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Saudi Aramco IPO – an upside for the climate?
2nd May 2017 | The Economist Intelligence Unit
| Ben Caldecott
The planned listing of part of Saudi Aramco on one or more international stock exchanges is one of the big energy stories of this year and next. It is anticipated that the listing of around 5% of Saudi Aramco could give it an implied value of potentially up to US$2 trillion, making it the most valuable company on earth. This is likely to be viewed with some trepidation by those concerned with tackling climate change. After all, Saudi Aramco has both the world's largest proven oil reserves and largest daily oil production. If its oil reserves were burnt they would account for around 15% of the remaining global carbon budget - the amount of carbon that can be emitted for a 66% probability of keeping the rise in global temperatures below 2°C. However, there is a potentially compelling, if counter-intuitive, climate 'upside' associated with the IPO of Saudi Aramco and there could be good cause for those concerned about climate change to promote its listing, particularly on a well-regulated exchange such as the London Stock Exchange.
Mainstreaming sustainable finance part 2 - reasons for optimism?
29th March 2017 | Ben Caldecott
The financial system has the capacity to change remarkably quickly. Many of the 'permanent' features of capital markets in terms of norms, practices, asset classes, and architecture are in fact quite new and became 'standard' very quickly. This highlights how rapid innovation and then the dissemination and mainstreaming of such innovation is a feature of capital markets. Low barriers to replication, large incentives for replication, and highly connected clusters where information and knowledge are shared quickly in common languages (accounting, mathematics, and English) all make this possible. This suggests pathways to successfully mainstream sustainable finance at the scale and pace required given the environmental challenges we face. This is part of a series of articles by Ben Caldecott, Director of the Sustainable Finance Programme at the Oxford Smith School, published by Responsible Investor.
Stranded assets: The transition to a low-carbon economy
23rd February 2017 | Lloyd's of London Emerging Risk Report
A new study as part of Lloyd's Emerging Risk Report Series was carried out in partnership with the Sustainable Finance Programme at the Oxford Smith School. The report, 'Stranded assets: The transition to a low-carbon economy', recommends that firms should stress-test portfolios to build a picture of potential exposure to stranded assets or consider the specific environmental characteristics of investments in their portfolios whilst playing an active role in the development of legislation and regulation around environmental policy. The report looks at actual and potential examples of how stranded assets caused by societal and technological responses to climate change could affect assets and liabilities in the insurance and reinsurance sector. The study aims to increase the understanding and awareness of these issues in the insurance industry. The report found this to be especially relevant for insurers and reinsurers exposed to vulnerable carbon-based assets and liabilities in the energy, commercial property and shipping sectors.
Mainstreaming sustainable finance by moving out of the echo chamber
31st January 2017 | Ben Caldecott
Integrating the environment and climate change into investor decision making will make capital less likely to flow to assets that are incompatible with sustainability and more likely to flow to assets that are. This is a necessary condition to address climate change and the other environmental challenges facing humanity. Doing so will also help financial institutions appropriately manage risk, improving the resilience of the financial system as a whole. For these reasons mainstreaming sustainable finance is critically important. Success in mainstreaming sustainable finance will depend on understanding what mainstreaming actually means and what this might really entail. Too often 'mainstreaming' is brandished around as an objective in this context without it being appropriately defined - which makes it very hard to track progress or to see what various efforts are contributing. This is the first of series of articles by Ben Caldecott, Director of the Sustainable Finance Programme at the Oxford Smith School, published by Responsible Investor.
Special Issue of the Journal of Sustainable Finance & Investment: Stranded Assets and the Environment
15th December 2016 | Ben Caldecott
Ben Caldecott, Director of the Sustainable Finance Programme at the Oxford Smith School, is the guest editor of a Special Issue entitled 'Stranded Assets and the Environment' published by the Journal of Sustainable Finance & Investment
. To critically review and help formulate a better understanding of stranded assets, and to help foster the development of the academic literature on the topic, the Sustainable Finance Programme organised the 1st Global Conference on Stranded Assets and the Environment on the 24th and 25th September 2015 at The Queen's College, Oxford. The conference brought together over 120 leading scholars and practitioners from a range of disciplines, including economics, finance, geography, management, and public policy. The Special Issue contains 8 of the 25 papers presented at the conference and these were selected through a multiple stage short-listing process based on an editorial assessment of quality and novelty, followed by double-blind peer review.
Avoiding gridlock: policy directions for Australia's electricity system
11th December 2016 | Alexander Marks
A secure energy future will remain out of reach unless Australia's energy system adjusts to new technologies like rooftop solar generation and battery storage, according to a paper released by the Centre for Policy Development and the Sustainable Finance Programme at the Oxford Smith School. Avoiding Gridlock: Policy Directions for Australia's Energy System argues that rising prices, lower energy consumption, and technological advances in renewable generation and storage are reshaping our electricity system. Regulators must keep pace to improve outcomes for consumers and strengthen overall energy security.
What environment change might mean for commodity traders
14th November 2016 | Ben Caldecott
Ben Caldecott, Director of the Sustainable Finance Programme at the Oxford Smith School, provides a guest expert commentary on what the environment might mean for commodity traders in the 2016 Trafigura annual responsibility report. He argues that the vast majority of commodity traders will be reluctant to adapt as there are sunk costs and it is too easy to irrationally discount these factors. The firms that adapt and do so early have a good chance of flourishing in a significantly altered operating environment, but those that don't will see significant asset stranding.
