Climate Risk

Electronic Press Kit

Climate change is a material issue for investors.

The human, environmental, and economic costs of a warming climate are increasingly clear - as is the need to take decisive action. If fossil fuel reserves cannot be burned, the potential market bubble created by overvalued reserves puts institutional investors at risk.

Reports

Risky Business

Launched in October, 2013, the Risky Business Project focuses on quantifying and publicizing the economic risks from the impacts of a changing climate. Led by co-chairs Michael R. Bloomberg, Henry Paulson, and Tom Steyer, the report describes the significant and diverse economic risks the U.S. faces from climate change.

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UPDATE: Financial Risks of Investments in Coal

As You Sow

Since As You Sow released the original White Paper: Financial Risks of Investments in Coal in June 2011, the prognosis for coal as a financially viable energy source has continued to decline.

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Unburnable Carbon 2013: Wasted Capital and Stranded Assets

Carbon Tracker Institute

Valuation and ratings aren't routinely pricing stranded carbon assets. As a result, regulators and investors need to review their approach to systemic risks and recognize that capital spent on finding and developing more reserves is largely wasted.

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Stranded Carbon Assets: Why and How Carbon Risks Should Be Incorporated in Investment Analysis

Generation Investment Analysis

An explanation of the "carbon budget", a summary of the risk facing investors holding carbon-intensive assets, and suggested investor actions starting from identifying carbon risks to full divestment from fossil fuel-intensive assets.

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Oil and Carbon Revisited: Value at Risk from 'Unburnable' Reserves

HSBC

The IEA(s World Energy Outlook (2012 edition) estimated that in order to have a 50% chance of limiting the rise in global temperatures to 2ºC, only a third of current fossil fuel reserves can be burned before 2050. The balance could be regarded as unburnable.

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What A Carbon-Constrained Future Could Mean for Oil Companies' Creditworthiness

Standard & Poor's Rating Service

Financial models that use past performance and creditworthiness may be insufficient to guide investors on the effects of future carbon constraints on the oil sector. Independent oil and gas produces should see deterioration in their financial risk profiles to a degree that could lead to negative outlook revisions and then down grades over 2014-2017 and majors could face pressure in 2016-2017.

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Cleantech Redefined

As You Sow, Kachan & Co., Responsible Endowments Coalition

Cleantech infrastructure, technology and services are revolutionizing how we make, grow, transport and consume things. Is there still time for investors to make good returns in cleantech? Yes.

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Investing to Curb Climate Change: A Guide for the Institutional Investor

US SIF

Investing to Curb Climate Change shows institutional investors how to move toward a low-carbon portfolio.

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The Price of Climate Risks

Bob Litterman

Bob Litterman is the former head of risk at Goldman Sachs worldwide and now a partner in New York based hedge fund Kepos Capital. This presentation from May 2014 examines how to model the price of climate risks in the context of hedging portfolio risk.

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Turn Down the Heat

World Bank

Turn Down the Heat: Climate Extremes, Regional Impacts, and the Case for Resilience looks at likely impacts of 2 degree C and 4 degree C warming across three vulnerable regions.

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Carbon Constraints Cast A Shadow Over The Future Of The Coal Industry

Carbon Tracker Institute and Standard & Poor's Rating Service

Coal is the most polluting source of power generation, accounting for 41% of global carbon emissions. As governments globally seek to reduce emissions, it looks increasingly likely that "King Coal" will lose its crown.

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Locked-In: The Financial Risks of New Coal-fired Power Plants in Today's Volatile International Coal Market

Sierra Club Beyond Coal Campaign

Coal "lock-in", rather than rational investments in coal power, is one of the largest global threats today. Excessive coal reliance is now becoming a serious economic threat.

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Responding to Shell - An Analytical Perspective

Carbon Tracker Institute and Energy Transition Advisors

The Carbon Tracker Initiative (CTI) and Energy Transition Advisors (ETA) have today produced a thorough response to Shell’s stranded assets statement published on May 16th. The think tanks’ reply is based on a detailed technical analysis of Shell’s argument.

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Media

The Coming Climate Crash

Henry Paulson Jr.

There is a time for weighing evidence and a time for acting. And if there’s one thing I’ve learned throughout my work in finance, government and conservation, it is to act before problems become too big to manage.

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In Shift, Exxon Mobil to Report on Risks to Its Fossil Fuel Assets

Energy companies have been under increasing pressure from shareholder activists in recent years to warn investors of the risks that stricter limits on carbon emissions would place on their business. On Thursday, a shareholder group said that it had won its biggest prize yet, when Exxon Mobil became the first oil and gas producer to agree to publish that information by the end of the month.

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The Coming Carbon Asset Bubble

Al Gore and David Blood

At least two thirds of fossil fuel reserves will remain in the ground as stranded assets. Gore and Blood outline three broad risks to fossil fuel assets investors are ignoring by continuing to invest in fossil fuels: 1) regulation (direct or indirect), 2) changing market forces, and 3) sociopolitical pressures.

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Fossil Industry is the Subprime Danger of this Cycle

Markets can misprice risk, as investors in subprime mortgages discovered in 2008. Several recent reports suggest that markets are now overlooking the risk of "unburnable carbon".

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After Bubbles in Dotcoms and Housing, Here's the Carbon Bubble

You're familiar with the dot com bubble and U.S. housing bubble. True financial geeks may even know of the Poseidon nickel bubble. But have you heard of the carbon bubble?

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Unburnable Fuel

Either governments are not serious about climate change or fossil-fuel firms are overvalued.

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Investors to Directors, 'Can We Talk?'

What if lawmakers never spoke to their constituents? Oddly enough, that’s exactly how corporate America operates.

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The Elephant in the Atmosphere

Managers at the biggest oil firms are clashing with investors over climate change.

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What Is the Right Price for Carbon Emissions?

The unknown potential for devastating effects from climate change complicates pricing.

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On Climate Change, Expect the Worst: Column

We must create incentives to prevent risks before the environment gets ugly.

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Robert Rubin: How Ignoring Climate Change Could Sink the U.S. Economy

Good economic decisions require good data. And to get good data, we must account for all relevant variables. But we’re not doing this when it comes to climate change — and that means we’re making decisions based on a flawed picture of future risks.

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Some Big Public Pension Funds Are Behaving Like Activist Investors

Activist investors like Carl C. Icahn, Daniel S. Loeb and William A. Ackman are getting deep-pocketed imitators. Some of the biggest public pension funds, which have sought to influence companies for years, are now starting to emulate these investors by engaging with, and sometimes seeking to oust, directors of companies whose stock they own.

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Oil and gas Company Debt Soars to Danger Levels to Cover Shortfall in Cash

The world’s leading oil and gas companies are taking on debt and selling assets on an unprecedented scale to cover a shortfall in cash, calling into question the long-term viability of large parts of the industry.

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Shale Drillers Feast on Junk Debt to Stay on Treadmill

“There’s a lot of Kool-Aid that’s being drunk now by investors,” Tim Gramatovich, who helps manage more than $800 million as chief investment officer of Santa Barbara, California-based Peritus Asset Management LLC. “People lose their discipline. They stop doing the math. They stop doing the accounting. They’re just dreaming the dream, and that’s what’s happening with the shale boom.”

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Norway Oil Fund Voting Declaration ‘Certain to Cause a Stir’

In its strategy report for the next three years, Norges Bank Investment Management – the manager of the oil fund – says: “We will make our voting intentions public before the annual shareholder meetings to increase transparency, and encourage initiatives to strengthen the vote execution chain.”

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