The great carbon arbitrage
10th June 2022 | OxSFG | Tobias Adrian, Moritz Baer & Patrick Bolton
OxSFG analysis shows that phasing out coal is not just a matter of urgent necessity to limit global warming to 1.5°C; it is also a source of considerable economic gain, in terms of net benefits, defined as gross benefits minus gross costs.
Transition plans will underpin progress towards net zero
28th April 2022 | BusinessGreen | Ben Caldecott & Kate Levick
The destination, net zero by 2050, is already law in the UK. The challenge is getting all parts of society to contribute to and think constructively about how we get there. Getting companies and financial firms to do this systematically through transition plans can spur action and help shift capital allocation. Transition Plan Taskforce secretariat Co-Heads Dr Ben Caldecott and Kate Levick explain how the initiative aims to develop the 'gold standard' for UK firms’ climate transition plans.
Article first appeared on BusinessGreen.com (paywall) on 28th April 2022.
Financial institutions serious about climate change and energy security need to end financing fossil fuel expansion
27 April 2022 | OxSFG | Christian Wilson & Ben Caldecott
Christian Wilson and Dr Ben Caldecott explain the need for financial institutions to rapidly end fossil fuel expansion in light of the International Energy Agency's Net Zero Emissions by 2050 scenario. Russia’s illegal war against Ukraine is an added impetus to make this transition, because it will reduce dependency on volatile and expensive fossil fuels.
Green Finance Strategy 2.0: Here's what an ambitious UK plan should look like (pdf)
6 April 2022 | BusinessGreen | Ben Caldecott
The UK is a world-leader in green finance, but there's still much more the government can do, writes Dr Ben Caldecott of the UK Centre for Greening Finance & Investment (CGFI).
Article first appeared on BusinessGreen.com (paywall) on 6 April 2022.
We need new ways to measure finance's contribution to Net Zero
16 June 2021 | Responsible Investor | Ben Caldecott, Christian Wilson
Climate conscious financial institutions need to become much better at tracking transactions in primary markets. This is where capital actually flows from the financial system to the real economy, via the issuance of new shares or bonds. Have financial institutions contributed to these capital flows and if so, to what extent, and is this compatible with their Net Zero targets?
How the US can stimulate private investment in cutting carbon (paywall)
7 April 2021 | The Financial Times | Brad Handler, Morgan Bazilian, Ben Caldecott
Conventional wisdom has it that US president Joe Biden can effect only modest progress on climate change legislation because of the Democrats' razor-thin Senate margin (paywall). But this undervalues the levers the administration can pull, including motivating the private sector. The financial sector is particularly ripe for change.
Public ownership of private companies and net zero: what should governments do? (pdf)
5 March 2021 | BusinessGreen | Ben Caldecott, James Thornton
If governments are forced to take stakes in companies, we must ask ourselves what they should use their ownership to achieve. How can governments help companies recover from the pandemic-induced recession, improve their financial and environmental performance, and thereby protect and create value for taxpayers?
Article first appeared on BusinessGreen.com (paywall) on 5 March 2021.
UK science and finance working together to green global finance through Oxford-led centre (pdf)
15 February 2021 | BusinessGreen | Ben Caldecott
The UK is investing £10 million in a new national green finance research centre that will advise lenders, investors and insurers, enabling them to make environmentally sustainable decisions, and support a greener global economy.
Access to scientifically robust data and analytics is currently patchy and unreliable. Armed with better information, underpinned by innovative UK science, financial institutions around the world will be much better placed to make decisions that contribute to a more sustainable planet.
The UK Centre for Greening Finance and Investment (CGFI) will be funded by UK Research and Innovation (UKRI) and led by the University of Oxford. CGFI aims to ensure that financial institutions can access climate and environmental data for any point on planet earth now and projected into the future, and for every major sector.
Article first appeared on BusinessGreen.com (paywall) on 15 February 2021.
