Quantcast

Banks Fear Risk of Investment in Fossil Fuels

Business

In a move that’s likely to cause consternation in some of the world’s most powerful corporate boardrooms, the Bank of England has disclosed that it is launching an inquiry into the risks fossil fuel companies pose to overall financial stability.

A growing number of senior figures in the financial community—some of them controlling many millions of dollars worth of investment funds—have been pressing fossil fuel companies to disclose how investments would be affected if energy reserves became frozen or stranded by regulatory moves associated with tackling climate change. Photo credit: Ellen Gibson / Fossil Free Future

Mark Carney, governor of the UK’s central bank, has written to British Members of Parliament telling them that his officials have been discussing whether or not coal, oil and gas reserves held by the fossil fuel industry are, in fact, unburnable.

“In light of these discussions, we will be deepening and widening our inquiry into the topic,” Carney says.

The burning of fossil fuels releases hundreds of thousands of tons of climate-changing greenhouse gases into the atmosphere.

Catastrophic change

The idea is that if global warming is to be tackled and catastrophic climate change averted, such energy resources will have to be left where they are—under the ground. They will, in effect, become frozen or stranded financial assets.

Carney’s letter, written at the end of the October this year but only recently made public, is addressed to the British parliament’s Environmental Audit Committee.

Carney tells the Committee—which has been carrying out its own investigation into the frozen assets question—that a special unit within the Bank of England responsible for identifying and reducing risks in the financial system, will also be considering the issue “as part of its regular horizon-scanning work on financial stability risks”.

Joan Walley, the head of the Audit Committee, told London’s Financial Times that investors should consider what effect regulatory action on climate change would have on their fossil fuel investments.

“Policy makers and now central banks are waking up to the fact that much of the world’s oil, coal and gas reserves will have to remain in the ground unless carbon capture and storage technologies can be developed more rapidly,” Walley said.

A growing number of senior figures in the financial community—some of them controlling many millions of dollars worth of investment funds—have been pressing fossil fuel companies to disclose how investments would be affected if energy reserves became frozen or stranded by regulatory moves associated with tackling climate change.

Carbon Tracker, a not-for-profit thinktank based in London, has been warning of what it sees as the dangers to investors and to the entire financial system of continued investment in the fossil fuel industry.

Vulnerability of assets

“The Bank of England has set a new standard for all central banks and financial regulators on climate risks by agreeing to examine, for the first time, the vulnerability that fossil fuel assets could pose to the stability of the financial system in a carbon constrained world,” Carbon Tracker says.

The question of stranded or frozen assets has been raised at the latest round of global negotiations on climate change taking place in Lima, Peru.

Christiana Figueres, the head of the UN’s Climate Change Secretariat, told the Reuters news agency that the long-term goal of negotiations must be the elimination of all greenhouse gas emissions by 2100—a goal that could not be achieved unless most fossil fuels were left in the ground. “We just can’t afford to burn them,” Figueres said.

YOU MIGHT ALSO LIKE

Cities Around the World Take Lead on Tackling Climate Change

Low-Carbon Economies Most Promising Pathway to Meaningful Global Climate Agreement

3 Key Issues Governments Must Agree On at Lima Climate Talks

EcoWatch Daily Newsletter

Pick one of these nine activism styles, and you can start making change. YES! Illustrations by Delphine Lee

By Cathy Brown

Most of us have heard about UN researchers warning that we need to make dramatic changes in the next 12 years to limit our risk of extreme heat, drought, floods and poverty caused by climate change. Report after report about a bleak climate future can leave people in despair.

Read More Show Less
Jamie Grill Photography / Getty Images

Losing weight, improving heart health and decreasing your chances for metabolic diseases like diabetes may be as simple as cutting back on a handful of Oreos or saying no to a side of fries, according to a new study published in the journal The Lancet Diabetes & Endocrinology.

Read More Show Less
Sponsored
Golde Wallingford submitted this photo of "Pure Joy" to EcoWatch's first photo contest. Golde Wallingford

EcoWatch is pleased to announce our third photo contest!

Read More Show Less
A boy gives an impromptu speech about him not wanting to die in the next 10 years during the protest on July 15. The Scottish wing of the Extinction Rebellion environmental group of Scotland locked down Glasgow's Trongate for 12 hours in protest of climate change. Stewart Kirby / SOPA Images / LightRocket / Getty Images

It's important to remember that one person can make a difference. From teenagers to world-renowned scientists, individuals are inspiring positive shifts around the world. Maybe you won't become a hard-core activist, but this list of people below can inspire simple ways to kickstart better habits. Here are seven people advocating for a better planet.

Read More Show Less
A group of wind turbines in a field in Banffshire, Northeast Scotland. Universal Images Group / Getty Images

Scotland produced enough power from wind turbines in the first half of 2019, that it could power Scotland twice over. Put another way, it's enough energy to power all of Scotland and most of Northern England, according to the BBC — an impressive step for the United Kingdom, which pledged to be carbon neutral in 30 years.

Read More Show Less
Sponsored
Beekeeper Jeff Anderson works with members of his family in this photo from 2014. He once employed all of his adult children but can no longer afford to do so. CHRIS JORDAN-BLOCH / EARTHJUSTICE

By Jessica A. Knoblauch

It's been a particularly terrible summer for bees. Recently, the U.S. Environmental Protection Agency (EPA) announced it is allowing the bee-killing pesticide sulfoxaflor back on the market. And just a few weeks prior, the USDA announced it is suspending data collection for its annual honeybee survey, which tracks honeybee populations across the U.S., providing critical information to farmers and scientists.

Read More Show Less

tommaso79 / iStock / Getty Images Plus

By Rachel Licker

As a new mom, I've had to think about heat safety in many new ways since pregnant women and young children are among the most vulnerable to extreme heat.

Read More Show Less
Pexels

By Kris Gunnars, BSc

It's easy to get confused about which foods are healthy and which aren't.

Read More Show Less