problem as OCI and came to a different conclusion. Yes, they said, opening new coal mines was bonkers. But some new oil and gas fields might be acceptable.

There are several reasons why having larger amounts of carbon in working fields that we can safely put into the air doesn’t automatically mean no new fields can be opened.

This new math profoundly changes our situation–fossil fuel frontier now closed, unless we want to break the planet https://t.co/FTCRvKY2Kd

— Bill McKibben (@billmckibben) September 22, 2016

An example of this nuance is that there is so much coal out there it dominates the measure, but how fast is it being dug up and extracted?

This matters because the longer it takes, the less competitive coal becomes against renewable energy sources and the more likely we are to see coal mines closed before they are exhausted. This could create some wriggle room.

Conversely, oil is going to be the most difficult fossil fuel to phase out because of the technological challenge of shifting planes, ships and trucks toward zero-carbon fuels.

At the same time, oil and gas wells decline in productivity toward the end of their lives sending their operating costs higher. This means that old fields might be closed early and new fields might fill the demand more cheaply – even with the start up costs.

This leads to the conclusion that:

942>843 ⇏ no new extraction

Not necessarily anyway.

The OCI report did take these dynamics into account, but it critiques the “least-cost pathway”. Just because some new oil drilling might cost less on paper, OCI argues, doesn’t make it the appropriate approach in reality.

New wells have investment and political interests behind them that makes them harder to shut down when the time comes.

“Since political action is required, we should look for solutions that are not just economically optimised, but politically optimised. Politically, it is much more difficult to demand the loss of physical capital – on which dollars have been spent, and steel and concrete installed – than to relinquish the future hope of benefits from untapped reserves,” argues the report.

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Here we find the crux of the disagreement. Carbon Tracker offers an olive branch of leniency to oil and gas companies to continue doing what they do for a while longer. OCI says they are drunk on profits and we should take away their keys.

Having made that decision, the maths was found to back it up. According to Kretzmann the major difference between Carbon Tracker’s report one year ago and Oil Change’s more recent one is the budget under which we allow ourselves and the fossil fuel companies to operate.

This is a risk judgement. In the climate world, the more carbon you emit, the less chance you have of achieving a certain temperature limit. Carbon Tracker base their budget on a scenario developed by the International Energy Agency (IEA) – called IEA 450.

A new report gives us the numbers we need: they show that the Paris agreement means no new coal, oil or gas. My col:https://t.co/I2dCEXkG82

— George Monbiot (@GeorgeMonbiot) September 28, 2016

“IEA 450 is based on a 50% chance of 2C, which frankly we think is too low to represent the top end of the Paris range,” Kretzmann told Climate Home. “If this is our policy ambition, shouldn’t we be aiming for better than a coin flip’s chance of success?”

OCI chose a scenario that gave a 66% chance of staying within 2C. Their budget also gives the world a 50% shot of staying below 1.5C – the more ambitious end of the Paris agreement.

So the new maths is based on a decision about acceptable risk. Which is fair enough but hardly revelatory.

To sum it up:

Carbon Tracker: 50% chance of 2C ⇒ some new gas and oil OK

Oil Change International: 66% chance of 2C ⇒ no new extraction

The difference is important because it reveals a split amid influential thinkers in the climate debate about the best way to effect change.

The question hinges on whether to engage fossil fuel companies on their terms: the IEA is considered an authoritative voice within the energy sector and some new oil wells is better than none. Or is it time for all-out war?

McKibben notes that his initiation to carbon budgets came when he based a seminal essay on the subject on the work of Carbon Tracker. But he now clearly believes their approach is too weak for the times.

Writing in the Guardian, Monbiot frames it as the conflict we must have: “Preventing climate breakdown means defending democracy from plutocrats. It’s their interests versus the rest of humanity’s.”

The war has already begun. Climate activists are drawing “red lines” in the grassy hills of Dakota and the courtrooms of the US, in the mud of the Ecuadorean Amazon, on the backs of whales in the Great Australian Bight and dozens of other places.

Calls for a moratorium on new coal mines will now shift to all new fossil fuel extraction. The above formula will be cited as the justification.

The reason McKibben invokes mathematics is its immutability. “The numbers are the numbers,” he says. An equation is inarguable. But the simplicity hides the subtext.

A decision is being taken and as the maths gets more complicated, we shouldn’t ignore the rounding.

The post Why the new climate math is a declaration of war appeared first on Climate Home News.

Environmental experts warned these incentives clashed with international climate goals, which imply a phaseout of fossil fuels.

A report released by financial activist group Market Forces on Thursday calculated the biggest exploration-related bonus for any oil company with interests in Australia was a potential AU$1.13 million a year for Bob Dudley, the chief executive of BP.

Dudley’s company is the first in line to open up the Great Australian Bight’s oil leases, although it experienced a setback on Wednesday when the Australian government regulator rejected BP’s environmental plan for a third time.

Reports to the national offshore drilling administrator show other international majors Chevron and Murphy joining BP making investments in the Bight basin, as well as local companies Santos and Bight Petroleum. All except for Bight Petroleum offer incentives for their top executives to open up new reserves.

BP’s annual report shows that all executive directors are entitled to bonuses if the company hits targets for “relative reserves replacement” – in other words if it grows its reserves faster than it depletes them. The report notes that BP did this faster than any other major oil company in the world in 2015-16.

Andrew Hopkins, sociology professor at the Australian National University, said it was likely that if the top executives in the company receive such bonuses, then they probably appear further down the organisation. Only those at the top have their bonus conditions disclosed publicly.

Hopkins said tying executive bonuses to finding new reserves could lead them to make decisions that could lead to major oil spills. BP’s modelling shows oil from a spill in the Bight could reach as far as the New South Wales coast.

“That really is an incentive to drill faster and faster drilling is more dangerous or increases the risk of blow out,” he said.

Analysis: Is it time for Norway to stop looking for oil?

Hopkins’ book, Disastrous Decisions: The Human and Organisational Causes of the Gulf of Mexico Blowout, found problematic bonus regimes contributed to BP’s Deepwater Horizon disaster, the largest marine oil spill of all time.

“That’s what was going on in the Gulf of Mexico,”said Hopkins. “They say they’ve learned their lesson. They’ve learned other technical lessons. But whether they’ve learned these management and organisational lessons, they provide no evidence of that whatsoever.”

Author of the Market Forces report, Dan Gocher said: “These things have to make a difference. These are their incentives. That’s why they go to work every day.”

The practice is common throughout the oil industry. A report last year found that executives at all of the 13 largest US oil companies received reserve expansion bonuses.

Study: Exxon and Chevron prone to ‘groupthink’ on climate

The reserve-related bonus are only a fraction of the overall payout an executive might hope for. Bonuses are also awarded for results on safety and environmental protection, which oil companies might argue balances the exploration impetus. None of the oil companies mentioned in the report returned requests for comment.

Gocher also questioned the rationale of paying out bonuses to executives who oversee the expansion of oil reserves when the world is trying to phase out fossil fuels. In order to prevent the world warming by more than 2C, the limit agreed by world leaders, more than a third of proven reserves must stay in the ground.

The Great Australian Bight. Photo: Alan & Flora Botting/Flickr

The governor of the Bank of England has warned that new reserves could become “stranded assets”. BP’s Dudley has questioned this concept, which is predicated on the world’s governments taking strong enough action to prevent dangerous climate change.

Gocher said: “Executive bonuses predicated on unearthing more fossil fuels when the world needs less shows the extent to which these companies’ business model is broken. They are not just in a state of denial, but actively accelerating towards a brick wall.”

Oil company share prices are tied to the amount of reserves they have on their books. Companies do not yet know the size of the reservoir of crude in the Great Australian Bight, but a significant find could boost shareholder profits. But if reserves can never be burned, Gosher said the impact on shareholders would be negative.

Even so, his report noted that 12 of Australia’s largest superannuation funds, which manage shares for millions of Australians, continue to vote overwhelmingly in favour of reserve-linked bonuses despite having made pledges that recognise the importance of climate action.

“There can be no more glaring example of the failure of superannuation funds to effectively engage with companies on climate change than their continued blind support for executive remuneration packages which expressly incentivise the expansion of fossil fuel reserves,” said Gocher.

The post Executives up for big bonuses in Great Australian Bight oil rush appeared first on Climate Home News.