UK green taxonomy: what we should learn from the EU taxonomy and how the UK can create a race to the top
25 January 2021 | Responsible Investor | Ben Caldecott
In November 2020 the UK Government announced that it will implement a green taxonomy - a common framework for determining which activities can be defined as environmentally sustainable. The proposal for a UK taxonomy is a response to the now well-established EU taxonomy, which is attempting to define what is green and what is not for the EU-27. A 'Platform on Sustainable Finance' has been set up by the European Commission (EC) to advise them on the technical screening criteria for the EU taxonomy. The Platform has 57 members and 10 observers, including representatives from a range of lobby groups and many members selected to represent different interest groups.
It is critical that, in contrast to the Commission's process, these metrics and thresholds are set independently from vested interests and are set in a way that is transparent and scientifically rigorous, with membership of the UK Green Technical Advisory Group entirely based on expertise, not industry representation. In that way, the UK taxonomy would become the more rigorous and robust of the taxonomies and help create a race to the top dynamic with the EU and other countries introducing green taxonomies.
Successful UK carbon pricing reform needs new carbon taxes and a new net zero-aligned carbon market (pdf)
13 October 2020 | BusinessGreen | Ben Caldecott
What are the most efficient and effective ways of pricing carbon as we seek to deliver net zero by 2050 and beyond? What policies do we have already in the UK, what works, and what do need we improve upon? These are critically important questions for the government's net zero strategy.
Article first appeared on BusinessGreen.com (paywall) on 13 October 2020.
Are electric utilities greening their business?
1 September 2020 | Nature - Behavioural & Social Sciences | Galina Alova
Utilities whose business has been traditionally dominated by fossil-fuel-based power generation face a major challenge to remain competitive vis-à-vis new market entrants and renewable energy expansion. Galina Alova's recent study in Nature Energy finds that utilities' transition to green has been slow.
With the TCFD in its fifth year, it's time to make 'net zero' mandatory for financial institutions
29 July 2020 | Responsible Investor | Ben Caldecott
The focus so far has been on risk management, but to meet our climate goals, the financial community must decarbonise the economy too, says Ben Caldecott.
"Innovative investing" - Delivering Net Zero Essay Collection
15 May 2020 | bright blue | Ben Caldecott
Dr Ben Caldecott has contributed to a major essay collection, Delivering Net Zero (pdf, 205 pages, 5.1 MB), which outlines radical new ideas for how the UK can deliver on its net zero commitment by 2050, published by Bright Blue, the independent think tank for liberal conservatism, and WSP, the leading engineering professional services firm.
Covid-19 bailouts, then what? (pdf)
31 March 2020 | BusinessGreen | Ben Caldecott
Dr Ben Caldecott argues the clamour for green strings to be attached to bailout packages could be misguided – could government take a long term stake in struggling companies instead and demand bolder climate strategies as a shareholder?
Article first appeared on BusinessGreen.com (paywall) on 31 March 2020.
Public financing and sustainability
30 March 2020 | The London Institute of Banking and Finance | Ben Caldecott
Governments and government-backed entities will have an important role to play in helping to finance the transition to global environmental sustainability. Ben Caldecott looks at the opportunity for rethinking public finance and makes some recommendations.
Resilience post Covid-19 (pdf)
26 March 2020 | BusinessGreen | Ben Caldecott
Ben Caldecott reflects on how a fixation on short-run cost optimisation has resulted in economic systems and business models that are not sufficiently resilient to shocks.
Article first appeared on BusinessGreen.com (paywall) on 26 March 2020.
Viewpoint: Investing in green doesn't equal greening the world
10 February 2020 | IPE | Ben Caldecott
Financial products and services marketed as green must make a clear and measurable difference to the transition to environmental sustainability, argues Ben Caldecott.
How sustainable finance helps the real economy go green
24 January 2020 | The London Institute of Banking and Finance | Ben Caldecott
Ben Caldecott showcases a 'sustainable finance framework' that could help regulators, bankers and consumers measure the impact of financial services and finance products on greening the real economy.
Will sovereign wealth funds green the markets?
25 November 2019 | The London Institute of Banking and Finance | Ben Caldecott
The One Planet Sovereign Wealth Fund (SWF) Working Group is an international coalition of SWFs, established to address climate change. Ben Caldecott looks at what the group has achieved since then and why climate change matters for SWFs.
