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How Your Pension Is Being Used in a $6 Trillion Climate Gamble

Business  (tags: abuse, americans, business, consumers, corporate, corruption, cover-up, debt, dishonesty, economy, energy, ethics, finance, government, investments, lies, marketing, money, oil, politics, society )

- 1890 days ago -
Fossil fuel companies' bet that climate agreements won't stop them from burning carbon puts pension funds at risk

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Kit B (276)
Friday April 19, 2013, 9:05 pm
The tailings pond at the Syncrude mine north of Fort McMurray, Alberta, Canada. Tar sands could become a 'stranded asset', campaigners say. (Photo: Ashley Cooper pics/Alamy)

Suppose you weren’t worried that we humans are destroying our water supply and eroding our ability to feed ourselves by burning coal and gas and oil and hence changing climate. Suppose you thought that was all liberal hooey. What might worry you about fossil fuels instead? How about a six trillion dollar bet, including a big slug of your own money, on people not doing what they have said they are going to do, and that some have already sworn to do in law?

Six trillion dollars is what oil, gas, and coal companies will invest over the next ten years on turning fossil fuel deposits into reserves, assuming last year’s level of investment stays the same. Reserves are by definition bodies of oil, gas or coal that can be drilled or mined economically. Regulators allow companies, currently, to book them as assets, and on the assumption that they are at zero risk of being stranded - left below ground, "value"unrealized - over the full life of their exploitation. Yet a report published today shows they are at very real risk of being stranded, and in large quantity.

Governments agreed in 2010 to keep global warming below two degrees. The Carbon Tracker Initiative, a group of concerned financial analysts based in London, has teamed up with the Grantham Institute, a climate research centre, to calculate how much carbon it would take to reach that two degree threshold, and what it means for the capital markets. By this calculation, fully 60 to 80% of oil, gas and coal reserves listed on stock exchanges are unburnable.

The six trillion dollar bet is that this calculation remains entirely theoretical, and that fossil-fuel companies will be allowed to keep pumping up the carbon bubble by investing more cash to turn resources into reserves, and continue booking them at full value, assuming zero risk of devaluation. It's a bet that effectively says to government: “nah, we don’t believe a word you say. We think you’ll do nothing about climate change for decades."

Yet the British government, for one, has signed its targets into law, and the Copenhagen Accord brokered by the Obama administration in 2009 specifically sets 2 degrees as its goal. And all governments at the most recent annual climate negotiations have agreed to set legally binding targets at the 2015 climate summit in Paris.

Both companies and ordinary citizens ought to be very worried by this disconnect between capital markets and climate policymaking. This is because so much of the value of stock exchanges involves pension money, and so much of peoples’ prosperity hinges on the value of their pensions. HSBC recently calculated that shares in coal companies could be devalued by 40-60% in a world acting on the climate threat.

Yet vast pension assets are invested in coal. The ratings agency Standard and Poor’s recently concluded that the business models of tar sands companies could be invalidated in a world acting to constrain carbon. Yet vast pension assets are invested in tar sands.

The six trillion dollar bet also involves two mandatory side bets. The first is that the news on climate change doesn’t get worse than it already is, so putting governments under even more pressure to act on carbon than they already are.

Sadly, we and many like us think it will, especially as natural amplifiers to global warming, like melting permafrost, kick in. For this reason we think that the Carbon Tracker Grantham figures are conservative: if they are wrong, they are much more likely to be wrong on the down side.

The second side bet is that the new civil resistance to fossil fuels won’t add significantly to the pressure on governments to act. We think it will, for reasons you can see on the website, and in the rising tide of peaceful direct action on streets, in campuses, on solar rooftops, and elsewhere across society.

The pooled message to regulators, from Carbon Tracker analysts and activists alike, is clear. Do your job. Start requiring recognition of stranded carbon-asset risk in capital-markets processes. Start deflating the carbon bubble before it pops.