That is what one of the world’s leading researchers of “unburnable carbon” told a conference in Oxford on Monday.

In the first summit of its kind, experts debated who should have the right to extract fossil fuels within “safe” climate limits.

“If any country in the world needn’t produce its fossil fuel resources, it’s Norway,” said Paul Ekins, professor of resources and environmental policy at UCL.

Half the world’s proven natural gas reserves and a third of oil needs to stay in the ground to keep global warming to 2C, according to a study Ekins co-authored. It was the most influential climate paper of 2015, according to Carbon Brief analysis of news and social media coverage.

Based on the cost of different supplies, Ekins and colleague Christophe McGlade also estimated how much each region would be able to sell. They judged that Arctic drilling was not viable in a 2C scenario, given the high costs of operating in polar conditions.

Then there is the question of whether poorer countries should be given dispensation to extract more, to redress global inequalities. That is the subject of ongoing research.

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Ekins’ remarks come as the wealthy Nordic petrostate, which counts on oil and gas for more than 20% of GDP, reaches a crossroads.

“With the fall in the oil price, the industry recently has experienced some major problems,” said Bard Lahn, researcher at CICERO, a research institute based in Oslo.

“This could lead the policy discussion in two different directions: either it leads to more support for the oil and gas sector, doubling down on production, or it could lead to a discussion about the transition to a low carbon economy.”

As Norway trumpets ambitious goals for reducing (or offsetting) its own greenhouse gas emissions, the climate impact of its main export industry is coming under scrutiny.

Yet the petroleum directorate is inviting bids for a 24^th round of oil licences, including on some of its northernmost frontiers.

“When you see the reasoning behind the new licensing round, there is hardly any mention of climate change at all,” observed Ragnhild Freng Dale, researcher at Cambridge University. “Where there is talk of climate change, it is about how it is making areas further north accessible.”

Analysis: How will Norway go carbon neutral from 2030?

Statoil, which is two thirds owned by the state, is planning with partners to drill between five and seven wells next year in the Barents Sea, off Norway’s northern coast.

Arne Eik, climate change adviser at Statoil, said the company was striving to compete in a carbon-constrained future.

“On the Arctic, we will not invest in projects if they are too costly. We also have requirements when it comes to carbon intensity,” he said.

“We have enough proven reserves to produce for eight more years, whereas Saudi Arabia has reserves for many many decades. It is not so that Statoil will overshoot the carbon budget by ourselves.”

Climate policy primarily focuses on where fossil fuels are burned, whether that is a power station or a car engine. That keeps oil suppliers – and their investors – busy trying to predict how demand will change over the coming decades.

Report: Total rules out Arctic oil drilling, citing 2C goal

Thina Margrethe Saltvedt, analyst at Nordea Bank, warned that clean technology or regulations might destroy demand faster than producers, with long investment lead times, can respond.

“The old idea of buying up reserves because you think at some point in the future it will be profitable isn’t going to work any longer,” she said. “Not all oil companies have taken this into account… nor has the Norwegian government.”

With the world’s largest sovereign wealth fund, generated from oil revenues, Norway is better placed than many to ride out the transition.

If the government does not choose to draw its oil era to an end, it could face a legal challenge.

Greenpeace Nordic and Young Friends of the Earth Norway wrote to the energy ministry on 9 August, setting out their objections to the latest licences. The main argument is that continued drilling violates citizens’ constitutional right to a health environment for future generations.

They have not yet decided whether to go ahead with the lawsuit, Truls Gulowsen of Greenpeace Nordic told Climate Home by email. But he added that recent analysis by Oil Change International, showing that existing fossil fuel extraction sites blow the 2C carbon budget, strengthened the case.

“If we are serious about Paris, we cannot explore for more oil,” said Gulowsen.

The post Is it time for Norway to stop looking for oil? appeared first on Climate Home News.

If all the existing fuel were to be burned, projects currently operating or under construction could be expected to release 942Gt CO2, said the report by US-based think tank Oil Change International (OCI).

This exceeds the carbon limits that would most likely warm the world 1.5C and even over 2C above the pre-industrial average. These were limits agreed at last year’s climate conference in Paris.

It has been established for some time that the enormous unworked reserves claimed by fossil fuel companies contain vastly too much carbon to ever be burned safely. But OCI said that this was the first time an analysis had been done of how much greenhouse gas is stored in projects already working or under construction.

Founder of 350.org and climate campaign Bill McKibben said the report “change[d] our understanding of where we stand. Profoundly”.

It means that even if not a single new coal mine, oil or gas field were opened up, the carbon budget would be at risk, said OCI’s executive director Stephen Kretzmann.

Projected investment in new extraction sites and infrastructure over the next 20 years adds up to a staggering US$14tn, the report found.

“Continued expansion of the fossil fuel industry is now quite clearly and quantifiably climate denial” said Kretzmann.

Source: Oil Change International

The OCI report said existing oil and gas fields alone would exceed the carbon budget for 1.5C – which is a limit some small island states say would finish them and scientists believe would wipe out most coral reefs.

James Leaton, research director at the Carbon Tracker think tank which did much to popularise the concept of “unburnable carbon”, said research by Carbon Tracker in 2015 showed coal demand was declining so quickly that current reserves would be enough. But the picture was less clear for oil and gas.

“There is clearly no need for new coal mines to be developed if we are to stay within a 2C carbon budget,” said Leaton. “Because oil and gas production declines over time in any particular well, this may fall faster than the level of oil and gas demand in [a 2C scenario], in which case some new production would be needed. Depending on how much carbon budget you allocate to each fossil fuel, and the speed of the energy transition assumed, the window for new oil and gas will also start to close.”

In the UK, the government has committed to opening its shale gas resources to fracking. Ken Cronin, chief executive of the industry body UK Onshore Oil and Gas, said: “This report needs to look more deeply into the use of gas in a modern energy mix, looking at areas such as reformation of methane into hydrogen and carbon capture and storage, particularly for heating systems and potentially transport. The simple fact is that the best way to combat climate change is to remove coal ASAP and to do that you need to replace much of the coal capacity with gas.”

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The OCI report did not take into account carbon capture and storage (CCS), which it argued is still at an “uncertain” stage of development. The International Energy Agency reported last week that CCS, which is fitted to emissions sources to trap carbon, was being rolled out at a rate of just one project every year.

Study author Greg Muttitt said it was imperative for governments to focus on shutting down new mines and fields before a sod was turned.

“Once an extraction operation is underway, it creates an incentive to continue so as to recoup investment and create profit, ensuring the product – the fossil fuels – are extracted and burned. These incentives are powerful, and the industry will do whatever it takes to protect their investments and keep drilling,” he said.

There is new carbon math coming tomorrow that will change our understanding of where we stand. Profoundly.

— Bill McKibben (@billmckibben) September 22, 2016

Ben Caldecott, director of the Sustainable Finance Programme at the University of Oxford Smith School said: “One direct implication of meeting climate targets are stranded upstream fossil fuel assets. These stranded assets need to be managed, particularly in terms of the communities that could be negatively impacted. Policymakers need to proactively manage these impacts to ensure a ‘just transition’.”

The report expands on a call made by former Kiribati president Anote Tong last year to stop opening new coal mines. China, the US and Indonesia, the world’s largest, third and fifth largest coal producers, have banned any new coal mines. In the US, the moratorium is only on public land.

But in Australia’s Galilee basin, there are nine proposed coal mines with a total lifetime emissions of 24Gt CO2. This includes the massive Adani Carmichael mine, which the Australian government has approved. The Australian Department of Environment would not comment on whether it had assessed the impact of the Carmichael mine on the global carbon budget.

The post Existing coal, oil and gas fields will blow carbon budget – study appeared first on Climate Home News.

Mark Campanale, a former fund manager with Henderson Global Investors, said the Carbon Tracker Initiative will soon open a New York branch to work with partners on Wall Street.

“The goal is to bring our analysis into the Wall Street mainstream on the energy side, share data and explain our carbon cost curves,” he said.

Since launching in 2011, CTI has stress tested the business case of leading oil, gas and coal companies in the context of incoming policies to tackle climate change.

Terrifying math: How Carbon Tracker changed the climate debate

Where stocks in BP, Shell, Exxon, Chevron and Peabody were long seen as safe bets, the group said the majority of their reserves were unburnable if the world wants to avoid 2C warming.

