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Fund managers who ignore climate risk breaching ‘fiduciary duty’

UN climate chief says future investments must reflect need for planet to avoid warming to dangerous levels

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By Ed King

Leading fund managers could be breaking the law if they refuse to take into account the threats posed by climate change, a leading UN official said yesterday.

Speaking at an investment summit in New York, the United Nations climate chief Christiana Figueres said bankers would be “blatantly in breach of their fiduciary duty” if they failed to accelerate the greening of their portfolios.

“Investment decisions need to reflect the clear scientific evidence, and fiduciary responsibility needs to grasp the intergenerational reality: namely that unchecked climate change has the potential to impact and eventually devastate the lives, livelihoods and savings of many, now and well into the future,” she said.

The warning came on the same day a study by low carbon business lobby group CERES revealed that over a trillion dollars of investment in low carbon infrastructure is needed by 2030.

It outlined 10 recommendations for the public and private sector to leverage these levels of funding, including favourable debt funding for low carbon projects and a greater focus on market transparency.

A new report by the Asset Owners Disclosure Project, a group that analyses the content of selected funds, reveals that of 460 funds, only five received a climate-friendly rating, while 173 funds were rated as taking “no action”.

Figueres added: “I urge institutional investors to request companies they are invested in to disclose their carbon footprint and potential stranded assets such as those linked to the mining, exploration and burning of fossil fuels, and for members of pension funds to hold their trustees to account in this respect.”

Funding fall

The challenge of reaching one trillion dollars was highlighted by new figures from Bloomberg New Energy Finance, which indicated clean energy funding fell for the second successive year in 2013.

Global investment stood at $254 billion, down from $288.9bn in 2012 and the record $317.9bn of 2011. China experienced a funding fall of 3.8% to $61.3bn, with the US recording an 8.4% drop to $48.4bn.

The fall was marked in the EU, with a remarkable 41% slump to $57.8bn, partly explained by new restrictions to subsidy payments in Germany, Italy and France.

But Japan, which drastically cut its climate targets at a recent round of UN negotiations, recorded a massive 55% increase in investment, largely in small-scale solar installations.

Analysts say the poor results mask some good news, pointing out that the costs of renewable technologies like wind and solar are steadily decreasing, offering energy at comparable costs to traditional fossil fuels.

Emissions rise

Separately, oil giant BP released its 2013 Energy Outlook on Wednesday, predicting global energy consumption will rise 41% by 2030, resulting in a 29% growth in greenhouse gas emissions.

BP believes this growth will be largely driven by fossil fuel use in emerging economies, although renewables are expected to be the fastest growing source of energy, expanding 6.4% a year till 2035.

This analysis suggests a peak in climate warming gases is unlikely over the next two decades, although it does not take into account the impact of any future global emission reduction agreements.

BP Group Chief Executive Bob Dudley said the Outlook posed three questions: “Is there enough energy to meet growing demand? Can we meet demand reliably? And what are the consequences of meeting demand? In other words, is the supply sufficient, secure and sustainable?”

He said the answers to the first two were broadly positive, but could only point to a slowing in emissions growth in regard to the question of sustainability.

Scientists believe releases of climate warming gases will likely need to peak at the end of this decade if the world is to avoid being locked into dangerous levels of warming.

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  • DaBilk

    Christiana, take a long walk off a short pier.

  • Hugh Murdoch

    It might be a very good thing for someone to challenge the financial institutions’ fiduciary duty in respect to this matter. That would certainly make the rest of the financial community sit up and take notice – whatever the outcome.

  • mapleleafup

    Of course Christiana Figueres would require sound scientific evidence other than dicey computer models.