January 19, 2012 / 3:33 PM / 9 years ago

UPDATE 2-UK's high-carbon investment risky, central bank told

* Heavy carbon emitting investments could harm UK growth

* Financial committee urged to investigate risks

LONDON, Jan 19 (Reuters) - The Bank of England should look into how Britain’s exposure to high carbon emitting investments might harm the UK’s financial system and long-term economic growth prospects, a coalition of investors, academics and environmentalists said on Thursday.

The group, which includes clean energy investor Climate Change Capital, FairPensions, the London School of Economics, as well as environmental groups Greenpeace UK and WWF and members of parliament, wrote in an open letter to the bank’s governor, Mervyn King.

It urged the bank’s Financial Policy Committee to investigate the risks to the UK economy of potentially environmentally damaging investments.

A Bank of England spokesman confirmed the letter had been received but decline to comment further.

The bank’s committee was formed late last year to examine threats to financial stability, such as the sale of risky financial instruments and credit oversupply, and to recommend actions.

Britain’s financial exposure to high carbon and environmentally unsustainable investments could become a major problem as the country tries to move to a low-carbon economy, the letter said.

Regulators are not currently monitoring the concentration of high carbon investments in UK’s financial system and have no view on what level would be too high, it said.

Five of the top 10 FTSE 100 companies, which account for a quarter of the index’s entire market capitalisation, emit high quantities of greenhouse gas carbon dioxide, the coalition said.

Mining companies BHP Billiton , Rio Tinto , as well as oil and gas firms Royal Dutch Shell , BP and BG Group, are in the top 10.

Similar levels of exposure are likely in other indexes, companies, bank loan books and in the strategic asset allocation decisions taken by institutional investors, the letter said.

“Investors continue to pour cash into unsustainable high carbon assets without understanding or being able to manage the risks associated with these investments, such as climate change, local pollution, fossil fuel price volatility, political risk and catastrophes such as Deepwater Horizon,” said James Cameron, founder and chairman of Climate Change Capital and member of the prime minister’s business advisory group.

“This poses significant strategic challenges for the future prosperity of Britain that just can’t be ignored.”

A separate report on Thursday said UK investors were exposed to significant risks through pension plans and savings because coal, the most carbon-intensive fossil fuel, faces tightening emissions curbs around the world.

Around 400 times the UK’s annual carbon dioxide (CO2) emissions from coal, or 44.56 gigatonnes of CO2 equivalent, are represented on the London Stock Exchange through coal companies listed in London, said the report by the Carbon Tracker Initiative, a non-profit research body.

“With natural resources companies now making up a third of the value of the FTSE 100, London has a high concentration in this sector. There is currently no limit to how much coal can be owned by UK-listed companies, so investors have no protection from coal reserves becoming stranded assets,” said James Leaton, project director at the Carbon Tracker Initiative.

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below