Writing for FTSE Global Markets, Michael Wilkins, Head of Global Environmental & Climate Research at Standard & Poor’s, points out that while the United Nations’ COP21 conference held in December committed world leaders to do more in the battle against climate change, ultimately it will be up to the private sector to deliver the bulk of the financing for new renewable power projects and improved energy efficient technology.
Underpinning this energy transition, he explains, will be financial incentives such as emissions trading systems and carbon taxes, both of which require companies to pay for excess greenhouse gas emissions. By putting a price on carbon, it is likely that investors will shift focus towards greener, cleaner projects.
Another result is that fossil fuel-dependent assets, such as coal-fired power stations, will be at an increased risk of ‘stranding’ (i.e. considered to have little or no economic value). And according to Wilkins, financial institutions – ranging from rating agencies to institutional investors and banks – are increasingly considering the impact of climate change in their analyses as a result.
For more details, please read the full article here.