Carbon investments may run out of gas

A trader works on the floor of the New York Stock Exchange earlier this month. Photo by Reuters..
A trader works on the floor of the New York Stock Exchange earlier this month. Photo by Reuters..
Investors are being urged to recognise the risk of putting money into the fossil fuel industry.

A report released last year by the London School of Economics and Political Science (LSEPS) and climate change policy group Climate Tracker warned that many investors, including members of pension funds such as KiwiSaver, were unaware of the risks associated with holding high-carbon assets.

About 80% of known fossil fuel reserves are ''unburnable carbon'', risking leaving investors holding stranded assets, Prof Lord Nicholas Stern, of the LSEPS, says in the report.

Lord Stern says fossil fuel reserves are essentially unburnable because of the need to reduce emissions in line with global climate agreements.

Calculations are based on estimated carbon emissions from known fossil fuel reserves (2860 gigatonnes (Gt) of CO2) and the global budget for emissions to keep temperature rise below 2degC (565Gt to 886Gt of CO2 by 2050).

''Investing in companies that rely solely or heavily on constantly replenishing reserves of fossil fuels is becoming a very risky decision,'' Lord Stern says.

The report encourages individuals to ensure their pension and mutual funds have a strategy to manage the potential for wasted capital and stranded assets.

New Zealanders have more than $16 billion invested in KiwiSaver schemes.

The four biggest providers are ANZ, ASB, AMP and Westpac.

About 2% of ANZ's $4.6 billion KiwiSaver funds are invested in the energy sector.

''Investments we hold in the energy sector will be across all aspects of the industry including exploration, production, services and distribution, including fossil fuels and renewables,'' an ANZ spokesman said.

ASB KiwiSaver scheme's ''predominantly index tracking investment style'' means environmental, social, and governance considerations ''are not taken into account'', a spokesman said.

A Westpac spokeswoman said the bank was unable to calculate what proportion of its KiwiSaver funds were invested in fossil fuel and renewable energy companies.

She said the bank's affiliate, BT Financial Group was a member of the Investor Group on Climate Change and a signatory to the United Nations Principles of Responsible Investment.

AMP did not respond to questions.


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