Bank of England head: Pension funds could be hit by 'worthless' fossil fuels

Oscar Williams-GrutSenior City Correspondent, Yahoo Finance UK
Mark Carney: “Up to 80% of coal assets will be stranded, up to half of developed oil reserves.” Photo: Pablo Blazquez Dominguez/Getty Images
Mark Carney: “Up to 80% of coal assets will be stranded, up to half of developed oil reserves.” Photo: Pablo Blazquez Dominguez/Getty Images

Bank of England governor Mark Carney has warned pension funds they could be stung as fossil fuels investments become “worthless” over time.

Carney said in an interview on BBC Radio 4’s Today Programme on Monday that global targets to reduce emissions would render many fossil fuel companies and their assets worthless, as people ditch ‘dirty’ energy in favour of renewables.

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“Up to 80% of coal assets will be stranded, up to half of developed oil reserves,” Carney said. “A question for every company, every financial institution, every asset manager, pension fund, or insurer: What’s your plan?”

Carney said pension funds “could make [the] argument” to clients that it is better to ditch fossil fuels now, even as returns remain attractive.

“They need to make the argument, to be clear about why is that going to be the case if a substantial proportion of those assets are going to be worthless,” the outgoing Bank of England governor said.

Carney called climate change a “tragedy on the horizon” and said the financial sector was “not moving fast enough” to address it.

The comments came during a special edition of the Today Programme guest edited by teenage environmental campaigner Greta Thunberg.

READ MORE: Credit Suisse exec: Firms ignoring climate change could 'go to zero'

Tackling climate change has been a major priority for Carney during his time at Threadneedle Street. The governor first raised the financial risk posed by warming temperatures in a speech in 2015 and has warned that firms “will go bankrupt” if they ignore climate risk. The Bank estimates that as much as $20trn-worth of assets could be at risk from climate change.

More recently, the Bank of England has committed to introducing regular climate risk ‘stress tests’ for big banks. Carney, who is set to leave the central bank next March, is also set to become the UN’s Special Envoy for Climate Action and Finance when he leaves Threadneedle Street.

Others in the financial sector are also sounding the alarm on climate change. Marisa Drew, head of Credit Suisse’s impact advisory and finance division, told Yahoo Finance UK in November that investments could “go to zero quickly” if firms ignore the risks.

READ MORE: Andrew Bailey named new Bank of England governor

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