When the giant investment firms understand that global warming is a real problem, the rest of us should really stop thinking global warming is some sort of communist plot. The capitalists are worried about global warming too. In fact they think they can make a lot of money by dealing with the problem. They also think they can save a lot of money by dealing with the problem before it becomes too big.
It would seem that the only people who think global warming is a scam are the industries that are set to lose the most, coal, oil and gas companies.
- Climate change could contribute as much as 10% to portfolio risk over the next 20 years
- Investors could benefit from increased allocation to infrastructure, real estate, private equity, agriculture land, timberland and sustainable assets
- Investment opportunities in low carbon technology could be as high as $5 trillion by 2030
- Institutional investors have numerous options for capitalizing on opportunities and managing risks arising from climate change
See a summary video here.
Continued delay in climate change policy action and lack of international coordination could cost institutional investors trillions of dollars over the coming decades, according to research released by Mercer and a group of leading global investors representing around $2 trillion in assets under management1.
Andrew Kirton, Chief Investment Officer at Mercer, commented: “Climate change brings fundamental implications for investment patterns, risks and rewards. Institutional investors should be factoring long-term considerations, such as climate change, into their strategic planning. Mercer is pleased to have had the opportunity to kick start such strategic discussions with a group of leading global investors.”
The report Climate Change Scenarios – Implications for Strategic Asset Allocation analysis the potential financial impacts of climate change on investors’ portfolios, identified through a series of four climate change scenarios playing out to 2030. The report identifies a series of pragmatic steps for institutional investors to consider in their strategic asset allocation.
In the report, a framework is outlined that can be used by institutional investors to enhance their understanding of climate-related investment risks and opportunities across asset classes and regions. Mercer’s “TIP Framework” estimates the rate of investment into low carbon technologies (T), the impacts (I) on the physical environment and the implied cost of carbon resulting from global policy (P) developments across the four climate scenarios.
Some of the key findings show that by 2030:
- Climate change increases uncertainty for long term institutional investors and as such, needs to be pro-actively managed.
- Investment opportunities in low carbon technologies could reach $5 trillion.
- The cost of impacts on the physical environment, health and food security could exceed $4 trillion.
- Climate change related policy changes could increase the cost of carbon emissions by as much as $8 trillion.
- Increasing allocation to “climate sensitive” assets will help to mitigate risks and capture new opportunities.
- Engagement with policy makers is crucial for institutional investors to pro-actively manage the potential costs of delayed and poorly coordinated climate policy action.
- Policy developments at the country level will produce new investment opportunities as well as risks that need to be constantly monitored.
- The EU and China/East Asia are set to lead investment in low carbon technology and efficiency improvements over the coming decades.
The launch of the report and the Mercer TIP Framework represents a collaborative endeavor led by Mercer which involved 14 global institutional investors, and was supported by the International Finance Corporation, a member of the World Bank Group, and Carbon Trust. Grantham LSE/Vivid Economics were engaged to lead components of the research on the economic impacts of climate change scenarios and a research group comprised of industry practitioners and academics was consulted in the development of the model.
Gov. Haley Barbour said Tuesday that the Gulf Coast oil spill occurred because the companies involved deviated from industry standards, not because of the inherent risk of drilling offshore.
“I think the biggest lesson learned from the Gulf oil spill is that it was totally preventable, totally avoidable,” Barbor told a meeting in Jackson of the Mississippi Energy Policy Institute.
Barbour, a potential 2012 Republican presidential candidate, also criticized what he called the Obama administration’s “permatorium” on drilling in new areas of the eastern Gulf and the Atlantic seaboard.
“Regrettably, right now we have an administration that is actively suppressing American energy production,” he said, adding that due to technological innovations and geological discoveries, America is now a global leader in terms of coal and natural gas potential.
“America is the Saudi Arabia of coal,” Barbour said. “We have multi-hundreds of years of supply of coal.”
The governor said he favors an “all in” energy policy that includes traditional and alternative fuels, plus energy efficiency. He singled out nuclear and hydroelectric energy for praise, calling them “absolutely emission-free” and questioning environmentalists’ opposition.
The Obama administration’s proposed fiscal 2012 budget would provide $500 million to restructure the regulatory and oversight regime for offshore drilling, strengthening enforcement in the wake of the Deepwater Horizon oil disaster in the Gulf and charging oil companies user fees for inspecting their operations and processing their drilling permits.
The new fees, recommended by the National Oil Spill Commission, would net the Bureau of Ocean Energy Management, Regulation and Enforcement about $65 million, an increase of $55 million over past levels, and would apply to offshore drilling rigs for the first time. Interior Secretary Ken Salazar said an inspection of a deepwater rig would cost an operator $16,700.
“The Deepwater Horizon explosion and resulting oil spill have led to the exposure of significant weaknesses in the way this agency has historically done business,” said Michael Bromwich, who, as director of Interior’s Bureau of Ocean Energy Management, Regulation and Enforcement, has led the administration’s post-spill reorganization of its regulations and regulatory structure.
“This bureau has not had sufficient resources to provide an appropriate level of regulatory oversight of offshore oil and gas development. These shortcomings have become more pronounced as operations have moved into deeper and deeper waters,” Bromwich said. “The president’s budget request would, if enacted, provide us with the resources — including personnel, technical expertise and equipment — needed to remedy that situation.”
Sen. David Vitter is renewing his practice of blocking votes on Obama administration nominees in order to force the Interior Department to hurry up and issue offshore drilling permits.
The Louisiana Republican Tuesday said he’ll place a hold on Dan Ashe, the nominee to head the Fish and Wildlife Service. He’s already blocking the nomination of Scott Doney to be chief scientist of the National Oceanic and Atmospheric Administration.
Vitter said he wants at least 15 deepwater exploration well permits and for the department to answer his previous string of letters on the permitting process. Interior has issued various new rules on deepwater drilling since last year’s BP oil spill, and plans to issue new permits later this year.
“The Interior Department has destroyed jobs in Louisiana, contributing to the bankruptcy of at least one major employer, and is breaching contracts with other employers and putting taxpayers on the hook for billions of dollars,” Vitter said in a statement, noting that Seahawk Drilling, a major shallow water drilling company, filed for bankruptcy last week.
The Senate Energy and Natural Resources Committee held a hearing on Ashe’s nomination Tuesday morning.
The U.S. Department of Energy finalized on Tuesday a $343 million loan guarantee for a Nevada power line expected to carry 600 megawatts of electricity including from clean sources such as solar power.
The ON Line project, jointly owned by Great Basin Transmission South LLC and NV Energy (NVE.N), is the first transmission line to receive loan aid from the DOE, the department said.
“This project will create jobs, increase the reliability of the grid, and save money through greater efficiencies in the grid,” Energy Secretary Steven Chu said.