The UN SSE was invited to participate in a panel discussing Carbon Tracker’s updated report “Unburnable Carbon: are the World’s Financial Markets Carrying a Carbon Bubble?” This new report finds that over $600 billion of oil and gas assets owned by listed companies are at risk of never being removed from the ground. The UN SSE provided insight on how stock exchanges can help financial markets prepare for this risk and provided insight into the key activities exchanges are already undertaking.
“The report says there are 40% more fossil fuels listed on the world’s stock exchanges today than when we did the first report a decade ago,” said Mark Campanale, Founder and Executive Chairman of Carbon Tracker at the opening of the event.
The report revisits an initial analysis from 2011 when Carbon Tracker found that in order to keep a global temperature rise below 2 degrees celsius, 80% of declared reserves owned by listed companies could not be utilized (and therefore risk becoming ‘stranded’). The updated analysis finds that a combination of listed companies having continued to increase their reserves, together with a more ambitious target set by UN member States aiming for 1.5 degrees, increases estimates to 90% of fossil fuel reserves now at risk of becoming ‘stranded’. A stranded asset is defined by Carbon Tracker as an asset that may turn out to be worth less than expected as a result of changes associated with the energy transition. In this case, it would be fossil fuel reserves that are counted as an asset in financial reports but will never be utilized by the listed company that owns them.
“Here is some of the good news. We have 2 terawatt hours (TWh) of installed capacity of wind and solar which is growing at 20% per annum, and that’s set to reach 40% of global generation in less than 10 years. Now, if we continue this growth trajectory, wind and solar capacity is going to reach 8 TWhS, which in 20 years is more than all the global fossil fuel capacity amassed over the last century. Renewables are growing at such a pace, we’re actually seeing the peak in demand for fossil fuels,” Campanale added.
UN SSE Academy Head Tiffany Grabski spoke during the report launch event on a panel that aimed to evaluate what has changed in the decade between these two reports, and explore the role of financial market participants in addressing the risks associated with stranded assets. Grabski highlighted the role of exchanges in promoting improved climate reporting, saying “The SSE just launched last week a database that tracks what stock exchanges are doing on climate-related financial disclosures. And what we found is that exchanges are doing a lot. So there is a shift in financial systems that’s creating the foundation needed to enable and empower more systemic change.”
“There are two things we need, one is urgency and attention. But we also need training and data that is actionable,” Grabski added.
The UN SSE tracks stock exchange’s sustainability efforts, including those pertaining to climate-change. More than 70 stock exchanges globally are actively promoting or engaging on climate change through work pertaining to the Financial Stability Board’s (FSB) task force on climate-related financial disclosures (TCFD). The top activities that stock exchanges use to support a transition to low-carbon markets are training and education. For example, nearly 40 stock exchanges have provided training for companies on the TCFD and a similar number also provide written guidance to their issuers on this topic. For the full list of activities visit the SSE’s TCFD database.
To further support stock exchanges and accelerate the transition to net zero economies, the UN SSE published a policy brief on the Net Zero Movement and has since supported stock exchanges in their net zero efforts. If your exchange would like to join the global net zero alliance, please contact the SSE secretariat ([email protected]) and we’ll guide you through the process. The full text for the Commitment to the Net Zero Financial Services Providers Alliance can be found here, including the supplemental text that provides interpretative guidance.
