Antinuclear

Australia’s economy is particularly tied to the fossil fuel industry.

PF This isn’t about stopping the economy from growing. It’s about how we get the maximum sustainable growth rate. It’s about making people more fuel efficient. It’s about making sure energy prices properly reflect the costs that are imposed on society, not just whatever the market price would otherwise be. This isn’t anti-Australia or anti-Australian industry, it’s about what you have to do to get Australian business working on a sustainable basis … given what’s happening to the planet. A lot of people are working behind the scenes quietly with firms to try to get the right position.

MS Nonetheless, we will see a lot of stranded assets here, won’t we?

PF Possibly, but the longer it’s left and the less is done, the more of those stranded assets you get……

Once it moves to the financial sector, as it has now, ideology’s out the window

Veteran UK banker Paul Fisher on climate change and the financial sector, Saturday Paper, 29 Oct 16  MIKE SECCOMBE
A veteran of Britain’s central bank, Paul Fisher says climate change will have a massive impact on the global financial sector. He talks about managing the risks.

Paul Fisher recently retired as deputy head of the Bank of England’s Prudential Regulation Authority, after a long career in financial markets, financial stability and monetary policy. In September 2015 the bank released a report on the risks to the financial system of dealing with climate change……

 Anybody who is a long-term asset-holder potentially is exposed to climate risk. You can divide the risks two ways; there’s physical risk if the climate does change, or as it does change, and that’s fairly easy to think about – floods or whatever. But more interestingly you’ve got the transition risk, and two things are going to happen. [First] the economy will need to restructure in order to try to minimise climate change and that will present both new opportunities for new businesses to grow, and it will be a threat to some existing business models. So you’ve got that structural change. But perhaps even more importantly you’ve got the policy change. Governments have committed to reducing climate change to below 2 degrees Celsius [and] that will evolve a whole series of policies of which we don’t know the full details yet. As those policies come through you could see the repricing of financial assets. People investing in infrastructure will find that is vulnerable to policy [change] risks. We saw a big utility company in Germany, RWE [hit by a share price plunge after Germany changed its energy policy away from coal and nuclear to more renewables]. We see the coal industry in the United States, for various reasons, collapsing. Peabody, for example.

PF In the UK that’s certainly true. The UK is one of the world’s largest insurance markets. Lloyd’s of London writes a lot of catastrophe, risk insurance, so they’ve been on this case for some time. They are experts and certainly helped the Bank of England in doing its work. The other insurers and pension funds, and savings managers generally, are also picking up on it. You are starting to see more of the bigger firms announcing investment policies to reflect climate risk. Banking, I would say, is a bit further behind, but coming along. In some countries now – China for example – if you lend to a polluting company, then you as the lender can be held to account, not just the polluter. China is one of the major forces in the world trying to get this on the agenda, which is relevant to Australia, of course, as a big exporter. Here you have big superannuation companies looking at long-term asset issues……..

Climate change is … becoming a material risk for more and more firms. If you could have taken it into account and you didn’t and the risks crystallise, you will be held to account for failing in your duties. This is the way the interpretation is going. The law is never static on this sort of thing and it will be interpreted by the courts as time goes on and more evidence mounts that if you didn’t take climate risk into account and it crystallises, you can’t expect the courts to be very sympathetic……..

MS However, Australia’s economy is particularly tied to the fossil fuel industry.

PF This isn’t about stopping the economy from growing. It’s about how we get the maximum sustainable growth rate. It’s about making people more fuel efficient. It’s about making sure energy prices properly reflect the costs that are imposed on society, not just whatever the market price would otherwise be. This isn’t anti-Australia or anti-Australian industry, it’s about what you have to do to get Australian business working on a sustainable basis … given what’s happening to the planet. A lot of people are working behind the scenes quietly with firms to try to get the right position.

MS Nonetheless, we will see a lot of stranded assets here, won’t we?

PF Possibly, but the longer it’s left and the less is done, the more of those stranded assets you get……

MS How did a scientific and economic issue become an ideological one?

PF Once it moves to the financial sector, as it has now, ideology’s out the window. This is a financial risk if you’ve got a long-term asset portfolio. Forget the ideology, do the risk analysis, otherwise you’re not meeting your responsibilities. We need to sweep the politics to one side and say this is just a commercial business risk, like any other, that we need to take into account. It’s coming, and ignoring it or pretending it isn’t there is not going to help. https://www.thesaturdaypaper.com.au/news/economy/2016/10/29/veteran-uk-banker-paul-fisher-climate-change-and-the-financial-sector