But while energy analysts and fund managers are now considering these risks in London, a different mentality wedded to fossil fuel growth remains in the US, said Campanale.

“I think they have still got a ‘climate is not to do with my job as an analyst’ mentality,” he said. ” That’s politics.”

Campanale cited a recent report released by top fund manager Blackrock which said all investors “should incorporate climate change awareness into their investment processes”.

Most of its inputs were London-based, he suggested, adding it was unclear how committed Blackrock’s US arm was on climate risk analysis.

“The folks in New York can take a different view than London. Blackrock in London are very negative on coal, but it’s hard to see if that’s shared,” he added.

That divide could explain why Blackrock voted against a climate change shareholder resolution at ExxonMobil’s AGM earlier this year.

(Pic: Carbon Tracker/2011)

The post Think tank takes “unburnable carbon” warnings to Wall Street appeared first on Climate Home News.

Fink praised shareholder activists, saying they often had better strategies for dealing with long-term risk than company boards.

Why then did the world’s biggest fund of its kind, with US$4.7 trillion of assets under management, side with ExxonMobil at its AGM against a proposal to do just that?

“It is real hypocrisy,” said Julian Poulter, CEO at non-profit the Asset Owners Disclosure Project. “There is no other word for it.”

AODP on Tuesday named and shamed the biggest Exxon investors blocking action to manage climate risk, including Vanguard, Bank of New York Mellon and JP Morgan.

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It focuses on item 12, which asked the US oil major to “stress test” its business model against the international goal of holding global warming below 2C.

BP and Shell embraced similar resolutions in 2015, implicitly accepting that carbon-cutting rules and clean technology could affect their future profitability – and investors had a right to know how.

The logic is that more than two thirds of known fossil fuel reserves are unburnable if the world is to avoid dangerous climate impacts.

Companies that overspend on exploration could struggle to sell their wares as emissions cuts bite. Their financial backers would lose out. In the worst case scenario, the “carbon bubble” bursts, triggering a financial crisis.

Report: Total rules out Arctic oil drilling, citing 2C goal

Exxon’s board rejected this analysis, adamant that only fossil fuels could realistically meet growing world energy demand. Activists drummed up 38% support for their proposal – a respectable result for a contested vote, but not enough to force change.

Of the funds that endorsed the status quo, 45% were signatories to the Principles of Responsible Investment and 25% to the Carbon Disclosure Project.

They were trying to show clients they were serious about sustainability, said Poulter, but undermining it with their voting behaviour. “You can’t have your cake and eat it.”

A spokesperson for Blackrock said: “We prefer to engage with companies directly on complex issues such as adaptation to a low carbon economy. We have engaged extensively on a range of issues related to the themes of these shareholder proposals. Where a company is unresponsive, we hold board members accountable.”

Analysis: Meet the investors pushing climate reality on carbon majors

Edward Mason, head of responsible investment at the Church Commissioners for England, which backed the climate resolution, noted that many of the institutions that voted against extra climate risk reporting at Exxon were in favour at BP and Shell.

“We hope that the size of this year’s vote will encourage these investors to adopt a consistent approach to voting on climate risk disclosure in the future. Their clients should demand nothing less,” he said.

“In the wake of the Paris Agreement, proper climate related financial disclosure is a pre-requisite for successful investment management.”

Report: Pension holders petition funds on Exxon, Chevron climate resolutions

AODP also found a “crisis of accountability”. Pension holders petitioned more than 1,000 pension funds ahead of the Exxon AGM, urging them to align their retirement pots with climate goals. Only 35 responded, of which 23 declined to reveal their voting intentions.

It was partly a question of time: the campaign letters were sent three weeks ahead of the AGM. But AODP argued pension fund members were entitled to better information about where their money was going.

Colette St-Onge, digital campaigns officer at Share Action, which led the Vote Your Pension push, said: “Members engagement on issues like climate risk is an important tool to encourage responsible investing…

“These figures highlight how much work the industry as a whole needs to do to improve communications and accountability to members. Well-governed schemes are transparent about their voting and engagement activities; communicate their activities in a clear and accessible way; and actively solicit their members’ views.”

This article has been corrected. Blackrock has US$4.7 trillion of assets under management, not $4.7 billion as previously stated

The post Named and shamed: the top funds blocking climate action appeared first on Climate Home News.

The French oil major is reducing its exposure to tar sands and avoiding the Arctic ice pack. When deciding where to drill, it assumes a carbon price of US$30-40 a tonne.

That was revealed in a strategy paper published to coincide with Tuesday’s AGM, in the clearest industry acknowledgment to date of the risks of unfettered exploration.

“The 2C scenario highlights that a part of the world’s fossil fuel resources cannot be developed. Total’s growth strategy takes this into account,” the document stated.

Report: Exxon, Shell, Total, Statoil renew clean energy drive

In a foreword, chief executive Patrick Pouyanne emphasised the significance of the Paris Agreement in shaping the company’s business plans.

“COP21 was definitely a watershed,” he said. “Despite the current instability worldwide, 195 countries managed to unite around an ambitious climate agreement. That sends a strong message.”

The firm is basing its investment decisions around the International Energy Agency’s 2C scenario. That still sees oil and gas making up nearly half the energy mix in 2035.

But “strict investment discipline is vital,” Pouyanne said, to avoid wasting money on costly resources that may be surplus to requirements.

He also aims to ramp up renewables, notably solar and biofuels, to form 20% of the company’s portfolio in 20 years’ time.

Report: Pension holders petition funds on Exxon, Chevron climate resolutions

Total’s intervention follows rival Shell’s unveiling of its first ever 2C-compatible energy outlook.

Also holding its AGM on Tuesday, Shell came under pressure to go further and base its investment plans on that scenario.

Across the Atlantic, it is the turn of ExxonMobil and Chevron on Wednesday. They are taking a more defensive stance, opposing shareholder resolutions to assess the implications of 2C for their portfolios and appoint climate experts to their boards.

Total’s strategy won praise from Helen Wildsmith, stewardship director at charity specialist CCLA and founder of the Aiming for A investor coalition.

“Today we’ve seen evidence of good strategic analysis of the low-carbon transition by both Total and Shell’s boards at their AGMs, following intensive engagement by Aiming for A members and other investors in recent years,” she said in a statement.

“Tomorrow institutional investors have an important opportunity to signal to Exxon and Chevron that portfolio resilience is key to maintaining shareholder value following the Paris Agreement.”

To stand half a chance of holding global temperature rise below 2C, scientists estimate a third of proven oil reserves and half of natural gas is unburnable.

The post Total rules out Arctic oil drilling, citing 2C goal appeared first on Climate Home News.

Supporters say they’re onto a winner. US campaign group 350 calculates 500 institutions with a total value of $3.4 trillion have made some kind of divestment pledge.

That’s a huge leap on 181 worth $50 billion in 2014, one that has seen a diverse range of investors from the Rockefeller Foundation to Yale University ditch polluting portfolios.

“It’s helping investors understand we are now past point where it makes sense to invest a penny in coal or oil. It must stay in the ground,” 350 founder Bill McKibben told a climate conference in Paris on Wednesday.

Analysis: Peabody’s climate-denying crash is a warning to investors

With divestment in the headlines and pressure intensifying on fund managers, pension schemes and universities it’s hard to argue with McKibben’s thesis.

But divestment has its critics, who argue it’s too binary a campaign that fails to acknowledge many companies – even major polluters – are exploring new business models.

“We cannot get rid of oil in just one night – we have to get real. If you want to sell a stock you have to find a buyer. People don’t get that,” says Philippe Desfosses, director of ERAFP, a French pension fund which has 4.5 million French public sector workers on its books.

“It’s great to take the moral high ground and say let’s get rid of this – but when you are running a business with 100,000 people with jobs you don’t just change with a magic wand touch.”

Report: Embrace 2C climate target to boost value, oil majors told

Desfosses – who sits on €25 billion of assets – tells Climate Home the markets are already sorting winners from the losers in the world’s looming great energy transition.

Once-mighty coal giant Peabody has declared bankruptcy, while fellow mining aristocrats Glencore and BHP Billiton are slowly tweaking their business plans to contain their exposure to lignite.

He points to France’s top oil company Total, which is rebranding as an oil and solar business and this week bid €1bn for battery-maker Saft with a view to entering the power storage market.

