Shifting capital to the low-carbon transition Feb Andrea Marandino Sustainable Finance & Corporate Risk Specialist – WWF-UK 1

About WWF 2014 network income: EUR657 million Offices in more than 80 countries with 6,200 full time staff 2

3 How WWF works with companies and investors Projects / Operations / Asset Investments Workers Listed Companies Stock Exchanges Institutional Investors (pension funds, insurance companies, sovereign wealth funds, etc.) Investment Consultants & Asset Managers

International Climate

“[The Paris Agreement provides] an unequivocal signal to the business and financial communities, one that will drive real change in the real economy” Paul Polman, CEO Unilever, Chairman, WBCSD 5

Energy sector in the centre of the debate 6 The burning of coal, natural gas, and oil for electricity and heat is the largest single source of global GHG emissions (25%) Source: US EPA (Environmental Protection Agency)

Renewables are growing but not fast enough 7 Global energy mix: Energy sources in world total primary energy supply, share in %, 2013 Source: IEA (2015) Renewables Information Fossil fuels still make up 81% of the energy supply and renewable energy only accounts for 13.5%

8 A big disconnect US$670bn are invested in additional fossil fuel reserves every year In order to keep global temperature rise below 2oC, we need US$1tn per year invested in clean energy by 2050 Source: Ceres US$315.9bn were invested in clean energy in 2015

Corporate governance implications 9 New interpretations of fiduciary duty Shareholder activism: divestment x engagement Shareholder value at risk: an impending crisis?

Shareholder activism in the fossil fuel sector Two different movements: Shareholder engagement Divestment 10 Example: ‘Aiming for A’ investor coalition: Climate risk shareholder resolutions at BP and Shell AGMs received greater than 98% support from investors in 2015 Substantial sums could affect fossil fuel production and lower emissions: Source: HSBC

Main drivers Moral duty Financial and economic considerations: carbon bubble and stranded assets 11

12 Rockefeller Brothers Fund: “We’re making a moral case, but also, increasingly, an economic case” Source: The Guardian, March

13 “Carbon bubble”: Emissions potential of fuel reserves In a 2 o C world, 80% of the reserves owned by the 200 largest listed fossil fuel companies are unburnable Financial risk to investors Source: Carbon Tracker

Stranded Assets ‘ Wasted capital or capex’: Companies continue to spend on exploring for new oil and gas resources Fossil fuel companies risk wasting $2 trillion of shareholder’s money on uneconomic projects in the next 10 years HSBC: equity valuations could be reduced by 40-60% Concerns have been raised by many: IEA, World Bank, G20, Bank of England, Barclays, Citigroup, Standard & Poor etc. 14

15 Source: Carbon Tracker Economic risk: Capital markets are highly exposed to carbon intensive stocks

Divestment commitments continue to grow… 16 And many more: British Medical Association, Guardian Media Group, University of Glasgow, City of Bristol, World Council of Churches… Full list: and

Shareholder engagement is also growing Growth in shareholder resolutions (BP, Shell, Chevron, etc.) In Jan 2016, a global investor coalition with more than US$1bn in shares has called on Exxon to prepare for a low carbon future ‘Forceful Stewardship’: Oxbridge joint statement from Feb 2016 calling on both universities to adopt a "morally sound" investment policy ShareAction Green Light Campaign: empowering citizens to take action 17

18 Divestment vs Engagement Source: Hermes Investment, Public Report Q2 2015

Recommendations to shareholders: Do not misread the speed of the low-carbon transition! Demand better disclosure on climate risks across all sectors Decarbonise your portfolio and stress test it against 2 o C Engage-Divest: Engage with fossil fuel companies and regulators and demand more robust, forward-looking information, including the amount of CO2 locked up in their reserves and their plans for a 2 o C world, and divest from slow movers – time is running out! Litigation risk: a threat to investors that overlook climate risks and fail their fiduciary duty 19

Thank You & Questions Andrea 20