Viewpoint: Spatial finance has a key role (pdf)
November 2019 | IPE | Ben Caldecott
More geospatial data is being collected than ever before. New generations of tiny satellites are flying overhead in low earth orbit taking high resolution images of every point on planet earth every single day. These constellations, the largest of which currently consists of 'cube sats' (at 10cm x 10xm x 30cm in size) that allow planetary-scale change on a daily basis to be observed. These are combined with larger and often more specialised platforms and earth observation 'missions' often funded by governments - for example, US Landsat Missions and the EU Copernicus Programme. The use of drones to complement traditional forms of aerial observation is also becoming more widespread.
Article first available from IPE, November 2019 (paywall)
Next Gen Carbon Markets (pdf)
17 October 2019 | BusinessGreen | Ben Caldecott
To meet the 'well-below two degrees' objective of the Paris Agreement we need to have a negative carbon footprint ('net zero') globally by mid-century. Net zero will allow us to stabilise the stock of carbon in the atmosphere and thus also stabilise global warming, but that means reducing carbon emissions to literally zero in every sector we can, while also extracting and sequestering carbon from the atmosphere using biological, chemical, and industrial processes at incredibly large scales.
Article first appeared on BusinessGreen.com (paywall) on 17 October 2019.
How green and sustainable is China's Belt and Road Initiative?
19 August 2019 | The London Institute of Banking and Finance | Ben Caldecott
What risks does the Belt and Road Initiative present to the Paris Climate Change Agreement and the United Nations' Sustainable Development Goals? Dr Ben Caldecott looks at how to green the world's biggest infrastructure programmes and the tools financial institutions will need to help them support it.
How banks can contribute to the Paris Agreement and the Sustainable Development Goals
1st July 2019 | In Social Market Foundation & Chartered Bankers Institute essay collection How sustainable finance can tackle the climate emergency | Ben Caldecott
The real economy cannot transition in time to meet the SDGs and the Paris Agreement without the banking sector providing the capital and services needed. It is in the interests of banks to move quickly given the scale of the opportunities and the risks that are already materialising. Banks need to develop comprehensive strategies, together with detailed plans for implementation tied to appropriate resourcing and levels of accountability to ensure implementation. This will likely become a mandatory regulatory requirement, and this is already so in the UK. But banks should be responsible and act sooner rather than later. Critically, it is also in their own commercial interests to do so and they should not wait for regulation.
Banks need to get ahead of climate change, or else (paywall)
30 June 2019 | Financial Times | Ben Caldecott
Real economy cannot meet sustainability goals without help from financial sector. Banks are where the financial system and the real economy meet. The UN's Sustainable Development Goals and the Paris climate change agreement will be unattainable unless banks finance solutions to these massive social and environmental challenges. Nor can we have efficient, fair and resilient financial and economic systems if banks fail to manage and reduce environment-related risks for themselves and their clients.
The future of engagement
17 June 2019 | Top1000Funds.com | Ben Caldecott
The Oxford Sustainable Finance Group at the University of Oxford has established a new research theme on The Future of Engagement, that will look at how to achieve greater success in engagement. Director of the program, Ben Caldecott, explains how emerging technologies, changing client preferences, new regulatory landscapes, and evolving economic geographies create new opportunities for more effective engagement and forms of active ownership.
'Encourages laziness and disincentives ambition': Ben Caldecott shares his thoughts on the EU's green taxonomy
14 June 2019 | Responsible Investor | Ben Caldecott
This is the second in RI's 'The EU Action Plan: What Matters To Me' series, providing insights from market experts on the implications of the current EU Action Plan on Sustainable Finance. Today, Oxford University's Dr Ben Caldecott gives ten reasons why the current proposals for a green taxonomy are a bad idea.
Why banks must develop climate strategies
21 May 2019 | The London Institute of Banking and Finance | Ben Caldecott
Ben Caldecott explains why new changes to banking supervision mean climate change must now be treated as a strategic issue by all UK regulated banks.
