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08/03/2015

Davos 2014: Financial risks of climate change

Carbon Tracker Initiative has being delivering findings about one of the most lucid and transformational concepts since the start of the 2007 crisis: The Carbon Bubble

Since its first report in 2011, Carbon Tracker Initiative has being delivering findings about one of the most lucid and transformational concepts since the start of the 2007 crisis: The Carbon Bubble. The idea that  coal, oil and gas companies reserves are increasingly becoming stranded assets, because using all fossil fuels will breach the global carbon dioxide Budget, thus implying a huge amount of the reserves are unburnable, posing a major risk for investors.

We met Mark Campanale, Founder & Executive Director of The Carbon Tracker Initiative; he told us what was in Davos for the Initiative:Davos. WEF

“The Carbon Tracker Initiative was in Davos to demonstrate how financial experts can use financial analysis to make carbon investment risk visible in the capital markets not tomorrow but today.

In Davos we had a unique opportunity to deliver this message to the world’s business & financial leadership. With WEF organizing a roundtable for business and senior figures from the central banks, pension funds and rating agencies on this topic, we’ve definitely made great progress in putting the financial risks of climate change onto the agenda of key bankers and regulators.  With the IPCC showing us that we’ve already emitted more than half of the one trillion tonnes of our total carbon budget, this means that a significant percentage of fossil fuel reserves will need to be kept in the ground to keep us within a maximum two degree warming. The WEF kicked off a discussion that concluded stranded carbon assets present a potential material risk to the global economy and compared this to the risk of inflated real estate assets that precipitated the 2008 financial crisis.  As Achim Steiner, Exec Director of UNEP wrote “If the world decides in 10 or 20 years to restrict the use of coal or oil due to absolute pollution limits, what happens to our pension funds and savings that are invested in these companies? Do our financial regulators need to start thinking about protecting them and us from the 'too big to fail syndrome'? Unravelling this is now a major challenge. With the Carbon Tracker Initiative engaging some of the smartest people to work on it, we are optimistic that we can make great strides in the year ahead in addressing it”.

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