Unearthed today: The money forecast and the weather forecast

Morning!

I’m reading about… the money forecast

When banks or pension funds invest in companies they are rarely thinking about the next few years, they are thinking long term. Indeed, it is the long term profitability or otherwise which decides a company’s share price and investability. Otherwise someone please explain Tesla (I mean, even with that, please explain Tesla).

So it was always the case that, for the oil giants, the forecasts of the future were going to be as important as the reality. Indeed, that’s why they put so much time and energy into trying to obscure it, to sow doubt, to put across the notion that ultimately everything will probably just stay something like the same – but with more trees, carbon storing robots and unicorns. After all, Unicorns might exist right?

Suddenly, without much warning, that strategy has stopped working. Total has just followed BP and Shell in writing off $8bn dollars worth of assets – the vast majority in Canada’s oil sands – which, in a previous story it told its shareholders only 12 months ago, were just fine.

Pension funds are also switching how they work. The FT reports today that Nest plans to invest £5.5bn into environmentally friendly strategies in a drive by the UK government-backed workplace pension scheme to decarbonise its £12bn investment portfolio and tackle global warming. Nest’s announcement follows an appeal by US pension funds managing almost $1tn to regulators urging them to treat climate change as a systemic financial risk.

And, of course, that matters because whilst some investors pro-actively think long-term others do not. A huge tranche of money just blindly tracks the world’s largest companies many of whom – especially in the UK – just so happen to be heavily bought into an economic future which is now looking decidedly shaky.

Which takes us to Responsible Investor and an article by Ben Caldecott this morning arguing that it’s not enough just to think about climate in terms of future risk – the money managers also need to invest in things which will actively reduce emissions to zero. Put simply – taking money out of companies which could go bust thanks to climate change is all very well and good, it’s not actually an investment in preventing climate change though.

“For example, reducing a company’s exposure to projected increases in Country A’s carbon prices could entail moving emitting production to Country B, which has lower environmental standards, potentially increasing net carbon pollution overall…Or a retail investor could disinvest shares from a fossil fuel company listed on the FTSE 100, thereby reducing their exposure to climate-related transition risk, but this will make very little or no difference to whether the fossil fuel company becomes more likely to achieve [emissions reductions]. Depending on who buys the disinvested shares, it could in fact, make [it] less likely.” Caldecott argues.

That’s why, he says, investors should be forced to seek net zero across their investments, starting with the financial community in the UK, which so happens to be huge. “COP26 provides a unique opportunity to mobilise ambitious action from across the financial system. In 2021, in the same way that governments will have to make new five-yearly climate targets under the Paris Agreement, financial institutions (as well as companies and other non-state actors) could be asked to do the same, with subsequent annual reporting of progress. This would be voluntary for all, but there is a strong case for the UK to lead by making such targets and plans mandatory for UK non-state actors, particularly for financial institutions, prior to the summit.”

…and the weather forecast

The Washington Post continues its world leading reporting on the impacts of climate change reporting that temperatures in Baghdad reached more than 51 degrees C on Tuesday (a new record). “The crippling heat forced many residents indoors, and street sellers had to seek whatever shade they could find. With the state electricity grid failing, many households were relying on generators to power fridges, fans or air-conditioning units, the machines adding a guttural hum to the city’s already-noisy streets.” Similar records are being broken across the Middle East a region which can ill-afford ever higher temperatures.
Meanwhile, in the Arctic, the post reports on more record temperatures, linked to accelerated melting and raging fires of the summer with massive smoke plumes extending for more than 1,000 miles. “Each day, smoke, containing planet-warming greenhouse gases, has poured into the air, while on the ground flames have been destabilizing permafrost by burning away protective vegetation above the permanently frozen soil. This, too, adds to climate change, since it frees up carbon and methane.”

“Arctic wildfire carbon emissions, driven primarily by Siberian fires, hit a record level in July, according to the Copernicus Atmosphere Monitoring Service, a European Union science agency based in Reading, England. Such data stretches back 18 years, with an increase in Arctic fire emissions seen during that period,” the post continues. And it continues, relentlessly, for another 800 words or so. Frankly, it’s enough to make me put whiskey in my tea.

Still, at least we are able to forecast and predict these things with some degree of accuracy right? Well, in many many respects – and thanks to amazing work by 1000s of scientists – yes, but in some respects, less so. Paul Voosen reports for Science of the problems scientists are having predicting how climate change will impact on rain and storms. Previously that had been put down to natural variability, but – it turns out – nature is less variable than thought, the problem instead is the models.

“The climate is much more predictable than we previously thought,” says Doug Smith, a climate scientist at the United Kingdom’s Met Office who led the 39-person effort published this week in Nature. But models don’t capture that predictability. There is hope though, now we know what the problem is.

Two other things you really need to know 

Loss of bees causes shortage of key food crops, study finds: I mean, we knew this was likely, but now we know it’s real. “The crops that got more bees got significantly more crop production,” said Rachael Winfree, an ecologist and pollination expert at Rutgers University who was a senior author of the paper, published by the Royal Society. “I was surprised, I didn’t expect they would be limited to this extent.”

Sea level rise threatens toxic sites, coastal communities: The BBC reports on the coastal communities abandoned to see their houses fall into the sea whilst Inside Climate reports from the US warns that toxic chemicals could be washed into the sea and nearby communities.