An abbreviated version of this piece was originally published in the summer issue of Radar Magazine – Issue 04: Better, Connected.
While the looming threat (and the perception of) climate change becomes more pronounced and immediate, we are seeing responses diverge in expected and unexpected ways. Recent efforts to broaden engagement on climate change, from the IPCC and US National Climate Assessment, focus on making climate risk relevant and tangible to people’s everyday lives. In the investment community, shareholder activism continues to be an influential front, with 12 US companies asked in 2014 to explain carbon asset risks via shareholder resolutions. A resolution on stranded assets at Anadarko Petroleum Corp. garnered the highest support ever for a carbon asset risk resolution (30% of the vote).
Alongside this, notable divestments speak to wider stakeholder refutation of business as usual: Stanford University pulled $18.7B from coal mining and the Norwegian sovereign wealth fund ($840B in assets) set up an expert group to explore divestment from fossil fuel. BlackRock, FTSE Group and NRDC are collaborating to create indices that exclude fossil fuel companies. Despite all this stakeholder pressure—from across policy, investment, and even Hollywood (a high-profile Showtime series, Years of Living Dangerously, has aimed to engage faith based-communities in the climate debate), the fossil fuel industry is largely unmoved. ExxonMobil and Shell have responded reflexively to shareholder concerns around stranded assets, asserting that international and national policies will not move fast enough to place any of their fossil fuel portfolio at risk. Furthermore, Shell pointed to the growing energy demands of the future, which will ensure society’s continued need for oil and gas energy resources. On a related note, Chevron’s recent divestments from its renewable energy portfolio, despite strong financial performance, is another sign that oil and gas majors remain unswayed despite the groundswell.
What to look for: How will the proposed US carbon emissions regulation in June (in parallel with a potential carbon cap in China) impact the velocity of the carbon asset risk debate? Furthermore, how might greater renewables adoption and supporting regulation in developing countries provide a counterpoint to oil and gas assertions that the world will continue to depend on fossil fuels indefinitely?