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Investors Demand Fossil Fuel Giants Assess Climate Risks

For related articles and more information, please visit OCA's Environment and Climate Resource Center page and our Organic Transitions page.

A group of 70 investors controlling more than $3trn in assets yesterday opened a new front in the battle to get fossil fuel companies to fully assess the climate risks they face, revealing that they have written to 45 fossil fuel and energy companies requesting detailed information on the "financial risks that climate change poses to their business plans".

Dubbed the Carbon Asset Risk (CAR) initiative and orchestrated by the Ceres group of responsible investors and the Carbon Tracker Initiative, the letters are backed by some of the world's institutional investors and pension funds, including the New York State and New York City Comptrollers, F&C Asset Management and the Scottish Widows Investment Partnership.

The campaign builds on Carbon Tracker's influential 'carbon bubble' report, which detailed how a large chunk of declared fossil fuel reserves will have to be left in the ground if the world is to meet its agreed target of limiting temperature rises to 2C. The report warned that as a result many of the world's largest fossil fuel companies could be investing in assets that will become stranded if governments enact the policies needed to curb emissions.

"We would like to understand [the company's] reserve exposure to the risks associated with current and probable future policies for reducing greenhouse gas emissions by 80 per cent by 2050," the letter states. "We would also like to understand what options there are for [the company] to manage these risks by, for example, reducing the carbon intensity of its assets, divesting its most carbon intensive assets, diversifying its business by investing in lower carbon energy sources or returning capital to shareholders."

Jack Ehnes, chief executive of the California State Teachers' Retirement System (CalSTRS), the second largest public pension fund in the US with $172bn under management, said long-term investors needed to understand whether their assets will be left exposed by the transition to a cleaner global energy industry. "The world is taking climate change seriously and global pressures to reduce fossil fuel use will only grow stronger," he said in a statement. "As long-term investors, we see the world moving toward a low-carbon future in which fossil fuel reserves that companies continue to develop may actually become a liability, which could take a toll on shareholder value."          
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