“When you are running such a big company it’s like a supertanker. You can change the direction and that’s what the smartest people are doing,” he says.

Investors who hold onto fossil fuel shares retain influence, he argues, especially those like ERAFP that wield significant financial clout.

That view is shared by others in the investment industry like Bill McNabb, CEO of fund management giant Vanguard which controls $3.5 trillion of assets.

“There is no impact to the income or balance sheet of the company. You are not sending a message to the company. You are better remaining an owner and being able to engage with the company,” he told the FT last week.

IRENA: Saudi Aramco float could spark renewables boom

Still, that’s where the approach of Desfosses and McNabb appear to diverge.

The head of the French pension fund is a staunch advocate of companies he is investing in disclosing their risks to climate change, threatening to sell shares if they refuse.

“We are not confrontational – but it’s our fiduciary duty to invest in a wise way,” he says.

#Vanguard‘s ‘use yr shareholder influence’ line wld be more credible if they’d ever voted for #climate resolutions. https://t.co/PQcrwBMnEA

— Catherine Howarth (@ca_howarth) May 9, 2016

Meanwhile McNabb stands accused of shying away from the climate debate by Catherine Howarth, chief executive of the Share Action campaign group.

In a statement, she says Vanguard’s backing of shareholder resolutions focused on the economic risks of global warming on company business models is “negligible”.

Upcoming AGMs of ExxonMobil and Chevron – where Vanguard holds shares – will be a “litmus test” for its desire to hold the oil giants to account for their environmental impact, she adds.

Analysis: In Paris, polluters in focus as investors shun climate risk

Penalties for ignoring climate risk may extend beyond a rap across the knuckles from NGOs, warns Desfosses, as the nature of fiduciary duty comes under scrutiny and the potential of legal action rises.

So far, evidence fund managers are taking climate risk seriously is limited. A recent survey by the Asset Owners Disclosure Project determined 246 of the top 500 investors worth $14 trillion ignored it when making investment decisions.

That’s a concern given a recent Oxford University study argues that virtually no fossil fuel power plants can be built after 2017 if the world is to avoid warming above 2C, a level deemed dangerous by governments.

Guidelines from the Financial Stability Board due later this year are expected to underline the need for fund managers to start taking carbon exposure seriously.

“It will not be long before someone says – you knew and you did nothing? So you are in breach,” says Desfosses.

“Fiduciary duty is evolving… it will be much more demanding. It is not very smart to go against the tide – and the tide is coming – it’s huge.”

The post Risky bet: Does divestment slow or speed green growth? appeared first on Climate Home News.

Previously, the oil major argued growing demand for energy would trump political agreement to hold global warming below 2C.

Under shareholder pressure, however, Shell has outlined what it describes as an “optimistic” scenario for preventing dangerous climate change.

Chief executive Ben van Beurden wrote in the foreword: “We know our longterm success as a company depends on our ability to anticipate the types of energy that people will need in the future in a way that is both commercially competitive and environmentally sound.”

Report: Embrace 2C climate target to boost value, oil majors told

Citing scientific studies, Shell says global greenhouse gas emissions need to peak in 2020 and reach net zero by 2070 to hold temperature rise to 2C. The tougher 1.5C target in the Paris Agreement implies a phase-out by 2050.

Meeting energy demand in that context is “technically feasible” but “very challenging,” said the company’s Jeremy Bentham.

The report emphasises the importance of carbon capture and storage and reiterates calls for a global carbon price to drive change.

It offers less detail than other scenarios on the mix of technologies and fuels, nor does it reveal how the 2C limit affects the value of Shell’s reserves.

While it aims to reduce the energy intensity of exploration projects, the company says “we have no immediate plans to move to a net-zero emissions portfolio over our investment horizon of 10–20 years”.

The post Shell unveils vision of 2C-compatible energy future appeared first on Climate Home News.

That is according to Vote Your Pension, which aims to sway institutional investors into engaging with oil majors on the climate agenda.

An estimated 15-20,000 people – the campaign is still sifting the data – have urged their pension funds to vote for shareholder resolutions on climate change at the US companies’ AGMs on 25 May.

“We have had a fantastic response,” said Julian Poulter, chief executive of the Asset Owners Disclosure Project, one of the organisations behind the initiative.

Report: Shareholder pressure mounts on downgraded ExxonMobil

It is a way for ordinary people to reinforce concerns about the conflict between fossil fuelled business models and international climate goals.

Funds are listening, according to Catherine Howarth of Share Action, which jointly runs Vote Your Pension.

For example, the Universities Superannuation Scheme, one of the UK’s largest pension providers, met a group of members on Monday to hear their climate concerns.

“If you care about climate, probably the single most effective thing you can do is influence the billions of pounds invested through your pension fund,” she said.

Report: Embrace 2C climate target to boost value, oil majors told

Pension funds are some of the biggest investors in energy giants, counting on their future profits for members’ retirement incomes.

Yet significant oil and gas reserves are unburnable if global warming is to be held below 2C – the goal governments signed up to in Paris.

It is why a coalition of investors filed a resolution calling on Exxon and Chevron to explain how they could deliver value in a carbon-constrained world.

Green investor network Ceres lists more than 60 shareholders who have publicly endorsed the move, collectively responsible for more than US$8 trillion worth of assets. These include big hitters like Norway’s $900 billion sovereign wealth fund and California’s CalPERS.

Report: FTSE launches fossil-free, green economy index

Two proxy advisory firms, ISS and Glass Lewis, which typically influence a quarter of the vote, also gave their support.

A similar resolution at Occidental Petroleum polled 49% support, the Houston-based company revealed on Friday, which Ceres described as a “high-water mark”.

The Exxon vote is “very difficult to call,” Poulter told Climate Home, but he expects at least 30% backing for the resolution.

Edward Mason, head of responsible investment for the Church Commissioners, said in a statement: “We hope that this vote will be the moment when shareholders give an unequivocal signal that, following the Paris Agreement, the time for climate risk reporting has arrived.”

The post Pension holders petition funds on Exxon, Chevron climate resolutions appeared first on Climate Home News.

Investments in sectors like agriculture and insurance are vulnerable to weather extremes in a warming world.

Regulation and litigation may pose a greater threat than such direct impacts, the research note said, hitting fossil fuel valuations.

“There is no time for complacency,” analysts wrote, advising companies to prepare for “multilayered and significant” impacts.

“If a bank’s business activities are concentrated in an area or sector we consider could be marred by climate change, this could weaken its business position and put its rating under pressure.”

The research note follows S&P stripping ExxonMobil of the triple-A credit rating it had enjoyed since the 1930s.

Partly attributed to costly exploration ventures shortly before the oil price crashed, the downgrade makes it more expensive for the oil giant to borrow money.

Report: Shareholder pressure mounts on downgraded ExxonMobil

There is a growing awareness coal, oil and gas assets could be “stranded” as carbon-cutting rules and clean technology curb demand.

The latest analysis from London think tank Carbon Tracker found oil majors would be more valuable if they drilled less.

In a bid to bolster its green credentials on Thursday, Exxon announced backing for fuel cell technology that could capture carbon emissions from power plants.

It comes amid legal inquiries into allegations Exxon lied about climate science and shareholder calls for transparency.

Report: FTSE launches fossil-free, green economy index

Financial services companies could similarly be targeted “if they are seen as supporting companies that emit high levels of carbon dioxide”, S&P said.

On the upside, analysts forecast increased demand for green investment products. The International Energy Agency estimates an extra US$13.5 trillion will be needed by 2030 to meet the energy efficiency and low carbon technology goals in national climate plans.

Despite a number of sustainable investment initiatives, S&P noted many industry players are not signed up. Corporate disclosure, meanwhile, is inadequate to accurately quantify the risks.

A Financial Stability Board task force headed by Michael Bloomberg is recommending climate risk data be incorporated into financial filings. It is set to publish detailed guidelines by the end of the year.

The post S&P: Banks that ignore climate risk face credit downgrade appeared first on Climate Home News.

That is the conclusion of analysis from Carbon Tracker ahead of key shareholder votes at ExxonMobil and Chevron AGMs this month.

At today’s prices, it found the seven biggest oil majors’ portfolios would be worth around US$140 billion more if they stuck to projects compatible with a 2C warming limit.

