Carbon Tracker co-hosted at a high-level event during COP23 titled “Enhancing Investor Actions to Implement the Paris Agreement and Accelerate the Low-Carbon Transition to Below 2 degrees”
Investors have responded to the Paris Agreement and are taking action to accelerate the low-carbon transition and implement the Paris Agreement. This session showcased examples of how investors, alongside companies and governments, are taking action in terms of low carbon investment, carbon risk management, disclosure, corporate engagement and public policy.
The video shows Anthony Hobley’s speech during this event, full transcript below.
Anthony Hobley’s full speech:
John from BlackRock referred to the fact climate science shows us that climate change is real. Financial analysis is the financial markets’ climate science and it shows us that the low carbon energy transition is real.
Financial based analysis shows us in no uncertain terms that we are now living through an unfolding energy revolution. Not just a revolution but a paradigm shift. Why is quantitative, financial analysis such an important part of telling this story? Because numbers don’t lie. This is one of the best tools we have to take the reality of this transformation beyond the choir to the mainstream, particularly within financial markets, but also within governments and beyond.
Some argue that 2ºC isn’t likely or even practical. Regardless, we see technology costs for renewables falling across the board and disrupting incumbent fuels. The winner in this paradigm shift is clear. So, what’s the problem? The problem is the pace of change: this shift it is not happening fast enough to deliver our goals of a stable climate. We need governments to step up their ambition to hasten the transition that is underway. Telling the positive financial story of this paradigm shift with quantitative evidence will make it easier for governments to surprise us with such ambition because they are provided the financial incentives to do so. This is mutually reinforcing because such ambition sends an even stronger signal to markets.
What’s the risk? If this story is not told, and told credibly with quantitative evidence, we will not begin to bend the curve down by 2020 or achieve the momentum needed to step up our ambition. In such a scenario, Carbon Tracker’s analysis highlights that if only those companies in the oil and gas sector pursue the wrong investments, $2.3 trillion could be fail to deliver an economic return for investors. These are investments that make neither climate nor financial sense.
It’s important to focus on mobilising new green finance, but we also cannot ignore the vast sums of capital that could go into projects surplus to 2ºC requirements. We must simultaneously turn off the finance to emissions and turn on finance for the low carbon transition. In summary, we must “shift the trillions” and mainstream climate finance.
How can climate-related financial disclosure help? For investors to anticipate and invest in the unfolding low-carbon transition, they require forward-looking, quantitative tools to assess both the investment risks and the opportunities. Scenario analysis can deliver this to help investors and companies navigate this paradigm shift we are all living through. Since the future is uncertain, one fundamental function of scenario analysis is comparability. As the TCFD highlighted, investors need a way to compare the risk of one company versus another. Carbon Tracker’s analysis shows how it’s possible to use forward-looking, quantitative metrics to compare multiple companies within the fossil fuel sector.
To conclude, the good news is that we are living through a paradigm shift whereby clean energy competes financially with fossil fuels. Even more mind blowing than that, increasingly fossil fuels have to be subsidised to compete with clean energy. The world has quite literally been turned upside down for the good. Collectively, we need to harness this momentum and use it to mainstream climate finance to help investors, governments and companies step up their ambition and shift the trillions.