Why climate change could damage your pension
Green energy war will be won in boardrooms, not on streets
AT ITS annual meeting next month, BP will bow to pressure from City shareholders to explain clearly how it plans to combat climate change.
It is a moment that matters to every saver and pensioner in Britain.
The oil giant and its arch-rival Royal Dutch Shell between them pay out around 20pc of all FTSE 100 dividends, so we all rely on their performance.
But if companies like these fail to play a part in moving to a low-carbon economy, they risk contributing to an environmental and financial catastrophe.
If the war to save the planet is going to be won, then the victory is more likely to be achieved by pin-striped executives in boardrooms than by a bunch of yogic hippies. It’s an inconvenient truth as far as the eco-zealots in London at the protests orchestrated by Extinction Rebellion are concerned.
The corporate world is neither oblivious nor uncaring, but is abundantly aware of climate risks. This is not for bleeding heart reasons, or for the sake of conforming to a new social orthodoxy, but because it makes financial sense.
The Bank of England this week told lenders and insurers they risk huge losses, which could include loans to companies in dirty industries that go out of business and are unable to repay their debts.
A sudden drop in asset values due to climate change could lead to trillion-pound losses. SOME banks, including RBS and HSBC, are no longer financing ‘extreme’ fossil fuels such as tar sands and they are likely to be screening assiduously for climate risks in future.
Sir David Attenborough’s appearance at the International Monetary Fund in Washington this month, where he was interviewed by managing director Christine Lagarde, is another gauge of how seriously economists and financiers are taking the issue. The nonagenarian broadcaster, whose series ‘Our Planet’ ( pictured) is showing on Netflix, painted a bleak picture of the economic, social and human costs if we fail to act on climate change and hurtle towards a ‘spendthrift suicide’.
Shifting to a more sustainable model will be an enormous undertaking for businesses and governments.
Lagarde said £4trillion has been spent globally since 2015 on fossil fuel subsidies to industry, much of it in the developing world. Removing those subsidies could cause job losses and hardship in the short term, even if the long-term benefits are clear.
Individual countries often are reluctant to cut subsidies or to impose carbon taxes if rival nations refuse to do the same, for fear of damaging their ability to compete.
‘The natural world is so delicate at the moment it needs all the protection it can get,’ Attenborough said. ‘Sometimes that will mean governments will have to take decisions that are painful and cost money.’
The reason companies are responding to climate change fears comes down to cash – the fear of losing it – and the fact big City shareholders are telling them to clean up their act.
Legal & General, one of the UK’s biggest investors with £1trillion under management, has been assessing more than 80 of the world’s largest businesses on their responses to climate change.
It has banned eight from a fund for those seeking to invest in environmentally conscious shares, including China Construction Bank, the world’s largest backer of coal mining, and Russian oil giant Rosneft.
There is a positive side: the need to come up with greener energy solutions also creates opportunities for business.
The UK is reducing the amount of carbon it produces relative to the size of our economy faster than any other country in the G20, and has generated 430,000 jobs in low-carbon businesses.
Indeed, innovations are likely to do more to help combat climate change, than any number of wellmeaning people supergluing themselves to railings.
It may not fit the narrative of the protesters, but those industrialists, investors and financiers so heartily despised by your average eco-warrior are actually doing their share to save the planet.