“A lot of the socially responsible investors we were speaking to wanted to know what an oil company would look like if it was managed in line with a 2C business model,” report co-author Paul Spedding told Climate Home.

“The concern was from management: if we stop growing, we will stop adding value. We wanted to see if it was true or not. Actually, there was surprisingly little difference between a 2C business model and a growth model.”

Report: FTSE launches fossil-free, green economy index

The Paris Agreement signed by 175 world leaders in April aims to hold global temperature rise “well below 2C”. That requires carbon-cutting regulations and technologies to be ramped up, slashing demand for fossil fuels.

Coal, oil and gas producers continue to forecast carbon budget-busting demand growth for their products, particularly from Asia.

Yet recent low commodity prices have shown the downside of such bullish projections, driving dozens of coal companies into bankruptcy. Czech miner OKD is the latest to file for insolvency, following US giant Peabody.

Analysis: Peabody’s climate-denying crash is a warning to investors

On the oil and gas side, some $380 billion worth of projects have been cancelled or deferred since late 2014. High cost ventures in the Arctic, Canada’s tar sands or Venezuela’s extra heavy oil were first for the chop.

With Saudi Arabia maintaining cheap production and Iran and Iraq reentering the market, low prices could persist, with many analysts predicting $50-80 a barrel in the medium term.

Carbon Tracker estimates business as usual will only deliver better returns than a 2C scenario if oil prices soar above $120/bbl for a sustained period.

The oil companies should be preparing for managed decline, Carbon Tracker’s Spedding argued. “It makes financial sense – you don’t need an environmental reason.”

Saudi prince: From 2020, we can survive without oil

It is why shareholders are urging ExxonMobil and Chevron to “stress test” their business models against the 2C goal.

The same time last year, only 4% of Chevron investors supported a similar resolution, while Exxon blocked the vote entirely. Chevron’s board dismissed the analysis as “flawed, if not dangerous”.

Since then, Financial Stability Board chair Mark Carney has spoken out about climate risk, pushing it up the mainstream agenda.

Norway’s $900 billion sovereign wealth fund, the seventh largest investor in both firms, added its weight to the campaign this week.

The post Embrace 2C climate target to boost value, oil majors told appeared first on Climate Home News.

The FTSE Divest-Invest Developed 200 Index will replace fossil fuel companies with green alternatives.

Waste Management, Tesla Motors and Vestas Wind Systems are the three biggest low carbon firms on the list.

Kevin Bourne, managing director of database services at FTSE Russell, said: “We’ve seen a rapid expansion of the green businesses of many companies around the world.

“What’s been missing from measures of the ‘green transition’ is exposure to this growth side of the opportunity.”

The Paris Agreement signed by leaders this month “put climate risk at the top of the agenda” added Neven Graillat of BNP Paribas, which collaborated on the product.

“For the first time, investors are being offered a way to assess companies based on their green revenues.”

The post FTSE launches fossil-free, green economy index appeared first on Climate Home News.

British insurer Aviva and Seattle’s public pension fund are among the latest to declare their support for a shareholder resolution to be considered at next month’s AGM. California’s CalPERS, New York City Pension Fund and the Church of England are also in favour.

They are asking Exxon to analyse the impact of a 2C global warming limit on the value of its oil assets and publish the findings by 2017.

Standard & Poors has stripped the world’s largest private oil company of the triple-A credit rating it held since the Great Depression.

The ratings agency cited Exxon’s pursuit of high cost ventures as part of the reason its debt levels have more than doubled in recent years.

Regulator rules: Exxon Mobil must give shareholders climate vote

Scientists estimate at least a third of the world’s proven oil reserves and half of natural gas is unburnable under the 2C threshold.

Previously, Exxon has insisted its assets will not be affected. Governments are “highly unlikely” to restrict emissions enough to meet the international 2C goal, it argued.

The firm’s credibility has been dented by emerging evidence it misled the public about climate science, however.

An investigation by Inside Climate News uncovered internal documents showing industry researchers were flagging the risks as early as the late 1960s.

The latest to surface, a 1980 report by Exxon subsidiary Imperial Oil published by blog DeSmog on Tuesday, said: “It is assumed that the major contributors of CO2 are the burning of fossil fuels…

“There is no doubt that increases in fossil fuel usage and decreases of forest cover are aggravating the potential problem of increased CO2 in the atmosphere.”

Yet over the next few decades, Exxon mounted a PR campaign to undermine that scientific consensus.

Report: Exxon Mobil faces legal inquiry on climate misinformation

While Exxon has been singled out for a legal inquiry into these allegations, the shareholder resolution is part of a wider movement.

Coalitions of investors have lodged similar requests with other oil and mining majors to assess their exposure to carbon risk.

Rio Tinto, BP and Shell embraced the challenge, recommending shareholders vote in favour.

Exxon has fought every step of the way, unsuccessfully appealing to regulator the Securities and Exchange Commission to strike the vote off the ballot.

In one of the most closely contested votes to date, 42% of shareholders in US utility AES backed a 2C “stress test” last week.

Investor activists are privately confident of getting at least 20% at the Exxon AGM in Dallas on 25 May.

Shanna Cleveland of sustainable investor network Ceres wrote: “This proxy season, shareholder proposals on climate risk are being propelled by a powerful set of tailwinds: an historic climate accord, rapidly changing market forces, and unprecedented shareholder collaboration.”

The post Shareholder pressure mounts on downgraded ExxonMobil appeared first on Climate Home News.

Rachel Kyte, Special Representative of the Secretary-General for Sustainable Energy for All (Pic: UN Photos)

By Megan Darby

Investors should consider how an aspirational 1.5C limit on global warming affects their portfolios, a top UN envoy said on Monday.

Shareholders are already pressing fossil fuel majors to recognise the risk greenhouse gas emissions curbs could dampen demand for their products. To date, most analysis has focused on a 2C threshold.

Rachel Kyte, CEO of Sustainable Energy for All, urged financiers to also factor in the tougher goal agreed at December’s Paris climate summit.

“If you are a long term investor,” she said, “I would want to be playing with what the scenarios look like for 1.5C, 2C and the differences therein, because it is not just a minor tweak of the curve.”

Pressure is mounting on fund managers and institutional investors to account for the impact of incoming climate legislation. A recent briefing note from Impax Asset Management warned the prices of energy stocks “do not account” for government intervention.

Kyte’s remarks at an event in London came as government representatives met 4,000 miles away in Nairobi to consider the science of the 1.5C threshold.

Profile: Meet the investors pushing climate reality on carbon majors

The Paris Agreement called on the Intergovernmental Panel on Climate Change (IPCC) to produce a special report on the subject by 2018; a challenge it is expected to accept.

The scope of that report is sensitive. Research into the impacts of 1.5C warming will fuel claims from vulnerable populations for damages from polluters. And there is limited evidence on the feasibility of curbing emissions fast enough to stay within that safety threshold.

UN chief climate diplomat Christiana Figueres, on the same platform as Kyte, acknowledged the shortage of peer-reviewed literature. She urged scientists to fill the gap.

“Do we know today how we would get to 1.5C? No. It is a moonshot. It is a clarion call to everybody,” Figueres said.

Average global temperatures have already risen by 1C since pre-industrial times. National pledges towards the Paris pact put the world on a 3-4C pathway – albeit with a plan to ratchet up commitments every five years.

Report: Climate scientists face tight deadline to deliver 1.5C research

Former BP chief Tony Hayward, now chair of mining giant Glencore, expressed scepticism about the speed of the transition to a low carbon economy.

“At the end of the day, it is governments that set the rules for capital markets,” he said. “Governments can mandate efficiency measures, governments can mandate tax measures and unless governments do that, I don’t believe there is a prayer for getting close to 2C, let alone 1.5C.”

He is not alone. A number of leading scientists are questioning whether 1.5C is the most helpful focus for study.

In a commentary for Nature Geoscience last week, Oliver Geden of the German Institute for International and Security Affairs called for a more “actionable” target.

Research should prioritise moving to net zero emissions, he argued – a target enshrined in the Paris pact for the second half of the century.

“2C has worked well as a focal point for the climate policy discourse, but not for the action,” he said. “It’s time to change the perspective. If we want to induce human action we will have to target human activity.”

Study: 1.5C climate goal still in reach

Climate expert Joeri Rogelj, who led the first modelling exercise to map a 1.5C emissions pathway, agreed more work was needed to translate that potential into policy.