Debt capital markets and financing clean energy
22 March 2019 | The London Institute of Banking and Finance | Ben Caldecott
The stock of cumulative investment in clean energy looks set to increase annually by at least US$300bn to US$350bn over the next decade. But it will have to increase by much more if we are to meet the commitments implied in the Paris Agreement on Climate Change. This means that global debt capital markets must be accessed. Ben Caldecott explains why.
Collaborating for Growth: Sustainable Finance in Asia
12 March 2019 | HSBC Guest Blog | Ben Caldecott
Demand and interest in sustainable finance is not a passing fad. Environmental challenges are getting worse, societal concern for the environment is growing, and as countries develop there will both be more assets to be invested, as well as more concern for sustainability-related issues. Policymakers, regulators, financial institutions, and the ultimate owners of wealth - citizens - are coming together in Malaysia and elsewhere to ensure finance becomes more sustainable. Not only is aligning finance with sustainability a great opportunity, it is also a necessary condition for saving our environment.
Sustainable finance: time for a shift of focus
13 January 2019 | The London Institute of Banking and Finance | Ben Caldecott
The December 2018/January 2019 edition of our member journal, Financial World, featured a series of articles looking at some of the issues around sustainable investing and its impact on both the planet and on financial services.
Environmental footprints, investing and changing company behaviour
18 December 2018 | Nordea Guest Blog | Ben Caldecott
Investor influence on companies and their environmental footprints differs enormously by asset class, sector, and geography, as well as (of course), by the size and reputation of the investor(s) in question. This needs to be much more clearly expressed to clients seeking to influence company behaviours through their investment choices.
A necessary starting point is, of course, understanding the environmental footprint companies and assets in personal or institutional investor portfolios have, and what particular environmental issues are being targeted. The next step needs to be a much more sophisticated and realistic conversation about what influence is possible where, followed by an effective execution strategy that prioritises concerted action and coordination with other like-minded investors. Asset managers and financial advisors need to up their game and provide these solutions. Only then is there a good chance that investors can actually reduce the environmental footprint of their holdings.
Data capture, not disclosure, is the way to meet our climate goals
12 September 2018 | World Economic Forum | Ben Caldecott
We have an entered an age of ubiquitous information and, potentially, ultra-transparency. New sensors, whether cube satellites in space or those contained in our smartphones, are generating constant streams of data. In the realm of sustainability and finance, these capabilities will allow us to upend the current information asymmetries that exist between companies and their investors, and between financial institutions and their regulators.
Ultra-transparency and the associated earth observation and data science capabilities we need, as well as the balance between public and private contributions to make them widespread, must be figured out now. Without progress on data, the TCFD and so many other related processes will not succeed.
Committed emissions from existing and planned power plants and asset stranding required to meet the Paris Agreement (journal article)
4 May 2018 | Environmental Research Letters | Alexander Pfeiffer, Cameron Hepburn, Adrien Vogt-Schilb, Ben Caldecott
Over the coming decade, the power sector is expected to invest ~7.2 trillion USD in power plants and grids globally, much of it into CO2-emitting coal and gas plants. These assets typically have long lifetimes and commit large amounts of (future) CO2 emissions. Here, we analyze the historic development of emission commitments from power plants and compare the emissions committed by current and planned plants with remaining carbon budgets. Based on this comparison we derive the likely amount of stranded assets that would be required to meet the 1.5C-2C global warming goal. We find that even though the growth of emission commitments has slowed down in recent years, currently operating generators still commit us to emissions (~300GtCO2) above the levels compatible with the average 1.5C-2C scenario (~240GtCO2). Furthermore, the current pipeline of power plants would add almost the same amount of additional commitments (~270GtCO2). Even if the entire pipeline was cancelled, therefore, ~20% of global capacity would need to be stranded to meet the climate goals set out in the Paris Agreement. Our results can help companies and investors re-assess their investments in fossil-fuel power plants, and policymakers strengthen their policies to avoid further carbon lock-in.
