Bank of England Governor says investors have right to know how companies are preparing for a low carbon transition
The governor of the Bank of England has said all businesses should aim to deliver zero greenhouse gas emissions in order to help avoid dangerous climate change, adding that companies should take steps to reduce their exposure to high carbon assets.
Speaking at the COP21 climate change talks in Paris today, Mark Carney, who is also chairman of the global Financial Stability Board (FSB), said companies should develop strategies for reducing their emissions in line with the national climate action plans of the nations in which they operate. Ultimately, they should aim to achieve net zero emissions, he added.
Nearly 190 countries have drawn up carbon reductions plans, known as intended nationally determined contributions (INDCs), ahead of the Paris talks, which they are expected to pledge to deliver under a global climate change deal that is due to be signed next week.
Carney said companies should explain how they are contributing to helping countries meet those goals. For example, the EU's INDC implies economy-wide greenhouse gas reductions of around 1.6 per cent a year, he said. "It is a reasonable question to ask a European company 'what is your strategy to reduce your footprint consistent with the INDC that the relevant jurisdiction is signing.' That's a basic question. 'Are you matching it? Are you outperforming?'."
However, he added that even if companies could demonstrate they were contributing to meeting medium term emissions targets they would also have questions to answer about their long term decarbonisation plans.
"There's another way to frame that question," he said, "which is ultimately, 'what's your strategy for net zero?' Ultimately, whatever degrees centigrade the climate settles at, you have to get to two degrees."
Carney's comments came at the launch of a new Task Force on Climate-related Financial Disclosures to be chaired by former New York Mayor Michael Bloomberg, which aims to boost transparency around corporate action on climate change.
Climate disclosure has been pushed up the agenda in recent months, particularly in the wake of criminal investigations by New York State Attorney General against Exxon Mobil and Peabody over their alleged failure to disclose the potential impacts of climate change on their balance sheets to investors.
Carney said the new taskforce would be a "one stop shop" to help give markets the correct information on the risks associated with the transition to a low carbon economy. He also predicted the results of the taskforce would help policy makers at future climate change summits when they are drawing up new INDCs. "We'll have real information in terms of the actions of the corporate world," he predicted.
Carney said his biggest climate-related concern is that markets would fail to make a gradual shift to low carbon investments over the coming decade, and would instead be forced to make an abrupt u-turn, putting their balance sheets and potentially wider financial stability at risk.
Earlier this year Carney warned climate change was a "tragedy of the horizon" that could lead to financial crises and falling living standards unless the world's leading countries do more to ensure their companies come clean about their current and future carbon emissions.
Today he said that diversifying away from carbon is one of the biggest challenges that business leaders face and he argued that greater transparency for investors would ease that path.
Both Carney and Bloomberg argued that no business leader could afford to ignore the financial risks associated with climate change, given the robust and wide-ranging evidence of man-made climate change, coupled with a fall in the cost of new green technologies.
"No CEO could survive if they tried to say climate change isn't real," Bloomberg said, offering a suggestion for why Fox News rarely features business leaders to tout climate sceptic positions.
He also argued that many fossil fuel companies are increasingly waking up to the risks of climate change, noting that Saudi Arabia is delivering a huge expansion in renewable energy nationally while exporting its fossil fuels.
Bloomberg also dismissed arguments touted by some in the fossil fuel industry that a shift to low carbon technologies would threaten jobs in the coal industry, arguing that new clean sources of energy were creating fresh employment opportunities.
He also called for research to be undertaken comparing job losses in the fossil fuel industry to the number of deaths caused by pollution.
"It is not the Billy Elliot days when you had big coal mines in England," said Bloomberg. "Today coal is mined by strip mining with enormous machines and very few people work in the industry.
"But there's an enormous number of jobs being created in solar and wind power so the net number of jobs because of environmental concerns has gone up, not down."