That would require region-specific data – something certain governments had proved reluctant to include in previous assessment cycles.

“We have these kind of mechanised integrated assessment models, which can inform us about potential pathways,” he told Climate Home.

“One of the aspects that is very interesting would be to see how they are actually going to be achieved in the real world. I am not sure whether this is actually feasible to do that within the IPCC.”

UN climate talks: Will only a global carbon price do?

To get to 1.5C or 2C, models tend to assume the introduction of carbon pricing worldwide, which has been slow to materialise.

As power plants and factories continue to churn out CO2, it looks like increasing levels of negative emissions will be needed to rebalance the atmosphere. That involves large scale investment in carbon capture and storage, which again has not been forthcoming.

Models that do not manage to output a 2C scenario are less likely to get published, according to Glen Peters of Norway’s CICERO.

“I think it would be better to look at what is feasible and how does that add up,” he told Climate Home. “Maybe the best a model would get is 2C. This will give us a much better understanding of where we are able to go.”

There is little point in producing more hypothetical emissions pathways, he said. Instead, a 1.5C special report should focus on unblocking political barriers.

Acknowledging that a 1.5C limit was important to vulnerable communities, Peters added. “We don’t need a special report to say that. We do need a special report on how we would actually do it. How would we get India to have a carbon price across the economy starting in 2020?”

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The trading floor at the New York Stock Exchange. Analysts warn a disorderly move away from fossil fuel-based investments could cause financial instability  (credit: Scott Beale / Laughing Squid)

By Alex Pashley

Leading asset managers, consultants, and credit agencies are to face greater scrutiny on how their practices stoke climate change in a set of global rankings.

The Asset Owners Disclosure Project said it would “hold suppliers and advisers to account over control of trillions in the low-carbon transition” as it unveiled a new index on Monday.

A hotter, stormier planet moving out of fossil fuel-based investments could damage the future value of pension and sovereign wealth funds.

Experts compare the spectre of ‘stranded assets’ to the subprime mortgage crisis that wiped trillions off the global economy.

No greenwash: Investors urged to disclose climate strategy 
Report: Pension funds failing to manage climate risk could get sued 

The AODP is part of a drive towards greater disclosure of investor portfolios, spearheaded by the Financial Stability Board.

The Global Climate Asset Manager Index will rate the top 50 asset managers covering 70% of the market and $40 trillion of investments. It will also target the 20 most prominent asset consultants and ratings agencies like Moody’s and Fitch.

Its indices rely on voluntary disclosure or publicly-available information, but it hopes the initiative will boost transparency.

“The Paris Climate Summit called time on the fossil fuel age and the Financial Stability Board has put climate risk firmly on the agenda,” said CEO of the AODP, Julian Poulter. “Asset owners need to see at a glance which agents are more progressive in the climate transition arena.”

In a survey of 500 leading asset owners last year, 85% did little or nothing to address climate risk. Only 7% had the ability to size up their carbon footprints.

The AODP is expanding its reach by targeting industry consultants, who play key roles in deciding where funds are invested, and ratings agencies who judge the long-term health of companies and countries that export fossil fuels.

The post Top money managers, ratings agencies scanned for climate risk appeared first on Climate Home News.

(Flickr/ECSP)

By Megan Darby

Coal prices will spike towards 2020 as supplies dry up, research firm IHS Energy is predicting.

“The future of coal is brighter than some people think,” said David Price, analyst at the firm.

“Coal’s battle for the European and US markets has likely been lost, worn down by increasing environmental costs, government measures to move away from coal, and in the US at least, competition from cheap gas, but other markets continue to offer promise of further growth.”

A commodity slump over the past five years has driven major players like Arch Coal into bankruptcy and others to slash investment.

Governments are under pressure to reduce their reliance on the polluting fossil fuel, after agreeing a UN climate pact in Paris.

Yet despite that deal, IHS sees the industry’s fortunes eventually reviving, with production cuts in Indonesia and the US tightening the market.

Report: Belgium quits coal power with Langerlo plant closure

In Europe, the average cost of thermal coal – the kind used in power stations – fell from US$125 a tonne in 2011 to $46 last month.

Price expects the bust to continue for a few years, then return to boom times as China’s economic growth strengthens.

“The ground has already been laid for the next boom in coal prices,” he said. “The longer the wait for price recovery goes on, the greater the likelihood that values will spike.”

London-based think tank the Carbon Tracker Initiative disagreed.

Two thirds of mining capacity is running at a loss, noted head of research James Leaton. It will struggle to stay in business for a protracted price slump.

“By 2020 the alternatives will only have got cheaper and the competition will be even tougher,” he said. “Even if supply is curtailed, demand may still disappoint in a low carbon future compared to industry expectations.”

Study: New fossil fuel plants post-2017 risk 2C warming limit

Carbon Tracker specialises in monitoring and predicting the impact of global efforts to curb greenhouse gas emissions on the financial system.

In Paris last December, 195 countries agreed to hold global warming “well below 2C”.

The most comprehensive study of its kind, from UCL, found more than 80% of coal reserves worldwide was unburnable under a 2C limit.

Another paper, published by Oxford University last week, said all new energy infrastructure needed to be zero carbon from 2017.

New coal, oil or gas-fired power plants built would have to be closed early or blow the 2C budget.

Asked how IHS saw climate policies affecting the outlook for coal, managing editor of coal Andrew Wells said the impact was “limited” outside Western Europe.

“It will take at least five years for the COP21 [Paris summit] pledges to be turned into a meaningful shift in coal consumption,” he said.

The post IHS Energy predicts coal price spike by 2020 appeared first on Climate Home News.

Oil and gas wells in Wyoming’s Jonah field (Pic: Ecoflight)

By Gerard Wynn

Investors backed a record amount of new share issuance by US shale oil and gas producers in the first three months of this year, even after a period of lower oil prices left some companies more battered than ever.

That’s the main finding in a new report by the Carbon Tracker Initiative, Beyond the Shale: Aboard the Price Roller Coaster.

Equity investors may be betting on bargains among US shale oil and gas exploration and production (E&P) companies, expecting a rebound in oil and gas prices.

But there are two grounds for caution.

US E&P valuations have fallen by an aggregate $340 billion since last May, the last time investors were betting on higher oil and gas prices.

Second, the analysis, which I co-authored, shows how more indebted companies are now even more leveraged than 10 months ago.

Some, including Chesapeake and Whiting Petroleum, have had to re-negotiate their borrowing terms after soaring leverage ratios looked set to exceed former credit facility covenants.

Below are four charts which illustrate some considerations for equity investors in U.S. shale.

Investors are pumping cash back into a weakened US shale industry in record amounts, with the first quarter this year seeing the highest E&P equity issuance since at least 2011.

Chart 1. US E&P equity issuance and WTI oil price, 2014 to late March 2016

But US E&P equity valuations have fallen by an aggregate $340 billion since May 2015, the last time investors were talking up the prospect of a rebound in oil and gas prices.

Chart 2. Market capitalisation of S&P US Oil and Gas Exploration and Production Select Industry Index, May 2015 to March 8 2016

In 2016, most E&P companies project lower output, and many will see less robust hedging.

The result will be lower pre-tax earnings, or EBITDAX. Creditors often specify a leverage ratio, in their borrowing terms to E&P companies, defined as net debt divided by EBITDAX.

Creditors often specify a maximum leverage ratio of four; a value of four is also the threshold which the US Office of the Comptroller of the Currency uses to define “sub-standard” E&P bank loans.

The chart below shows how Chesapeake’s leverage ratio is expected to exceed four at any conceivable oil  and gas price this year.

Both Chesapeake and Whiting Petroleum have had to suspend total leverage ratios, under their credit facilities.

Chart 3. Scenario analysis of Chesapeake, 2016, Net debt/ Consolidated EBITDAX ratio

While equity issuance soared in the first three months of this year, US E&P bond issuance has remained below recent historical levels, suggesting prospective creditors are exercising greater caution.

Do bond investors know something equity investors do not?

Chart 4. Bond issuance by quarter, U.S. E&P companies, 2014-2016 (as of March 8)

Gerard Wynn has two decade’s experience in energy, climate change, the environment and economics. In 2014, Gerard founded the consultancy GWG Energy, providing communications and analysis services in the fields of energy and climate change.

