Investor Coalition Seeks Climate Change Risk Assessment
Wespath Investment Management (Wespath) has joined a coalition of 70 global investors who are concerned with the financial risks associated with climate change. The investors—representing a total of more than $3 trillion in assets—have sent letters to 45 of the world’s major energy-related companies. The letter requests they conduct a risk assessment using two possible assumptions:
No change in current business operations.
A low-carbon alternative based on the goal to reduce greenhouse gas emissions 80% by the year 2050.
The investors are concerned that the proven reserves (oil, gas and coal) of many energy companies could not be developed if the world’s governments enact regulations designed to reduce greenhouse gas emissions.
The International Energy Agency’s World Energy Outlook 2012 claims that in order to limit an increase in the world’s temperature to 2° Celsius or lower, “no more than one-third of proven reserves of fossil fuels can be consumed prior to 2050…”
Many investors are concerned that energy companies do not fully understand the reality of climate change and its ultimate effect on shareholder value. Research by the Carbon Tracker Initiative (www.carbontracker.org) suggests that the 200 largest fossil fuel companies in the world spent a collective total of $674 billion in 2012 on locating new fossil fuel reserves that may never be produced.
These letters have been signed by several major retirement funds including the California Public Employees’ Retirement System (CalPERS,) the California State Teachers’ Retirement System (CalSTRS,) the New York State Common Retirement Fund and the United Church of Christ Pension Boards. Recipients of the letter include BP, Exxon Mobil, Royal Dutch Shell, Arch Coal and Peabody Energy.
A copy of the letter is available here. Additional information is available here.