Empirical Calibration of Climate Policy using Corporate Solvency
18 January 2018 | Climate Policy | Ben Caldecott
At present, policymakers do not have a means to accurately and impartially gauge the impact of climate policies on corporate solvency. If they did, policymakers could optimise climate policy so that it delivered the least loss of corporate solvency for any given level of emissions reduction. An ideal solvency trajectory for firms affected by climate change policy would cause corporate solvency to initially decline - approaching but not exceeding 'distressed' levels - and then gradually improve to a new 'steady state' once the low-carbon transition had been achieved, at which point the carbon-limiting regulation would continue. At present, there is considerable potential for industrial outcry and political lobbying to influence policy resulting in negative social consequences. By contrast, a climate change policy partly based on corporate solvency could be adjusted relatively mechanically at each financial reporting period, and would be automatically sensitive to variations in the business cycle.
A green BRI is a global imperative
15 December 2017 | ChinaDialogue | Ben Caldecott
The successful implementation of the Paris Agreement and the Sustainable Development Goals will be impossible if the huge amount of capital invested under Belt and Road Initiative (BRI) is inconsistent with tackling climate change and ensuring sustainable development. "Greening" BRI is therefore a priority of global significance. A pre-requisite for greening BRI is understanding, firstly, the impacts that current and planned BRI projects will have on the local and global environment, as well as on sustainable development and, secondly, the stranded asset risks current and planned BRI projects face from different physical and transition risks related to environmental change, particularly climate change. The new "Green BRI Platform" relies on methodologies Oxford has trialled and refined intensively with major financial institutions. At the heart of this project is a new online data and analysis platform that will be available in the first half of 2018. It can help all financial institutions meet their commitments to integrate climate and sustainability assessment into their decision-making across multiple sectors. This same information will also be useful for policymakers, regulators, companies, and civil society.
Coal-fired power stations in Coal in the 21st Century: Energy Needs, Chemicals and Environmental Controls published by the Royal Society of Chemistry (journal article)
4 October 2017 | Royal Society of Chemistry | Lucas Kruitwagen, Seth Collins and Ben Caldecott
Lucas Kruitwagen, Seth Collins and Ben Caldecott contribute a chapter entitled 'Coal-fired power stations' to Coal in the 21st Century: Energy Needs, Chemicals and Environmental Controls published by the Royal Society of Chemistry. The future of coal in the 21st century depends largely on the future of coal combustion for power generation. This chapter provides a technical overview of coal-fired power stations and their exposure to a wide array of environment-related risks, including greenhouse gas emissions and stranded assets; water consumption and competition with agriculture, industry, and domestic uses; climate stresses induced by anthropogenic climate change (of which they are the primary cause); competition with renewables and generating flexibility; costs and trade-offs of mitigation options; retrofitability with carbon capture and storage; and the availability of finance. The future of coal in the 21st century depends largely on the response of policy makers, industry and the concerned public to these risks.
Green Fintech Catapult
2 October 2017 | The Economist Intelligence Unit | Ben Caldecott
We are entering the most capital intensive period in human history with clean technologies at the very centre. This will benefit owners and organisers of capital and the UK is uniquely placed to reap the benefits. Fundamental to this is transparency. Financial centres agglomerate and attract financial institutions and related service providers to be close to one another for many reasons. One of these reasons is to reduce information asymmetries and the transaction costs associated with gathering, assuring, and using information. For green finance to develop and expand in the UK, financial institutions must have unparalleled levels of access to information to enable its financial institutions to fully assess environmental risks, returns, and impacts. Data and information allows financial markets to access green opportunities and manage physical and transition risks related to environmental change.
Asian utilities need to wake up to limitations of new coal
22 August 2017 | Business Times, Singapore | Ben Caldecott
While Europe and Asia are at different stages of development, the European experience provides some instructive lessons. Company executives in Europe were too optimistic about coal, a technology that they believed was "safe" or "tried and tested". Coal is, in fact, perhaps the generation technology most vulnerable to low marginal cost renewables, commodity price volatility, concerns about air pollution, competition from gas, and of course, necessary action to tackle climate change. The scale and pace of the decline in coal's economic attractiveness in Europe is significant and provides a cautionary tale for Asian utilities and their investors.