The message to all the players across the financial chain, from ratings agencies through accountants, to actuaries, investment advisors and all the rest, is also obvious. If the regulators won’t do their job, do it for them. Jump, before you are pushed.

By: Bill McKibben and Jeremy Leggett | Common Dreams |

Nancy M (169)
Saturday April 20, 2013, 1:11 pm
My Dad (who did do well in the stock market) always said, never invest any money that you will need in the short term, any money that you have ear-marked for a purpose.

Back in the 90s (possibly before) as fewer companies wanted to keep up with pensions plans, we were sold on the idea of having our own retirement plans so we could invest our own money and create a better retirement. I remember hearing that we each needed to have a million dolalrs put away in order to retire.

What the bankers and too big to fail corporations have pulled on us all is truly outrageous.

Thanks for the article Kit.

Birgit W (160)
Saturday April 20, 2013, 5:34 pm
What pension? If it is going ahead like this we will end up with pretty well nothing.

Colleen L (3)
Saturday April 20, 2013, 8:44 pm
So sad. Here we work all of our lives and what do we have to look forward to?...Nothing, Thanks Kit

Kit B (276)
Saturday April 20, 2013, 8:46 pm

That about sums it up.

Darren Woolsey (218)
Sunday April 21, 2013, 11:14 am
Sorry to say, this is how the world's finances run. You give a bank or other financial institution your hard earned money, and they gamble and bet, or risk it in one or many ventures to realize greater returns. This works all the way along the financial scale, from the easiest to understand, savings / loans / mortgages to bonds, certificates and so on, up to derivatives and other more complex financial mechanisms... so basically, what we still hear from time to time, is that a) the financial institutions and banks of the world ARE STILL taking risks to make money, and b) there doesn't appear to be any real alternative to this, otherwise, you would have imagined some smart clever person would have invented it.

Darren Woolsey (218)
Sunday April 21, 2013, 11:17 am
For further reading, try Robert Peston's (business editor of the BBC News and the guy who broke the Northern Rock scandal in England) "Who Runs Britain". It in he describes how two Conservative (Tory, the American form of Republican), *borrowed* from the nation's pension chest...

Now, if someone borrows money from me... I expect them to pay it back... not an unreasonable request is it?

Kit B (276)
Sunday April 21, 2013, 11:50 am

No that is not an unreasonable request. Though others have offered many alternative ideas, there is just too much money to made by the few from the many.

Theodore Shayne (56)
Sunday April 21, 2013, 12:24 pm
Tell that to the Frackers who've overstated the amount of natural gas in the ground. Lying to the authorities and the public in general is their stock in trade. I don't know whether we can stop the Tar Sands Operation but we can certainly do our best to stop any pipeline.

Lois Jordan (63)
Sunday April 21, 2013, 12:25 pm
Noted. Oh, what a lovely carousel we've hopped onto! Employers take money out of workers checks to invest in pension funds. Wall St. takes pension funds and gambles them away, while profiting enormously from this. Meanwhile, anything that's left in the depleted funds is still ripe for gambling, once the market is "healthy" again. But, the money's invested in dirty fossil are you going to protest vehemently against fossil fuels and your own best financial interest? Better to stick the money in your mattress!

Kit B (276)
Sunday April 21, 2013, 12:33 pm

Actually, I have divested from all fossil fuels. I don't like protesting something and then making a profit from that.

Birgit W (160)
Sunday April 21, 2013, 4:06 pm

Elle B (84)
Sunday April 21, 2013, 7:08 pm
Thank-you Kit. What a stupid-stinking mess. . .

"...For a charm of powerful trouble, Like a hell-broth boil and bubble." . . .

“Confusion now hath made his masterpiece.” ― William Shakespeare

Kit B (276)
Sunday April 21, 2013, 7:43 pm

Thanks Elle and "toil and trouble" we do have.

Shirley B (5)
Tuesday April 23, 2013, 12:12 pm
Ty for posting, Kit.
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