The overweighting of the UK stock market towards fossil fuel companies means that UK pension funds are at particular risk of any sudden reassessment of the viability of high-carbon energy sources, according to a leading analyst.
According to the most likely projections by climate scientists, "at least one-half of fossil fuel assets will have to be left in the ground," said Nick Robins, head of the HSBC climate change centre of excellence in London. "We're still pricing [companies in the extractives sector] as if they are all going to be exploited."
"This is a particular concern for the UK as our stock market is overweight fossil fuels," he said, creating the risk of stranded assets.
Robins was speaking at a seminar at the Association of Chartered & Certified Accountants to discuss a new book by Australian environmental activist and entrepreneur Paul Gilding, The Great Disruption.
Gilding argues that the global economy has grown to a point beyond which the planet can sustain, and that the growth-driven economic model will exacerbate looming climate, energy, food and water crises.
"The earth is full," Gilding said, and "economic growth is dead", with the global economy already bumping up against physical limits, as evidenced by energy and food price spikes. "We're operating past the earth's limits and that has economic consequences," he added.
He argued that humankind is "very, very good at responding to a crisis", and he believes that the challenges posed by reducing greenhouse gas emissions are solvable. "However, climate change is not the problem - the problem is economic growth."
Gilding calls for a reorientation of society away from metrics of material growth to a focus on human capital.
By. Mark Nicholls
Source: Environmental Finance
Mark is a writer for Environmental Finance. Environmental Finance is the leading global publication covering the ever-increasing impact of environmental issues on the lending, insurance,… More