Friends Fiduciary calls for fossil fuel risk assessment

January 23, 2014
Friends Fiduciary

FFC, as part of a coalition of 70 global investors representing over $3 trillion in assets under management, launched the first-ever coordinated effort to spur 45 of the world’s largest oil & gas, coal and electric power companies to assess the financial risks that current and probable future climate policy pose to their business plans.

The World Bank warns of catastrophic climate change impacts at the world’s current path for global warming of 4 degrees Celsius or more. Recent studies by the Intergovernmental Panel on Climate Change (IPCC) and the International Energy Agency (IEA) suggest that achieving the international goal of limiting global warming to 2 degrees Celsius requires a global carbon budget and leaving proven fossil fuel reserves in the ground.

In 2012 alone, however, the 200 largest public fossil fuel companies collectively spent an estimated $674 billion on finding and developing new reserves, according to the Carbon Tracker Initiative’s Unburnable Carbon report. Some of these reserves, however, may never be utilized due to the probability of increased carbon emission regulation.

FFC supports mitigating climate change risks and is concerned that directing capital towards high carbon assets, in the wake of growing climate change concern and the probability of increased carbon-limiting policy, would ultimately lead to share value loss. As a long term investor, FFC advocates and anticipates a low-carbon future, and calls for companies to assess business plans in an environment of greater fossil fuel emission restrictions.

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