It's no longer possible to rely 100% on ads to keep our organization going. If you believe in why Films For Action exists, we hope you'll become a supporter on Patreon. A monthly donation of $1, $3, $5 or more per month will really help!
How Your pension is Being Used in a $6 Trillion Climate Gamble
By Bill McKibben and Jeremy Leggett / guardian.co.uk
Apr 19, 2013

Suppose you weren’t worried that we humans are destroying our water supply and eroding our ability to feed ourselves by burning coal and gas and oil and hence changing climate. Suppose you thought that was all liberal hooey. What might worry you about fossil fuels instead? How about a six trillion dollar bet, including a big slug of your own money, on people not doing what they have said they are going to do, and that some have already sworn to do in law? 

Photo: The tailings pond at the Syncrude mine north of Fort McMurray, Alberta, Canada. Tar sands could become a 'stranded asset', campaigners say. (Credit: Ashley Cooper pics/Alamy)

Six trillion dollars is what oil, gas, and coal companies will invest over the next ten years on turning fossil fuel deposits into reserves, assuming last year’s level of investment stays the same. Reserves are by definition bodies of oil, gas or coal that can be drilled or mined economically. Regulators allow companies, currently, to book them as assets, and on the assumption that they are at zero risk of being stranded - left below ground, "value"unrealized - over the full life of their exploitation. Yet a report published today shows they are at very real risk of being stranded, and in large quantity. 

Governments agreed in 2010 to keep global warming below two degrees. The Carbon Tracker Initiative, a group of concerned financial analysts based in London, has teamed up with the Grantham Institute, a climate research centre, to calculate how much carbon it would take to reach that two degree threshold, and what it means for the capital markets. By this calculation, fully 60 to 80% of oil, gas and coal reserves listed on stock exchanges are unburnable. 

The six trillion dollar bet is that this calculation remains entirely theoretical, and that fossil-fuel companies will be allowed to keep pumping up the carbon bubble by investing more cash to turn resources into reserves, and continue booking them at full value, assuming zero risk of devaluation. It's a bet that effectively says to government: “nah, we don’t believe a word you say. We think you’ll do nothing about climate change for decades."

Yet the British government, for one, has signed its targets into law, and the Copenhagen Accord brokered by the Obama administration in 2009 specifically sets 2 degrees as its goal. And all governments at the most recent annual climate negotiations have agreed to set legally binding targets at the 2015 climate summit in Paris.

Both companies and ordinary citizens ought to be very worried by this disconnect between capital markets and climate policymaking. This is because so much of the value of stock exchanges involves pension money, and so much of peoples’ prosperity hinges on the value of their pensions. HSBC recently calculated that shares in coal companies could be devalued by 40-60% in a world acting on the climate threat.

Yet vast pension assets are invested in coal. The ratings agency Standard and Poor’s recently concluded that the business models of tar sands companies could be invalidated in a world acting to constrain carbon. Yet vast pension assets are invested in tar sands.

The six trillion dollar bet also involves two mandatory side bets. The first is that the news on climate change doesn’t get worse than it already is, so putting governments under even more pressure to act on carbon than they already are.

Sadly, we and many like us think it will, especially as natural amplifiers to global warming, like melting permafrost, kick in. For this reason we think that the Carbon Tracker Grantham figures are conservative: if they are wrong, they are much more likely to be wrong on the down side. 

The second side bet is that the new civil resistance to fossil fuels won’t add significantly to the pressure on governments to act. We think it will, for reasons you can see on the 350.org website, and in the rising tide of peaceful direct action on streets, in campuses, on solar rooftops, and elsewhere across society. 

The pooled message to regulators, from Carbon Tracker analysts and 350.org activists alike, is clear. Do your job. Start requiring recognition of stranded carbon-asset risk in capital-markets processes. Start deflating the carbon bubble before it pops. 

The message to all the players across the financial chain, from ratings agencies through accountants, to actuaries, investment advisors and all the rest, is also obvious. If the regulators won’t do their job, do it for them. Jump, before you are pushed.

Bill McKibben

Bill McKibben is Schumann Distinguished Scholar at Middlebury College and co-founder of 350.org. His most recent book is Eaarth: Making a Life on a Tough New Planet.

Jeremy Leggett

Jeremy Leggett is Chairman of Carbon Tracker. He is author of The Carbon War and Half Gone.

 

3.5 ·
1
Featured Films
The Staging Post: Courageous People Never Give Up! (2017)
61 min The Staging Post follows two Afghan Hazara refugees, Muzafar and Khadim. Stuck in Indonesia after Australia 'stopped the boats' and facing many years in limbo, they built a community and started the school which inspired a refugee education revolution. A real-life...
Inhabit: A Permaculture Perspective (2015)
92 min Humanity is more than ever threatened by its own actions; we hear a lot about the need to minimize footprints and to reduce our impact. But what if our footprints were beneficial? What if we could meet human needs while increasing the health and well-being of our...
Within Reach (2013)
87 min Within Reach explores one couple's pedal-powered search for a place to call home. Mandy and Ryan gave up their jobs, cars, and traditional houses to 'bike-pack' 6500 miles around the USA seeking sustainable community. Rather than looking in a traditional neighborhood, they...
Schooling the World (2010)
66 min If you wanted to change an ancient culture in a generation, how would you do it? You would change the way it educates its children. The U.S. Government knew this in the 19th century when it forced Native American children into government boarding schools. Today, volunteers...
Fall and Winter (2013)
102 min This stunning film takes you on a hypnotic journey, reaching to the past to understand the origins of the catastrophic environmental transitions we now face. Over two years, director Matt Anderson traveled 16,000 miles to document firsthand our modern industrial world and the...
The Economics of Happiness (2011)
65 min Economic globalization has led to a massive expansion in the scale and power of big business and banking. It has also worsened nearly every problem we face: fundamentalism and ethnic conflict; climate chaos and species extinction; financial instability and unemployment. There...
Trending Today


Love Films For Action? Become a Patron!

Our Patreon campaign is now live! We hope you'll be among the first to support this new direction for Films For Action. The goal is to go 100% ad-free by next year and become 100% member supported. A monthly pledge of just $1 -5 per month x a few thousand awesome people will ensure we can continue our work and grow our impact across the world. Click here to join.

Join us on Facebook
How Your pension is Being Used in a $6 Trillion Climate Gamble