Fortune - USA (2020-04)

two existential problems, in other words,

will define humankind’s future. And it has

become increasingly clear that while govern-

ment plays a key role in the race to solve

these problems, so too do banks, insurance

companies, and asset managers: Wall Street

as well as Washington, if you like shorthand.

There’s an emerging agreement among all

parties, activists and financiers alike, that

if the transition to clean energy goes at the

pace that the oil and coal lobbyists would

like, the planet will break.

If that transition instead goes unnaturally

fast—well, we can’t stop global warming.

Not anymore. But we might limit it to the

point at which civilizations endure. I wrote

the first book for a general audience on this

topic back in 1989, and I can tell you we are

at a point we have never seen before. The

demand for urgent action is today crashing

up against a climate denial script that has

been carefully nurtured by the oil industry

since the 1990s and is now the reigning wis-

dom at the White House. Which narrative

emerges victorious will not only determine

the financial landscape of the planet, but it

will also determine the literal landscape—

how high the seas rise, how many forests

burn, how many people must leave their

homes. Changing the climate is the biggest

thing humans have ever done, and now we’ll

see how effectively we can respond to a mess

of our own making. One thing is for certain:

The chances of success are very low unless

the business world embraces the challenge.

A

BOUT A DECADE AGO,

analysts at a small London

think tank, the Carbon

Tracker Initiative, published

a report laying out the es-

sential underlying facts of the climate crisis.

The fossil fuel industry had in its inventory of

reserves a vast quantity of carbon: that is, the

coal and gas and oil deposits it had identi-

fied and told shareholders and regulators

it would burn—enough to produce almost

3,000 gigatons of carbon in the form of car-

bon dioxide. The world’s scientists, however,

had concluded that we could really only

burn about 600 gigatons more and have any

hope of meeting the climate targets that the

world’s governments had set. The numbers

have fluctuated some over the decade as

those targets have shifted, but the ratios

remain unchanged: In essence, the industry

has far, far more supply than the atmosphere

can deal with.

And that’s a problem not just for life on

earth but also for balance sheets. You could

call that excess supply a carbon bubble if

you’d like—at current prices it may represent

something like $20 trillion worth of fossil fuel

that is already reflected in the value of these

firms but that scientists say we must keep in

the ground. (The dramatic decline in crude

prices that has helped rock the stock market

of late, meanwhile, has put a profit squeeze

on Big Oil.) Mark Carney, who just stepped

down as governor of the Bank of England in

March to become the UN’s climate finance

envoy, was far ahead of other regulators in

recognizing the danger, telling the world’s

insurers at Lloyds of London in 2014 that

they were dangerously overexposed to the risk

of these potentially stranded assets.

COAL

OIL

NATURAL GAS

BIOFUEL/WASTE

NUCLEAR

HYDRO

OTHER

RENEWABLE

GLOBAL ELECTRICITY

GENERATION

SOURCES

0

5

10

15

20

25 MILLION GWH

1990 2000 2010 2017

SOURCE: IEA

A PLANET IN CRISIS : COMMENTARY

ERIK M

CGREGOR—

LIGHTRO

CKET/GETTY IM

AGES

Total value of

asset managers and

endowments that

had divested from

fossil fuels as of

December 2019

SOURCE:

GOFOSSILFUELFREE.ORG

Estimated market

value of fossil fuels

reflected in energy

companies that

scientists say we

can’t afford to burn

SOURCE: CARBON TRACKER

INSTITUTE

$12

TRILLION

$20

TRILLION

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