Savers face £100bn losses, warns Carney

Britons’ investments are second-most vulnerable to any shares plunge driven by climate change worries

Mark Carney, the Bank of England Governor, warned yesterday that almost £100bn of UK savers’ money could be made worthless by climate change. The funds that are invested in the world’s biggest fossil fuel producers could be derailed by a market crash as capitalism grapples with the effects of global warming. Mr Carney said the economy may rapidly switch from using oil to green alternatives, causing the producers’ value to fall as their market disappears.

ALMOST £100bn of UK savers’ money is invested in the world’s biggest fossil fuel producers, raising concerns following a stark warning from Mark Carney that assets could be rendered “worthless” by climate change.

It means that UK shareholders are the second-most vulnerable in the world to a plunge in the value of the top 20 listed oil and gas producers, analysis by The Daily Telegraph shows – behind only the US. The figures will spark fresh fears that millions of pension savers’ retirement plans could be derailed by a market crash as capitalism grapples with the effects of global warming.

A total of £95bn has been invested in the biggest drilling firms by UK asset managers, insurers and pension funds, an exposure that Bank of England Governor Mr Carney warned yesterday is highly vulnerable to climate change.

While most is in London-listed firms, chiefly BP and Shell, UK investors have put more than £30bn in foreign players such as Exxonmobil and Chevron.

On BBC Radio Four’s Today, Mr Carney said investors and firms are “not moving fast enough” to protect themselves from climate change, singling out “stranded assets” in the energy industry. He warned that in total, £16trillion could be wiped out around the world if banks and building societies fail to wake up to the threat.

He fears the economy will rapidly switch from using oil as it is replaced by increasingly cheap green alternatives such as wind and solar power, causing the value of firms that make their money from fossil fuels to plummet as their market disappears.

Mr Carney said: “How many of those assets that exist today are actually going to be stranded, because if we collectively across the planet were to consume all of that oil and gas there is no way we would meet the carbon budget.” He claimed up to 80pc of coal assets will never be mined, along with as much as half of all developed oil reserves.

The Governor, who will become the UN’S special envoy for climate action when he leaves Threadneedle Street, said many assets owned by institutions looking after Britons’ pensions and investments could become “worthless” due to climate change.

Leaders of the energy industry leapt to its defence after his warning. Deirdre Michie, chief executive of trade body Oil & Gas UK, insisted it will be part of the solution and is playing a critical role in developing technology to tackle the issue. She warned that abandoning oil and gas companies will trigger a fall in the tax revenue that is essential to fund the switch to a lowcarbon economy. Ms Michie added the industry is supporting the development of renewable energy in the UK.

Maarten Wetselaar, of Shell, acknowledged that the oil giant had an important part to play in trying to avert the climate emergency. But he said that customers and regulators had to aid the transition too. Speaking on Today, he said: “We absolutely accept that climate change is ongoing, and urgent action by all involved – regulators, companies, customers – is necessary.”

Shell has allocated significant sums of money to invest in clean energy, he said, and set itself stringent targets for reducing fossil fuel production.

Responding to criticism about the pace of change at the Anglo-dutch company, Mr Wetselaar said: “We see this very much as a transition where we need to replace the consumption of fossil fuels with a consumption of lowcarbon products and as that consumption goes down then obviously the production of it will go down as well.”

The Bank of England will become the first central bank to conduct climate change “stress tests”, to judge how well finance firms can respond to the threat. It will test firms against three different scenarios over a 30-year horizon and plans to reveal the results in 2021.