Business Green: “Why did a Norwegian pension fund last week announced that it was excluding 19 fossil fuel companies from its funds, while a Dutch bank said it would not be investing in shale gas? Why are 400 universities and cities facing campaigns calling on them to divest their holdings in the most carbon intensive companies?”
For Leggett, the recent decision by Norwegian pension fund Storebrand to exclude a number of coal and tar sand companies from its portfolios is part of a trend that is likely to accelerate over the coming months and years.
“There will be more investors making these decisions,” he predicts. It is a view shared by Peter Michaelis, Head of Sustainable and Responsible Investment (SRI), at Alliance Trust Investments, who credits Carbon Tracker with having a significant impact on the expanding SRI sector.But why has Carbon Tracker’s arguments managed to cut through when previous efforts to highlight the risk presented by the “carbon bubble” have faltered? Leggett acknowledges that the Carbon Tracker’s central premise is not new, but argues that it has presented its research in a manner that is more likely to resonate with business leaders and investors.
“We were pushing this message with Greenpeace from 1990 onwards, but what we didn’t have was the ability to speak to the capital markets in the parlance of capital market risk,” he explains. …..Leggett is convinced that some of the criticism of the carbon bubble hypothesis comes not from a balanced assessment of the risks, but an emotional attachment many analysts and investors have for the established fossil fuel business model. “There was an article by the Financial Times on the carbon bubble back when we published the first report, where one fund manager said it was a ‘bollocks subject’,” he recalls. “And I just thought that is not a logical statement or a rational response, that is an emotional response, it’s just a ‘get out of my face response’, it’s a statement of a threatened belief system.”
….Founded in 2011 by sustainable investment veterans Mark Campanale and Cary Krosinsky with backing from a number of foundations, including The Growald Family Fund and The Rockefeller Brothers Fund, Carbon Tracker has had a big impact in a short period of time, but the team is well aware of the need to “keep up the momentum”, as Leggett puts it. One of the challenges the organisation faces is that once it has presented its initial argument around “unburnable carbon” it risks finding itself repeating the same analysis ad nauseum. As a result the team is now working on a series of reports and campaigns that aim to evolve the message and raise its profile still further.
Leggett reveals the organisation is now looking to develop on two main fronts: working with investment firms and other interested parties to improve its modelling still further and playing a more active campaigning role. Meetings are in the diary with the Bank of England and Leggett says that the organisation will have no qualms about producing reports that “name and shame” those investors and companies most exposed to carbon risks. He also hints that the organisation will look to use the new environmental corporate reporting rules being introduced in the UK to increase pressure on carbon intensive firms to acknowledge climate risks. “We’ll be calling on regulators to do their duty and make sure people are being transparent,” he says. “We’re also looking at opportunity to use legal instruments to make sure people are complying with legal requirements.”