May 24, 2010 / 1:56 PM / 9 years ago

Pension wealth at risk as climate priority slips

LONDON (Reuters) - Pension funds must shift more capital into low-carbon energy to drive long-term returns, British academic Nicholas Stern told Reuters Global Energy Summit, adding that a cold U.S. and European winter had sapped urgency on global warming.

Pension funds have hundreds of trillions of dollars of assets, much needed to drive carbon emissions cuts, but far more is invested in fossil fuels than low-carbon renewables.

They also have clout as major investors in oil and coal companies. Shareholders rejected last week resolutions calling for oil firms Statoil and Royal Dutch Shell to cull investments in Canadian tar sand projects, which are more carbon emitting than traditional oil.

“Investing long-term in dirty technologies is actually risking their clients’ money,” said Stern, who pointed to the long-term opportunities of low-carbon growth for example in transport and construction as well as power generation.

“I’m not criticizing them in a moral sense, they have to think carefully about where to put the money of their long-term pensioners. They have to be responsible investors,” said the author of the 2006 Stern Review which drew mainstream attention to the cost of climate change.

Now based at the London School of Economics and Political Science, Stern said one way to tilt the balance in favor of low carbon technologies may be a carbon price floor, which would boost cap and trade schemes meant to penalize fossil fuels.

A future carbon price of about $50, for example, may be needed to support carbon capture and storage — a technology meant to bury the greenhouse gases emitted by coal plants - compared with about 15 euros ($18.55) in Europe now.

One problem for governments implementing such advice was the added cost for populations facing rising unemployment, since utilities pass on added, “green” costs to consumers.

“The price per unit of electricity might have to go up by 15 or 20 percent, over time,” he said, speaking at the Reuters Global Energy Summit.


In another drag on action, a cold winter in politically influential parts of the North had combined with scandals over the repute of climate scientists, later exonerated.

“Nature played a funny trick on us,” said Stern. “It sent a cold winter through the chattering capitals of Europe and north-east United States.”

Despite those particular, colder regions, America’s National Oceanic and Atmospheric Administration (NOAA) agency reported last week record high global temperatures in the first four months of 2010.

And climate scientists who had sniped at skeptics, as revealed in leaked emails last year, had not fixed climate data, found two reviews which nevertheless got less attention than the original scandal, said Stern.

“A lot of discussion has been a great deal less than serious,” he said.

Polls have suggested growing apathy to climate change. A poll on Monday showing 62 percent of British people were interested in the issue, compared with 78 percent in 2007:. here

Additional reporting by Nina Chestney, Barbara Lewis, Christopher Johnson and Peter Dinkloh

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