Statement on the G20 climate/carbon risk probe

Apr 30, 2015 - 1:00pm

The Climate Institute is pleased that the G20 will be conducting “public-private inquiry” into stranded asset risk.

“This G20 inquiry into the risks of high carbon investments is a powerful acknowledgement of how climate change could affect financial systems. Risk management is about opening eyes to potential consequences," said John Connor, CEO of The Climate Institute. 

“Avoiding two degrees warming will require conventional fossil fuel practices and investments to end. Almost 200 countries have agreed to keep warming below this level. This sort of risk examination should be a priority and it is entirely appropriate that the Financial Stability Board investigate it at a global level.”

“We welcome reports that Australia supported this inquiry, and as a high carbon economy, encourage Australia’s financial institutions – public and private - to do the same.”

On Monday, The Climate Institute - as the Australian agent of the Asset Owners Disclosure Project - analysed the release of the third Global Climate Index of the world's 500 asset owners. The index examines the incorporation of climate and carbon risk management into the core of managing superannuation, sovereign wealth and insurance funds.

The 2014/15 index found that two Australian funds, Local Government Super and AustralianSuper, are among just nine AAA rated funds in the world. But many large funds - such as the Future Fund, Telstra Super, QSuper and SunSuper - are being rated D or X for poor or non-existent risk management in this area.

The Climate Institute examined the risks for Australian investors of stranded high carbon assets in its Unburnable Carbonreport. Key findings from that report include:

  • Applying Australia’s market share to the precautionary global carbon budget for coal means Australian reserves are already more than double that amount with more extraction planned.
  • A conservative estimate of all the potential Australian coal resources is 150 GtCO2, which is as much as 75 per cent of the global coal carbon budget to 2050.
  • Australian coal is becoming less competitive, given its high cost operations in a highly competitive market. Expansion beyond the 11 per cent market share is highly unlikely.
  • Last year, Australian listed companies spent an estimated AU$6 billion on developing more coal reserves.
  • An increasing number of countries that import Australian coal, such as China, are tightening their belts on coal use. This means that investments into Australian coal that may seem sound at the moment could easily turn into stranded assets that cannot be sold in a world acting on climate, with the cost of alternative energy falling.
  • The significance of Australian coal for investors goes beyond its own shores, with more Australian coal reserves owned by companies listed outside Australia - especially in London and Tokyo – than by those listed domestically.

“Australian and overseas investments in Australian coal rest on a speculative bubble of climate denial, indifference or dreaming,” said Connor. “Investors, governments and even some coal companies say they take climate change seriously, but our Unburnable Carbon report shows they do not or are taking risky gambles.”

For more information

Kristina Stefanova, Communications Director, 02 8239 6299

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