(Sydney Morning Herald - February 25, 2017) Investors controlling trillions of dollars, and powerful regulators, have decided the purely financial risks of climate change are too great to be left unchecked. In July 2017, a group of global firms with combined market value of $US1.5 trillion and $US20 trillion in assets will deliver recommendations to G20 leaders on how to avoid the risk of serious financial dislocation caused by a carbon bust.
And as a carbon-intensive economy with $2.1 trillion in retirement savings that is heavily exposed to equity markets, Australia has plenty at stake in this debate. Most corporate commentary on climate change is buried in sustainability reports that few investors read too closely. It’s handled by the teams that deal with environmental, social and governance issues, rather than the bean counters.
The Australian Prudential Regulation Authority last week made the first detailed comments from a domestic regulator, showing how seriously they view these risks. The shift towards less carbon intensive forms of energy could trigger a ‘significant repricing of carbon-intensive resources and activities and reallocation of capital’, executive board member Geoff Summerhayes said. APRA was ‘keenly aware of potential systemic implications”.