Their call to action is in response to this year’s Unburnable Carbon report, which found that in 2012 alone, the 200 largest publicly traded fossil fuel companies collectively spent an estimated $674 billion on finding and developing new reserves – which may never be utilized and plummet in value.
Mindy Lubber, president of Ceres said:
“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”
Investors are concerned that the money pouring into dirty energy projects, which contribute to dangerous climate change, will become stranded assets.
For instance, the value of some holdings in coal are already falling as increasing competition between energy sources, new air quality standards to reduce health impacts, and measures to reduce carbon pollution combine to change the energy landscape.
Jack Ehnes, CEO of the California State Teachers’ Retirement System (CalSTRS) said:
The world is taking climate change seriously and global pressures to reduce fossil fuel use will only grow stronger. As long-term investors, we see the world moving toward a low-carbon future in which fossil fuel reserves that companies continue to develop may actually become a liability, which could take a toll on shareholder value.
The 70 investors are demanding to know how fossil fuel companies plan to manage climate risks and the emerging clean energy economy; for example, by reducing the carbon intensity of assets, divesting from the most carbon intensive projects, and investing in lower carbon energy sources.
Their effort chimes with recent moves by major funds and institutional investors, like the $38 billion pension fund A4P, who are shifting their support from risky fossil fuel assets towards low carbon solutions.
This behaviour is hardly surprising given the scale of the risk, HSBC analysts say that up to 60% of the market value of oil and gas companies is under threat if they continue to operate under their “business as usual” model.
Craig Mackenzie, Head of Sustainability at Scottish Widows Investment Partnership said:
Demand for coal has been falling in key markets. Climate policy and economic changes in Asia mean this trend could soon become permanent. Analysts tell us that demand for oil could weaken too before long. Companies must plan properly for the risk of falling demand by stress-testing new investments to minimize the risk our clients’ capital is wasted on non-performing projects.
One energy firm that appears to be acknowledging and responding to the reality of climate change and the developing energy environment is European giant RWE. This week they announced a departure from large-scale thermal energy production as they shift their future core business towards leading the transition to the future energy world.