World’s top companies to face £1trn climate change bill - UN

Global delays in tackling climate change will cost the world’s biggest companies nearly £1trn, according to the United Nations.

The claim is included in an eagerly awaited report into the effect of climate change on global investments.

The UN will say the economic effects of these delays will cut the value of many industries and lower the returns for investors, including those saving for their pension.

The report, which has been seen by Sky News, concludes that transitioning the world to a low-carbon economy could see the assets of just 500 investment companies fall by more than £8.2trn.

And it adds that the world’s top 30,000 companies will face an extra bill of more than a trillion dollars thanks to slow progress in cutting carbon emissions.

The Paris Agreement of 2016 said that global governments should seek to limit the rise in the global temperature to less than 2 degrees above pre-industrial levels. Although the agreement has now been ratified by 185 countries, there is widespread concern that carbon emissions remain higher than at any point in history.

In particular, there is a fear that while many people say they want to take action to stop climate change, they remain unconvinced that the costs of change are worthwhile.

I understand the UN believes it is crucial to persuade investors around the world that their financial interests are best served by confronting problems now, rather than risking vastly higher costs at a later date.

But the official leading the Bank of England’s work on climate change told Sky News that financial markets are at “a pivot point” and “further action might be needed” to bring in new regulations to deal with the failure of the market to adapt.

Sarah Breeden, the bank’s executive director for international banks supervision, said: “Our focus at the moment is dealing with the unprecedented challenge of trying to analyse and understand this risk.

“This is an unprecedented challenge. It is for governments to set climate policy and it’s our job to ensure the financial system is resilient to whatever state of the world we find ourselves in.

“If the market is not doing a good job of managing that risk then it is incumbent upon us to think about whether further action might be needed to mitigate that risk.”

The UN report was written by the UN Environment Programme Finance Initiative, and included input from asset management firms around the world, among them the UK insurance giant Aviva.

The company’s chief responsible investment officer, Dr Steve Waygood, told Sky News that climate change presents “an existential risk to our sector”.

He said: “The valuation of fossil fuel sector has gone up by about $580bn (£445bn) since the Paris Agreement pen was held, so there is not a managed transition away from fossil fuels. There’s actually more money going into fossil fuels.

“For the governments to think that their job is done now that the Paris Agreement is signed is wrong. This remains the world’s biggest market failure.

“The costs of inaction are categorically higher than the costs of taking action today, much, much higher. This is about economic sense, business sense – of course we care about the pandas and the polar bears as much as anybody – but this isn’t about them, it’s about our shareholders and our customers.”

Later this month, Aviva will use its shareholding in BP to back a resolution that calls upon the company to set clearer targets for reducing carbon emissions. Similar action by shareholders at Shell resulted in the company having to accept responsibility for emissions, and Dr Waygood said that he wanted BP to come up with a clearer plan for dealing with climate change.

“It’s not new to them, they’ve been thinking about it for decades. But I don’t see a strategy that says ‘if Paris were to be delivered, what would that mean?’. What is there strategy? How do they measure performance?

“We can send a message to other shareholders that this is a fundamental issue for the board of BP. They need to think five, 10, 20 years into the future.”