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The bankruptcy filing in April of Peabody Energy, the world’s largest private coal company, was a warning to those that disregard the risk to their business of decarbonisation.

Peabody said it would be back because coal is “expected to be an essential source of global electricity generation and steel making for many decades to come”. But this would seem to fly in the face of the logic of the COP21 Paris climate agreement at the end of 2015, which sets a goal of global carbon neutrality during the second half of this century.

Investors are waking up to the risk that such investments could end up worthless if they fail to heed warnings about fossil-fuel intensive assets being left stranded. There is a growing body of research into the risks of investing in coal, oil and similar companies, and the burgeoning fossil-fuel divestment campaign might be accelerating the downgrading of those assets.

Broader impact

Less well understood, however, is the impact of climate change and decarbonisation on the wider economy beyond companies that extract fossil fuels. At the end of 2015, Bank of England governor Mark Carney established a Task Force on Climate-related Financial Disclosures to study exactly this issue. The aim of the task force is to develop a consistent body of disclosures companies can make to inform investors about the risks they face as the world’s exit from fossil fuels gathers steam.

By Stephen Gardner. Read the article in full at Innovation Forum.

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