UN: Carbon-intensive businesses will lose trillions as climate policies tighten

Oil and gas majors could lose almost one-third (31%) of their value by 2030

That is a warning issued today (9 December) by the UN’s Principles for Responsible Investment (PRI) arm, ahead of a key investor session at COP25 in Madrid this evening.

The PRI commissioned analytics firm Vivid Economics to analyse what the “inevitable policy response” to the climate emergency is likely to be on a global scale, and the impact these changing policies will have on businesses.

It found that carbon-intensive firms which fail to change their business models are likely to lose up to 43% of their value by 2030, against a 2018 baseline. Industries considered to be at risk in this trend include oil and gas, where, according to CDP, the sector’s 24 largest publicly listed firms spend just 1.3% of their combined capital expenditure (CAPEX) into low-carbon technologies and projects between January and October 2018.

Coal, building materials, cattle, soy, automaking and metals and mining were also determined to be likely to lose much value over the next decade.

On the flip side, the PRI-funded research found that companies which act rapidly to spur the low-carbon transition are likely to see an average value uplift of one-third within the next decade.

Particularly primed to benefit from a swift transition are carmakers, the study found, with electric vehicle (EV) portfolios likely to increase in value by 108%.

The findings rely on the assumption that policymakers in most of the world’s major economies will be forced to introduce strict new climate policies amid increased demands from business, investors, and the public, and increased exposure to physical climate risks.

Such policies would include net-zero targets of 2050 or sooner, bolstered with shorter-term and sector-specific roadmaps; carbon pricing and other tax mechanisms; and the alteration of the legal process by which businesses causing negative environmental impacts can be held to account.

Wishful thinking?

World leaders, business representatives and activists are currently discussing these, and other sustainability issues, at COP25 in Madrid.

Given that current policies are, according to the UN, likely to result in 3.4C of warming above pre-industrial levels by 2100, opinion on whether the “inevitable policy response” will be brought about in time to limit warming to 1.5C – if at all – is split.

However, Vivid Economics’ findings are similar to those of several other recent studies on the economic impacts of climate change and policy responses.

One study this August,  co-authored by researchers from the University of Cambridge and published by the National Bureau of Economic Research, concluded that 7% of global GDP will disappear by 2100 over the impacts of climate change and stricter policies.

Similarly, the Bank of England’s Mark Carney warned corporations this autumn that they will lose trillions of dollars through the imposition of stricter green policies in the coming decades, and that those wishing to get ahead of the curve should set ambitious internal targets.

With regards to oil and gas specifically, Carbon Tracker is forecasting that large companies within this space will lose £1.8trn to stranded assets by 2030. Oil and Gas UK’s head of upstream policy claims that British oil and gas majors are “actively reducing their carbon footprints, pursuing technologies including Carbon Capture and Storage and diversifying their businesses into a broader mix of renewable energy”.

Sarah George

Comments (1)

  1. Keiron Shatwell says:

    So the world is going to give up using petrochemicals, synthetic fabrics and all the other billions of products (many lifesaving) that come from Crude Oil and Gas?
    So Electric Vehicles are not going to be made from steels, aluminium and plastic?
    And Lithium, Cobalt, Nickel, Tantalium and other Rare Earth Elements grow on trees does they?

    What a complete load of waffle and garbage.

    Crude production, mining and other heavy industries will continue to be required and be a corner stone of industry for decades to come

Action inspires action. Stay ahead of the curve with sustainability and energy newsletters from edie