Planned coal plant expansions in Europe have backfired, Asia could lose too
16 August 2017 | Business Standard | Ben Caldecott
Between 2005 and 2008 European utilities were determined to embark on a major coal-plant construction programme. They announced plans to build 49 GW of new coal-fired power capacity. To date, 77% of this new capacity has been cancelled, with more likely to be cancelled soon. 20GW has been cancelled in Germany alone. The economics of existing plants have deteriorated too. New analysis from the University of Oxford Smith School of Enterprise and the Environment finds that unjustified optimism in the future of coal at a company-level combined with wishful thinking in sector-wide forecasting led to the proposed coal expansions that ultimately backfired. The scale and pace of the decline in coal's economic attractiveness is significant and provides a cautionary tale for Asian utilities and their investors.
Why Indian power companies must dump coal and bet big on solar, wind
14 August 2017 | Hindustan Times | Ben Caldecott
The economics of coal-fired power generation is incredibly vulnerable, much more so than is recognised. Coal is particularly at risk from competition from low cost renewables, volatile commodity prices, growing concerns about air pollution, worsening water availability for cooling, the increasing incidence of heat waves that reduce operating efficiencies and, of course, necessary action to tackle climate change. These factors in combination are driving the structural decline of coal. The implications for Indian power companies and their investors are crystal clear: Bets on new coal don't pay off whilst solar and other renewables are both cheaper and much more resilient to the challenges and opportunities of the future.
Back-tag to the future! We need to tag and back-tag all new and outstanding issuance of securities 'green' or 'sustainable'
26 July 2017 | Responsible Investor | Ben Caldecott
All the current 'green' tagging of securities is focussed on new bond issuance wanting to self-identify as green. This accounted for only 2.1% of total new bond issuance globally in Q1 2017 and 0.25% of the global bond market. Many bonds that do not self-identify as green are as 'green' as their officially labelled equivalents. Accurately tagging all 'green' securities would enable institutional investors to shift allocations in the right direction over time. A major new undertaking is required by actors engaged in sustainable finance: the systematic tagging and back-tagging all new and outstanding issuance of securities and loans 'green' or 'sustainable'.
Despite the best of intentions green 'use of proceeds' bonds are a distraction and a false hope
28 June 2017 | The Economist Intelligence Unit | Ben Caldecott
Debt capital markets, particularly bond markets, will play a critical role in financing large parts of the transition to global environmental sustainability. These deep pools of low cost capital are well suited to the capital-intensive projects and technologies that need to be deployed to implement both the Paris Agreement and the Sustainable Development Goals (SDGs). The green bonds that now dominate the conversation in ESG and Responsible Investment circles are the kind issued by a sovereign, multilateral institution, or company as 'use of proceeds' bonds. But green bond advocates need to be much more honest about what a green 'use of proceed' bond does and does not do. They face significant problems and these are underplayed and under-appreciated by market participants.
Large is beautiful: could asset owner consolidation boost sustainable finance?
27 June 2017 | Responsible Investor | Ben Caldecott
The key factor for the development of sustainable finance is demand for related products and services, particularly from asset owners. One generalisation that can be made across all these different groups is that the larger the asset owner, the greater the number opportunities it has to access different asset classes and markets, as well as develop, operate, and use different types of analysis to improve decision-making. Helping smaller asset owners to consolidate and upskill could help create champions able to spur significant demand for products and services related to sustainable finance and investment. This could complement demand from existing larger asset owners.
Saudi Aramco IPO - an upside for the climate?
2 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?
29 March 2017 | Responsible Investor | 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 Group at the Oxford Smith School, published by Responsible Investor.
Stranded assets: The transition to a low-carbon economy
23 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 Group 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
31 January 2017 | Responsible Investor | 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 Group at the Oxford Smith School, published by Responsible Investor.
Special Issue of the Journal of Sustainable Finance & Investment: Stranded Assets and the Environment (Journal articles)
15 December 2016 | Ben Caldecott
Ben Caldecott, Director of the Sustainable Finance Group 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 Group 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
11 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 Group 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
14 November 2016 | Ben Caldecott
Ben Caldecott, Director of the Sustainable Finance Group 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
1 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 Group 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
28 October 2016 | Sustainable Finance Group
This report has been developed as part of a joint initiative with E3G, the Oxford Smith School Sustainable Finance Group, 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 Group 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.
