LONDON, Sept. 30 (UPI) — Shifting to a low-carbon economy carries with it unique concerns for investors on both sides of the energy debate, the Bank of England’s governor said.
Bank of England Governor Mark Carney told an audience at Lloyd’s of London that investors need take a hard look at the shifting energy landscape.
“We don’t need an army of actuaries to tell us that the catastrophic impacts of climate change will be felt beyond the traditional horizons of most actors — imposing a cost on future generations that the current generation has no direct incentive to fix,” he said.
A late 2014 report from the Intergovernmental Panel on Climate Change found emissions of carbon dioxide, a potent greenhouse gas, from the combustion of fossil fuels accounted for 78 percent of the total emissions increase from 1970 to 2010.
The IPCC report said warming trends could slow under a scenario in which renewable energy grows from roughly 30 percent of the energy share to 80 percent by 2050. Carney estimates the shift away from fossil fuels would leave at least 20 percent of the world’s total proven energy reserves unburned.
About 20 percent of companies listed on the FTSE 100 Index are fossil fuel extractors and 11 percent are utility companies, a share Carney said highlights the economic consequences of a low-carbon future.
“The exposure of U.K. investors, including insurance companies, to these shifts is potentially huge,” he said.
The potential, meanwhile, for investments in alternative energy resources are significant for long-term investors, though Carney said green financing is, as it stands, a niche interest focused on the medium term.
“In other words, an abrupt resolution of the tragedy of horizons is in itself a financial stability risk,” he said. “The more we invest with foresight; the less we will regret in hindsight.”
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