Ignoring carbon risk is ‘gross negligence’ – pensions chief

Money managers will face lawsuits if they fail to confront climate impact of fossil fuel holdings, warns ERAFP boss

 Pic: arbyreed/Flickr

Will shovelling assets into companies engaged in off-shore drilling lead to legal action? Pic: arbyreed/Flickr

By Alex Pashley

Investors that ignore the climate impact of their coal, oil and gas holdings will face lawsuits, the head of France’s civil service pension scheme has warned.

“If carbon is a risk, whoever will have disregarded it will be under threat of being accused of gross negligence and being sued for that,” according to Philippe Desfosses of ERAFP, who oversees US$25 billion.

The financial sector voice strengthens calls for divestment of “unburnable” carbon assets.

More than 80% of coal, half of natural gas and a third of oil reserves must stay in the ground to limit temperature rise to 2C – an internationally agreed aim.

But energy giants are expecting world leaders to baulk at radical overhauls in policy, permitting softer reductions in their burning of fossil fuels.

Report: Fossil fuel giants reject calls to keep oil, gas and coal in ground

The Paris-based fund, into which 4.5 million public servants pay, is set to grow by $2.2 billion every year up to 2025 and has brought sustainability to the fore, Desfosses said in similar speeches at climate conferences in Paris and Barcelona over the past fortnight.

The carbon footprint of its investment portfolio last year was 16% smaller per million euros of revenue than a benchmark index of global funds, reported Investment & Pensions Europe.

“People who contribute to our pension funds are entrusting us with money that we must invest in a prudent but productive way,” Desfosses said of the $11 trillion Institutional Investors Group on Climate Change, of which he is a trustee.

Organisations from Oxford University to the Church of England are shedding fossil fuel holdings to signal their support for a swifter transition to a low-carbon economy.

In the largest such move to date, Norway is set to drop coal holdings from its $900 billion sovereign wealth fund after a cross-parliamentary committee backed divestment calls on Wednesday.

Report: Climate change threat demands reform to financial system – UNEP

Desfosses welcomed climate-friendly investments such as green bonds, debt securities which raise finance for pollution-cutting projects, but said “the 5% should not distract from the the 95%”.

Putting a price on carbon to limit emissions was critical.

He also told “those who didn’t get it” to read the Risky Business study released last June by former New York mayor Michael Bloomberg, ex US treasury secretary Henry Paulson and billionaire Tom Steyer.

The report warned that US$507 billion of property could be under water by 2100 as global warming causes sea levels to rise.

“We (institutional investors) should not wait for the perfect agreement in December,” Desfosses added. “So let’s get together and make everyone aware of what we are aiming at and of what we will not accept any more.”

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