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Former New York mayor and financial data baron Michael Bloomberg is leading a climate risk task force (Pic: US Navy)

By Megan Darby

Climate risk information should form part of companies’ routine financial filings, a heavyweight taskforce led by Michael Bloomberg is recommending.

As companies like Peabody Energy and Exxon Mobil face legal probes over allegedly lying about their exposure, it reinforces moves for greater transparency.

In its first report on Friday, the taskforce emphasised the need to incorporate global warming threats into financial reports.

“That is a big deal,” Curtis Ravenel, a Bloomberg executive on the taskforce’s secretariat told Climate Home. “Once it goes into financial filings, there is all sorts of oversight for companies. The point is to try and institutionalise thinking on this at board level.”

Report: Top US attorneys step up probe into oil major ‘fraud’

Most G20 countries already require businesses to disclose “material” climate-related risks in their financial reports. But interpretations of what is “material” vary.

Carbon-cutting regulations, clean technology and lawsuits can all hit the value of companies that rely on burning fossil fuels.

Mark Carney, chair of the Financial Stability Board, last year warned there could be market shocks if investors failed to anticipate these trends.

Long-term investors like pension funds are increasingly urging coal and oil majors to face up to the potential carbon crunch.

Yet they face resistance from firms like Exxon Mobil, which maintains that demand for energy will trump global efforts to curb warming.

Report: Exxon Mobil must give shareholders climate vote, regulator rules

Members of Bloomberg’s taskforce represent companies ranging from mining giant BHP Billiton to the Industrial and Commercial Bank of China.

They are set to publish a final report by the end of 2016, with voluntary guidelines on what kind of information companies should disclose.

“Our thought is companies will want to adopt the guidelines to avoid the kind of legal implications facing Peabody and Exxon,” said Ravenel.

Responding to the initial report, the Carbon Tracker Initiative emphasised the need to test business plans in line with a 2C warming limit.

.@FSB_TCFD's first report lays the groundwork for more transparency in #ClimateRisk disclosure: https://t.co/fDPZtwatek

— Mike Bloomberg (@MikeBloomberg) April 1, 2016

“Investors no longer want to see regulatory filings from fossil fuel companies that fail to discuss how the low carbon transition might impact their business models,” said Mark Campanale, founder of the London-based think tank.

The Institutional Investors Group on Climate Change, which represents 120 investors worth €13 trillion, agreed.

“We strongly support the focus on more standardised disclosures and forward-looking quantitative and qualitative information,” said the group’s CEO Stephanie Pfeifer. “This will help investors better assess and address carbon risk in their portfolios.”

Jon Williams of consultancy PwC welcomed the taskforce setting out its stall. He said: “There is much ground to cover over the next nine months if it is to deliver on its highly ambitious targets and embed climate-related risks firmly within the financial mainstream.”

The post Bloomberg climate taskforce to target financial filings appeared first on Climate Home News.

The taskforce was requested by the G20 to investigate how companies with high carbon assets could pose a risk to global financial stability (Flickr/ arbyreed)

By Alex Pashley

A Financial Stability Board-led venture to coax companies into revealing their exposure to an overheating planet will publish preliminary findings on Friday, according to its head Mark Carney.

Set up on the sidelines of the Paris climate talks in December, the Taskforce on Climate-related Financial Disclosures (TCFD) will flesh out the voluntary scheme in the ‘phase one’ report and seeks feedback. It is set to conclude its investigation by the end of the year.

Better reporting of exposure to coal, oil and gas assets is vital for a “smoother transition to a low-carbon economy,” Carney, who is governor of the Bank of England, told reporters at the close of an FSB meeting in Tokyo.

Approximately one-third of the world’s top 1,000 companies currently provide some degree of disclosure, he said. That information – ranging from greenhouse gas emissions to fossil fuel holdings – is deemed essential for accurate investment decisions in light of climate impacts.

Report: Bloomberg climate risk initiative targets secret polluters 
Report: Bloomberg unveils crack team to assess global climate risk

To cap warming to safe levels this century, scientists say 80% of fossil fuel reserves must remain in the ground. That “abrupt repricing of risk” could make oil rigs and gas fields worthless, and roil the global economy.

The report – prepared by a team of business leaders from the likes of Axa, Blackrock and Unilever – will give a “soft take on existing initiatives”, said Carney. Some 400 already cover carbon to some extent.

It will determine whether disclosure should be limited to publicly-listed companies, or private companies with shares, among other things.

The taskforce seeks to emulate a separate FSB-backed disclosure initiative, which is fast becoming an industry standard, Carney said..

Three years after being set up, over four-fifths of 40 leading financial institutions had fully implemented the recommendations that ‘stress test’ their assets.

“It’s both in the interest of issuers, but demanded by investors. I think that’s the standard this taskforce is trying to reach,” he said.

The post Bloomberg climate risk initiative to release first report appeared first on Climate Home News.

(Flickr/Mike Mozart)

By Megan Darby

The US Securities and Exchange Commission has ordered Exxon Mobil to give shareholders a vote on how it discloses climate risk data.

The oil major had sought to block a shareholder resolution that would make it reveal how climate action could hit its profits. Exxon argued it already gave enough information.

That was overruled by the regulator, as explained in a letter dated Tuesday 22 March. It found Exxon was not doing as much as investors including New York State’s pension fund and the Church of England asked. Chevron was issued with a similar notification.

New York State comptroller Thomas DiNapoli welcomed the decision.

“This is a major victory for investors who are working to address the risks that global warming presents to our portfolios,” he said.

“Investors need to know if ExxonMobil is taking necessary steps to prepare for a lower carbon future, particularly now in the wake of the Paris agreement.”

Profile: Meet the investors pushing climate reality on carbon majors

Separately, the Rockefeller Family Fund, which made much of its fortune in oil, announced its intention to immediately divest from Exxon Mobil, coal and tar sands companies.

As the global community works to eliminate fossil fuels, the fund said, “it makes little sense – financially or ethically – to continue holding investments in these companies”.

It singled out Exxon for “morally reprehensible conduct,” referring to allegations it lied to the public about the risks associated with climate change.

“Appropriate authorities will determine if the company violated any laws, but as a matter of good governance, we cannot be associated with a company exhibiting such apparent contempt for the public interest.”

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(Pic: Bank of England/Flickr)

By Ed King

The financial impacts of climate change could hit global markets hard and at any time, a senior Bank of England official has warned.

Vulnerable companies include those holding long term high-carbon assets and businesses who could face legal action for their contribution to global greenhouse gas emissions

“As climate change evolves those responsible for causing it or not mitigating it are likely to get sued,” said Paul Fisher, deputy head of the Bank’s regulatory body.

Better levels of transparency were now essential to guide investors through the transition away from fossil fuels, he told a meeting in London hosted by the IPPR think tank.

“If we can get companies to disclose what their carbon footprints are, those carbon footprints will become less over time,” he said.

Report: Bloomberg climate risk initiative targets secret polluters

The Bank of England has proved an unlikely champion of global efforts to reduce greenhouse gas emissions, a driving force behind the Michael Bloomberg-led climate disclosure taskforce, launched in December 2015.

The Financial Stability Board-backed initiative is likely to call for companies to release more data about their exposure to oil, gas and coal assets and liability to new regulations.

Fisher suggested climate change could be a factor in the ongoing slump in oil prices, which collapsed from over $115 in 2014 to $30 this year, rising last week to what was described as a $40 “high”.

“We don’t know how much the fall in the oil price over the last couple of years is linked to people changing their investment pattern away from carbon-based resources,” he said.

“Certainly that story is starting to appear in the analysis from the financial sector.”

The post Bank of England regulator warns of growing climate risks appeared first on Climate Home News.

Investors are warning coal miners to be prepared for climate policies (Pic: Peabody Energy)

By Megan Darby

On Wednesday Rio Tinto, one of the world’s biggest mining conglomerates, embraced a shareholder resolution on climate change.

The politely worded submission focuses on disclosure of information. Reading between the lines, it encourages a shift away from coal – an increasingly risky bet as governments crack down on greenhouse gas emissions.

“This is an unusual event, although not unprecedented,” chairman Jan du Plessis wrote to shareholders, recommending they vote in favour of the proposal.

It is the latest mini-victory for a quietly revolutionary coalition of institutional investors known as “Aiming for A”.

