A coalition of 70 major global investors managing more than $3 trillion of collective assets have called upon the world’s 45 top fossil fuel companies to assess the financial risks that climate change pose to their business.
This week, a new initiative -the Carbon Asset Risk (CAR), launched the world’s first-ever coordinated effort to spur the largest fossil fuel companies to analyze financial risks associated with climate change.
CAR is coordinated by Ceres and the Carbon Tracker initiative. CAR investors, collectively worth $3 trillion; last month, sent a letter to 45 fossil fuel companies requesting detailed responses of climate change threats before their annual shareholder meetings in 2014.
The investors’ letter follows the release of the Carbon Tracker’s April 2013 report, ‘Unburnable Coal’, which sparked alarm. The report stated that in 2012 alone, 200 of the largest publicly traded fossil fuel companies spent a collective $674 million on locating and developing new reserves. Signatories of the letter include California’s two largest public pension funds, F&C Asset Management, the Scottish Windows Investment Partnership and the California State Teachers’ Retirement System (CalSTRS).
CAR investors cite recent studies, including that of the Intergovernmental Panel on Climate Change (IPCC), which suggest that significant amounts of fossil fuel reserves need to remain in the ground in order to limit global warming to 2˚C. With this in mind, investors are asking fossil fuel companies to rethink the future of their operations.
“Fossil fuel companies are the biggest sources of carbon pollution by far, which means they are also uniquely positioned to lead the world in responding to global climate risks”, says Ceres president Mindy Lubber.
So far, 30 of the 45 companies have provided preliminary responses to their investors, with detailed answers expected by early next year.
“Many of the responses investors have received from the companies thus far acknowledge that there is a legitimate risk issue around carbon reserves, and companies are open to continued engagement from the investor community to determine the scope”, says Mark Fulton, a member of the Carbon Tracker’s Advisory Board and a Ceres adviser.
He added, “Fossil fuel companies will prove to be more responsible stewards of capital in the future if they take action now to manage the risks posed by climate change.”
The new initiative’s release comes at the same time as Al Gore’s discussion on the economic impact of climate change. Gore has cautioned investors to divest from fossil fuel companies before the “carbon bubble” bursts.