There is an old story about the physicist Niels Bohr. Noticing a horseshoe hanging over a door at his home, a visitor asked the Nobel laureate in physics if he believed in luck. “Of course not. But I understand it works whether you believe in it or not.”
It is now widely accepted science that in order to keep the globe from warming more than another 2 degrees C, in other words to avoid the worst case scenarios associated with climate change, then over 80% of fossil fuel reserves will have to remain in the ground. This reality gives rise to the notion of ‘stranded assets’ and a whole new set of risks to evaluate when formulating a long term investment plan, whether you are an individual with a small RRSP, or a public pension fund with hundreds of billions of dollars under management.
It is definitely not business as usual for investment managers, and if you’ve been paying attention to the news, you’ll have no problem answering this simple quiz. See if you can correctly match up the public figures below, with the quotes that follow. I’ll even give you a head start. It was the Saudi Sheikh Ahmed Zaki Yamani who made the remarkable stone age comments.
A. President of the World Bank Jim Yong Kim
B. Prime Minister Stephen Harper
C. Nicholas Stern, member of the U.K. House of Lords, and former chief economist at the World Bank
D. Dermot Foley, head of Environmental Social and Governance investment at VanCity Credit Union
E. Rush Limbaugh, radio show ‘personality’
F. Joint statement from CEOs of six of the world’s largest energy companies
G. Mercer Consultants, a global consulting company with 20,000 employees
H. Bank of England Governor Mark Carney
I. Sheikh Ahmed Zaki Yamani, former chief oil minister of Saudi Arabia
J. 2015 G7 communique
K. The Financial Times
L. Al Gore
M. Pope Francis
1. “Thirty years from now there will be a huge amount of oil and no buyers. Oil will be left in the ground. The Stone Age came to an end, not because we had a lack of stones, and the oil age will come to an end not because we have a lack of oil.”
2. “We commit to doing our part to achieve a low-carbon global economy in the long-term, including developing and deploying innovative technologies striving for a transformation of the energy sectors by 2050.”
3. “You can have growth that will protect the planet and decouple carbon emissions from growth. We can get it now, but it would be much easier if we put a price on carbon.”
4. “Under the current circumstances of the oil and gas sector, it would be crazy, it would be crazy economic policy to do unilateral penalties (carbon tax) on that sector. We’re clearly not going to do it.”
5. “The world is likely to strengthen its resolve on climate change. Investments in fossil fuels should be seen as a rather risky activity.”
6. “We looked at the returns from oil and gas companies over the last 10 years and realized that with the ups and downs, they really added no value to the fund. We think there’s going to be more divestment, and that adds to the risk of oil and gas companies.”
7. “Climate change, the biggest thing facing Catholicism and Christianity. You believe this? You know, when this guy came out with his economic statements and I said it’s Marxism, the world erupted in outrage that I would dare characterize the Pope as a Marxist. But his economic policies and philosophies as he explained them were completely that.”
8. “As a group of business people, we are united in our concern about the challenge and the threat posed by climate change. We urge governments to take decisive action at December’s UN summit. We are also united in believing such action should recognize the vital roles of natural gas and carbon pricing in helping to meet the world’s demand for energy more sustainably.”
9. “Traditional modeling approaches do not adequately capture the nature of the economic transformation process and the potential sources of risk associated with climate change. As such, the tools to integrate climate change into the way we think about sources of risk for strategic asset allocation need to be expanded.”
10. “Asset managers and real money investors no longer view environmental sustainability as a fringe theme. Climate is a bonafide risk for beneficiaries which professional investors must guard against to fulfill their fiduciary duties. To do nothing, essentially, is to encourage a disorderly capital transition and, potentially, a financial panic.”
11. “The vast majority of reserves are unburnable.”
12. “A host of ills (are) wracking the planet: dirty air, polluted water, industrial fumes, toxic waste, rising sea levels and extreme weather. The problem is aggravated by a model of development based on the intensive use of fossil fuels. The idea of infinite or unlimited growth, which proves so attractive to economists, financiers and experts in technology … is based on the lie that there is an infinite supply of the earth’s goods, and this leads to the planet being squeezed dry at every limit.”
13. “Investors who haven’t yet come to grips with the stranding problem are like the classic scene in the Road Runner cartoons where the coyote runs off the edge of the cliff, and his legs keep moving for quite a long time before gravity takes hold. There are investors out there whose legs are moving in mid-air.”
The 3rd person to contact me and correctly match up the sources with the quotes will win a very nifty roll-up, thin film solar charger, great for powering phones, tablets and other USB compatible devices when you find yourself off the old fashioned electricity grid.