How asset-level data can improve the assessment of environmental risk in credit analysis
3 October 2016 | Ben Caldecott and Lucas Kruitwagen
In a guest commentary for Standard & Poor's the Sustainable Finance Group at the Oxford Smith School examines how in the absence of perfect reporting, asset-level data can open up sophisticated new bottom-up approaches to measuring environmental risk that are particularly relevant to credit risk analysis.
Carbon Capture and Storage in the thermal coal value chain
28 June 2016 | Ben Caldecott, Lucas Kruitwagen, and Irem Kok
In the latest issue of the Oxford Energy Forum published by the Oxford Institute for Energy Studies, the Sustainable Finance Group at the Oxford Smith School examines the limited role CCS might play in mitigating environment-related risk in the thermal coal value chain.
Climate Disclosure: How to Make it Fly
17 May 2016 | Sustainable Finance Group and 2° Investing Initiative
The Sustainable Finance Group 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-Amer4ican 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.
Avoiding Stranded Assets in State of the World 2015: Confronting Hidden Threats to Sustainability (pdf)
13 April 2015 | WorldWatch Institute with Ben Caldecott
Ben Caldecott contributes a chapter entitled 'Avoiding Stranded Assets' to State of the World 2015, the flagship publication of the Worldwatch Institute. The book explores hidden threats to sustainability and how to address them. Eight key issues are addressed in depth, along with the central question of how we can develop resilience to these and other shocks.
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.
Closing UK unabated coal: Coal-fired generation should end by the close of 2020
27 February 2015 | BusinessGreen by Ben Caldecott
Opinion piece by Ben Caldecott argues that remaining UK subcritical coal-fired power stations should be closed by the end of 2020.
The solution to coal plants? Pay their owners to close them
9 September 2014 | China Dialogue by Ben Caldecott
Opinion piece by Ben Caldecott arguing how compensating owners of coal assets for prematurely closing their power stations could be a cost-effective and politically feasible way of dealing with coal divesment.
The coal industry needs to know the game is up
30 July 2014 | BusinessGreen by Ben Caldecott
Opinion piece by Ben Caldecott arguing how the world needs to develop Coal Closure Funds to manage the necessary decline of the industry.
Investors should be wary of domino effect on 'stranded assets'
13 June 2014 | China Dialogue by Ben Caldecott
The US fossil fuel divestment campaign could increase the chance of carbon pollution regulation, thereby stranding some carbon-intensive assets.
Why the coal industry is right to fear divestment
3 April 2014 | The Drum by Ben Caldecott
Divestment by Australia's Group of Eight universities would have little direct impact on the fossil fuel industry, but the message it would send would be powerful.
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.
Australia could be caught out by Chinese peak in coal demand
17 December 2013 | China Dialogue by Ben Caldecott
Falling Chinese demand for coal could impact the viability of Australian coal projects.
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".
What does divestment mean for the valuation of fossil fuel assets?
8 October 2013 | BusinessGreen by Ben Caldecott
Ben Caldecott explains why fossil fuel investors and companies should be concerned about the emerging divestment trend.
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.
Stranded assets in Agriculture: Are we facing a multi-trillion dollar agri-bubble?
9 August 2013 | BusinessGreen opinion piece by Ben Caldecott
Writing in BusinessGreen, Ben Caldecott highlights the need for investors and asset managers in the agricultural supply chain to prioritise environmental factors in their risk management strategies.
Bank of England's opportunity to tackle market failure
6 February 2012 | The Guardian by Ben Caldecott and James Leaton
Writing in The Guardian, Ben Caldecott and James Leaton recommend that the Bank of England investigate the financial system's exposure to high carbon and environmentally unsustainable investments.
High-carbon investment and systemic risk
12 July 2011 | The Guardian by Ben Caldecott
Writing in The Guardian, Ben Caldecott explores how markets might be fundamentally mispricing risk and as a result, creating a systemic risk that threatens long-term growth.