The financial think-tank Carbon Tracker Initiative (CTI) and the UK Sustainable Investment and Finance Association (UK SIF) have called on the Government and regulatory authorities to consider actions which align capital markets and investment more effectively with the realities of climate change. This call is supported by the All Party Parliamentary Climate Change Group (APPCCG)

At an APPCCG meeting on 5 November on the carbon bubble and stranded assets, Mr. Tim Yeo MP, who was chairing the meeting said: “Particularly in light of the IPCC’s recent calculation of a global carbon budget – the amount of carbon that can be emitted and it still remain likely that we will limit warming to two degrees – greater disclosure by companies about their carbon risks is very desirable.”

Ms. Joan Walley MP added: “As demonstrated by the recent IPCC report, there are rapidly increasing risks from climate change.  Both policymakers and businesses must take action to ensure that there is full transparency about exposure to carbon risks so that investors can take account of this when making investment decisions.”

Following a recent intervention from Bank of England Governor, Mark Carney, and the IPCC synthesis report on climate change, CTI said at the meeting that there was an urgent need for regulators to mandate companies to disclose future CO2 emissions embedded in their fossil fuels.

This could be done through:

  • a revision to the mandatory UK GHG Emissions Reporting Requirement
  • the Bank of England Prudential Regulatory Authority and the UK Listing Authority ensuring that companies whose primary activity is the development of fossil fuels provide clear, transparent descriptions of their assessment of climate-related risks
  • the EU Directive on Non-Financial Reporting, which offers an opportunity for regulators to give clear interpretative guidance on climate risk
  • an independent commission, including regulators from other countries, examining the scope for what can be done on financial regulation and guidance.

Carbon Tracker’s Founding Director, Mark Campanale said; “It’s time regulators provided clear guidance to fossil fuel companies on public disclosure of how they factor in climate-related risks. A business as usual approach is no longer tenable.”

“Some fossil fuel future production projects will not be able to break even unless there is a very high oil price. Such high oil price would mean a double whammy of high energy prices and high costs of climate. That is a pure financial risk for investors and a major political risk for politicians. Policymakers have the responsibility to create the conditions for financial and climate risk disclosure to create transparency allowing investors to correctly price the fossil fuel risk premium” says Anthony Hobley, Carbon Tracker’s  CEO.

“UKSIF was delighted to work with the APPCCG to deliver this meeting and were pleased that the MPs and their staff who attended are engaging with these fundamental issues. We now hope to see policymakers take the appropriate action to mitigate very real climate-related risks to our economy.”says Simon Howard, Chief Executive, UKSIF.