Investors ignore climate change at their peril

The Bank of England Governor is right when he says “green” finance cannot conceivably remain a niche interest over the medium term, says Charlie Thomas, manager of the Jupiter Ecology Fund.

When you have Mark Carney, the Governor of the Bank of England making a keynote speech warning of the risks associated with ‘stranded’ fossil fuel reserves, you know the topic is no longer a niche concern.

As Carney rightly notes, these risks, linked to energy companies being unable to exploit the large reserves of oil, coal and gas, as the world moves towards a lower-carbon economy, are driven not just by policy, but by technology.

As the Bank’s report points out, renewable energy forms are profoundly changing energy economics such that the world is now adding more electricity capacity in renewable power each year than coal, natural gas, and oil combined. This, we believe, is a key driver behind the 50-fold increase over the last year in the total assets of investor groups who have committed to either cut back or sell out of holdings in fossil fuel companies to $2.6trn.

It also provides another reason to agree with Carney’s statement that “’green’ finance cannot conceivably remain a niche interest over the medium term.”

Carney’s speech is clearly timed to send a warning shot across the bows, with the UN Climate Change Conference in Paris just two months away.

The progress we have seen from the major emitters going into the Paris Climate Conference already mark it apart from Copenhagen in 2009. So while an agreement will likely fall short of the ambition needed to limit climate change to 2 degrees Celsius at this stage, it appears that the pieces are in place for a first truly global climate agreement – the thought of which seemed almost inconceivable in the aftermath of Copenhagen.

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