Since 2012, this growing band of charities, churches, pension funds and commercial fund managers has been putting carbon majors under the spotlight. Representing US$8 trillion of assets at the last count, they are making climate concerns impossible to ignore.

So who is behind this movement? What impact are they having? And where next?

Report: Investors pressure mining giants to phase out coal

Helen Wildsmith, the coalition-builder-in-chief, talks to Climate Home over lunch.

As stewardship director for CCLA, one of the UK’s largest charity fund managers, she had been chewing over the problem for years.

It is important to understand why churches and charities like to invest in companies like energy majors in the first place.

Trustees have a duty to maximise cash available for their charitable purpose and tend to favour reliable dividend payments over fast capital growth. Wildsmith likens it to owning a house and spending the rental income, but keeping the house. Oil companies and utilities tick that box.

But Wildsmith realised there were strategic threats on the horizon, which 2009’s climate summit in Copenhagen brought to the fore.

“Quite a key moment for me in the period around Copenhagen, where I started to realise that climate change was not linear,” she says. “A lot of what I read up until that stage had accidentally given the impression that it was a linear system, almost that we could stretch the rubber band a bit too far and then correct it.

“I started realising this was a discontinuous system and we couldn’t stretch it too far or that wouldn’t be good for investors, society and the economy.”

Terrifying math: How Carbon Tracker changed the climate debate

If policymakers didn’t tackle climate change, the rise in extreme weather could damage all sorts of assets and business models. If they did, it would be severely disruptive to certain carbon-intensive sectors.

It was a different type of problem than responsible investors were used to. Rather than being limited to monitoring companies’ performance on human rights or environmental standards, it cut across their whole strategy.

In 2011, two things happened that gave Wildsmith an idea for how to address that big picture.

One was that US churches wanted to file a shareholder resolution with BP over its response to the Deepwater Horizon disaster. Wildsmith got involved and while they decided there were other ways to address those particular concerns, the idea of a resolution stuck.

The other was a “fleeting conversation” with Peter Montagnon, an ethical investment expert involved in responding to the financial crisis. “It left in my mind the sense that it’s actually quite hard for long term investors to get their voice heard, because of the day-to-day noise in the markets,” says Wildsmith.

Report: BP embraces climate change risk resolution

Her brainwave was to use shareholder resolutions to amplify the concerns of long term investors. Traditionally in the UK, these were seen as antagonistic, the preserve of activists buying a minimal number of shares to make a point. Wildsmith envisaged a more constructive approach, as part of a sustained engagement by major funds.

One of her first allies was Tessa Younger of PIRC, research partner to the Local Authority Pension Fund Forum (LAPFF).

Representing 69 of the UK’s 89 local authorities, LAPFF had a record of shareholder activism. Back in 1997, it filed a resolution to get Shell to clean up its act in the Nigerian delta.

While it can’t be said to have solved the problem – only this week, Nigerian communities lodged another lawsuit against the company – LAPFF claims credit for improvements in Shell’s approach to social responsibility.

Report: Norway’s oil-rich capital first to divest from fossil fuels

The strongest criticism of investor engagement tends to come from activists who prefer divestment from fossil fuel interests. Networks like 350 see energy majors as the enemy, to be shunned not coddled.

With eye-catching stunts and hashtags like #keepitintheground, they celebrate disruptive clean technology – with the odd pang of sympathy towards redundant coal miners.

Aiming for A, by contrast, is the work of a thousand well-mannered meetings. Long term investors value stability. They want a “smooth transition” to a low carbon economy.

At different ends of the spectrum, both are trying to resolve the conflict between a safe future climate and the profits of fossil fuel producers.

To hold global warming to 2C, scientists estimate more than 80% of coal reserves, half of natural gas and a third of oil cannot be burned. In Paris, governments agreed to a tougher “well below 2C” goal, aspiring to 1.5C.

Report: Fossil fuel divestment accelerates as pledges pass $2 trillion

It took Aiming for A three years to work up to their first resolutions, in 2015. They were anxious to build up enough support to get them passed. Filed with BP and Shell, they aimed to be “supportive but stretching”.

The most important ask was that oil majors consider the possibility climate policies could hit demand for their product. They should model how their assets would fare in a 2C world – and publish the results.

In BP’s 2016 energy outlook last month, there were signs of progress. They added a “faster transition” scenario, which was in line with the International Energy Agency’s “bridge” pathway – not the most cost-effective route to 2C, but potentially keeping it within reach.

“It is a huge move from where the company was a couple of years ago,” says Younger. “I was really pleased to see that. It was more progress than I had expected.”

But she acknowledges that compared to what the Paris agreement mandate, “it doesn’t quite get there”.

“We don’t ask them to set targets. Some people criticise it for not being strong enough, but it is horses for courses.”

Analysis: Coal, steel sectors to suffer as China pollution drive accelerates

This year, the coalition has turned its focus to mining majors: Glencore, Anglo American and – the first to respond – Rio Tinto.

It is an expanded movement, with co-filers representing US$8 trillion – a 30-fold increase on the first resolutions.

They include four of the world’s ten largest pension funds: ABP and PFZW from the Netherlands, California’s Calpers and the Canada Pension Plan Investment Board.

Even commercial fund managers have joined in, with Bruce Duguid of Hermes coordinating the latest round of interventions.

Duguid says they had voted with the coalition last year, but wanted to make sure their 40 pension fund clients backed closer involvement.

“We had a conversation with our clients earlier last year and they supported us taking a more muscular approach,” he says.

“I think that shows how institutional investors have been increasingly concerned with climate change and know that they need to help drive companies towards the long term agenda, rather than just ask nicely.”

Report: Bloomberg climate risk initiative targets secret polluters

For the miners more than the oil sector, Duguid says, climate policies bring opportunity as well as risk. While coal looks like a worse bet, copper and uranium have a role in clean electricity networks.

He sees senior management as often supportive of taking a longer term view, but under pressure to deliver immediate results.

As such, he defends the decision to demand disclosure rather than specific actions: “We want the companies to be in the driving seat, we just want to ask the right questions.”

On the back of this investor awakening, Financial Stability Board governor Mark Carney last year launched a task force to address climate risk.

Headed by Michael Bloomberg, it will propose standards of carbon disclosure across the sector, and it could make a big difference, says Duguid.

“We shouldn’t have to use resolutions for long, because it should become obvious this is what investors want and need.”

The post Meet the investors pushing climate reality on carbon majors appeared first on Climate Home News.

(Flickr/Mike Mozart)

By Megan Darby

New York State and the Church of England have stepped up their fight with ExxonMobil over its attempt to silence climate change questions.

The US oil major has asked regulator the Securities and Exchange Commission to block a shareholder resolution on climate risk at its next annual meeting this spring.

But as long term investors, the New York comptroller and Church Commissioners have today appealed for the vote to go ahead.

At issue is the clash between Exxon’s bullish projections of oil demand and international agreement to curb greenhouse gas emissions.

“Exxon risks becoming an outlier among its peers who have publicly supported reining in climate change,” said NYS’s Thomas DiNapoli.

“As investors, we need to know how Exxon’s bottom line will be impacted by the global effort to reduce emissions and what the company plans to do about it.”

Report: Paris climate pact spells slow death for fossil fuels

Last December, 195 governments agreed to hold global warming “well below 2C”. That goal implies an early peak in fossil fuel burning globally, followed by a rapid phaseout.

Exxon insists that all its hydrocarbon ventures will be needed, dismissing politicians’ commitment to the 2C goal.

Edward Mason, head of responsible investment for the Church Commissioners, said: “We are extremely disappointed that even after the Paris climate change agreement ExxonMobil has contested the relevance of the resolution we have co-filed.

“We believe that our desire to see reporting on how ExxonMobil’s business would fare were warming to be restricted to 2C is widely shared in the institutional investor community. It is a perfectly reasonable ask. Without this information investors cannot properly assess the resilience of ExxonMobil’s business strategy.”

Last year, BP and Shell accepted similar resolutions, agreeing to analyse how their business model would fare under strict climate regulations.

In its latest energy outlook, BP included a new “faster low carbon transition” scenario, which goes half way to the rate of emissions cuts needed for 2C.

A group of UK-based activist shareholders is turning its attention to mining giants Anglo American, Glencore and Rio Tinto, urging them to shift away from polluting coal.

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