Stranded assets: a climate risk challenge
1st November 2016 | Ben Caldecott
, Elizabeth Harnett
, Theodore Cojoianu
, Irem Kok
, Alexander Pfeiffer
The Inter-American Development Bank (IDB) published report authored by a team led by Ben Caldecott, Director of the Sustainable Finance Programme at the Oxford Smith School. Despite the importance of stranded assets, there is little analytical work available on the subject in Latin America and the Caribbean, a region that is vulnerable to the physical effects of climate change and to regulatory responses to the phenomenon. The report provides a better understanding of the topic that could lead to the design and implementation of management strategies that might contribute to diffusing some of the associated risks.
A Sustainable Finance Plan for the European Union
28th October 2016 | Sustainable Finance Programme
This report has been developed as part of a joint initiative with E3G, the Oxford Smith School Sustainable Finance Programme, 2 Degrees Investing Initiative, Ario Advisory, Carbon Tracker Initiative, ClientEarth, Climate Bonds Initiative, Climate Disclosure Standards Board, Eurosif, Future-Fit Foundation, Preventable Surprises, ShareAction, and WWF. It outlines a 'Sustainable Finance Plan 2030' that focuses on three key aims and objectives that should be central to the European Commission's strategy on sustainable finance. First, the Commission should focus on increasing investment in sustainable infrastructure. It should use the current infrastructure investment gap as an opportunity to boost development and employment opportunities, shore up investor confidence in the European project, and put the EU on a pathway to sustained economic recovery whilst managing climate risk. Second, it should look for opportunities to increase responsible investment practices. The need to address social and environmental problems should be at the heart of the financial reform agenda to enable sustainable growth. Third, the Commission should improve climate risk disclosures. Good governance and better information can help improve corporate accountability, an enabler of inclusive prosperity. Eight priority actions are recommended to take this forward.
Avoiding long-term value destruction: a conversation
7 October 2016 | Ben Caldecott
and Roger Urwin
In June 2016, the Investment Institute brought together Ben Caldecott, the Director of the Sustainable Finance Programme at the University of Oxford's Smith School of Enterprise and the Environment, and Roger Urwin, Global Head of Investment Content at investment consultant Willis Towers Watson, to discuss the issue of stranded assets and how investors can defend their portfolios from the long-term value destruction that could arise from asset stranding.
Climate Disclosure: How to Make it Fly
17 May 2016 | Sustainable Finance Programme & 2° Investing Initiative
The Sustainable Finance Programme and 2° Investing Initiative ('2DII') published a joint submission to the Financial Stability Board's Task Force on Climate-related Financial Disclosures (TCFD), chaired by Michael Bloomberg. The submission recommends that existing asset-level information, that is widely available but in disparate locations, be brought together in ways that can complement existing voluntary disclosure.
The future of climate-related disclosure
29 February 2016 | The Economist Intelligence Unit
| Ben Caldecott
The European Systemic Risk Board (ESRB) has joined with the Bank of England and the G20 Financial Stability Board in highlighting how a late and abrupt transition to a low carbon economy could have implications for financial stability. The ESRB has emphasised the need to pre-emptively manage 'stranded asset' risk in financial institutions, and throughout the financial system as a whole, but without better data availability this will be extremely challenging. Correcting this major gap is now an urgent priority.
Why stranded assets matter and should not be dismissed
9 December 2015 | The Conversation
| Ben Caldecott
Whatever the outcome of the climate talks in Paris, one thing is certain: climate change will result in assets becoming “stranded”. And, despite the claims of various naysayers, investors should be prepared. Ben Caldecott explores why stranded assets matter in The Conversation
Stranded Assets and Multilateral Development Banks
November 2015 | Inter-American Development Bank | Ben Caldecott
, Ana Rios, Amal-Lee Amin
To lay the foundation for practical and implementable approaches to stranded assets, especially from a multilateral development bank (MDB) perspective, three main topics of consideration are highlighted in this publication by the Inter-American Development Bank (IDB) and authored by Ben Caldecott.
Download: English version
| Spanish version
An Economy That Works: Policy Report
13 March 2015 | Aldersgate Group with Ben Caldecott
This report on “An Economy That Works” initiative hosts contributions from leading experts on one facet of the six core areas of An Economy That Works: high employment, equality of opportunity, wellbeing, low carbon development, zero waste and enhancing the UK's natural capital.
Sidestepping Australia's unsustainable assets
27 March 2014 | Business Spectator by Ben Caldecott
There are a variety of converging risks that could erode or destroy the value of polluting and environmentally unsustainable assets in Australia and almost everywhere else. These range from climate change, through to new environmental regulations, developments in clean energy technologies, resource limits, evolving public opinion, and litigation.
Steps to deal with emerging risks of stranded assets
5 December 2013 | Pensions & Investments by Ben Caldecott
Changes in environmental regulations and technologies could quickly erode the value of assets in various sectors including energy and real estate. Ben Caldecott, Director of the Stranded Assets Programme at the Smith School of Enterprise and the Environment, Oxford University, offers steps to deal with emerging risks of so-called "stranded assets".
The environment: The carbon bubble
5 September 2013 | The Actuary
Catherine Cameron, Elisa Hewlett, Simon Jones and Paula Robinson evaluate the current carbon budget commitment and the implications for fossil fuel investments.