Former US vice-president Al Gore has today announced a white paper he funded, highlighting the risks to investors of owning carbon-intensive assets. Mr Gore, who served under Bill Clinton, has stressed the need for investors to consider the carbon risks inherent in their investment portfolios, suggesting that investors “divest from carbon-intensive fossil fuel assets”.
The 65-year-old said: “Although the scientific community overwhelmingly agrees that climate change is happening, investors have so far been slow to appreciate the implications for the carbon-intensive assets within their portfolios.” Mr Gore, who is now chairman of Generation Investment Management, fears carbon assets will become “stranded”, a term used to describe assets that lose economic value well ahead of their anticipated useful life – whether as a result of changes in legislation, regulation, market forces, disruptive innovation, societal norms or environmental shocks. Assets at risk of being stranded range from gold mines in South Africa and coal-fired power stations in China and India, to grand cru vineyards in France and ski resorts in the US. Regulation, for example, will lead to the closure of Germany’s nuclear power stations, which were due to produce power until 2036. Following the Fukushima disaster in Japan and a wave of public opposition to nuclear power, Chancellor Angela Merkel announced that the country’s nuclear plants would be mothballed by 2022. Mr Gore, who won an Oscar for An Inconvenient Truth, his documentary about the perils of global warming, said: “The global economy must continue to rapidly evolve to reflect the realities of climate change. Investors must now acknowledge that corresponding changes are needed on their part as well.” According to the World Resources Institute, 1,199 new coal-fired power plants are being proposed around the world, yet the coal industry is one of the most exposed to becoming stranded. David Blood, a senior partner at Generation Investment Management, which backed the white paper financially, added: “From the perspective of risk management, it is no longer prudent for investors and asset owners to treat climate change as a peripheral issue.”