Climate policies will shrink value of carbon intensive businesses by 43%

Utilities burning fossil fuels could lose 43% of their value due to policies designed to combat climate change, according to an international network of investors.

The UN-supported Principles for Responsible Investment (PRI) commissioned a study carried out by Vivid Economics, which predicts that the world’s largest listed coal companies could see their value fall by 44% and the 10 biggest firms in oil and gas could lose 31% of their current value.

The figures quoted in the report and reported on by the BBC today, rely on an assumption that politicians will be forced to respond strongly to the growing climate crisis.

The most progressive companies, responding to predicted changes in climate policy, will see an uplift in their value of 33%, according to the report. 

Car manufacturers making the swiftest transition to electric vehicles are projected to increase in value by 108%, but those slow to the transition will see their value fall, as governments realise that petrol and diesel models must be phased out faster for climate targets to be met, according to the study.

Electric utilities with the strongest strategy for renewables could also see values increase by 104%, while laggards could see them fall by two-thirds, it found.

Similarly, miners producing minerals critical for the transition may see a 54% boost in value, while those with the smallest share of “green minerals” will witness valuations almost halving.

Agricultural firms with high exposure to sustainable biofuels and non-beef protein sources could gain at least 10% of current value while those exposed to under-pressure sectors such as cattle may lose between 15% and 43% - depending on their links with deforestation, said the PRI.

Fiona Reynolds, CEO of the PRI, said: “This analysis underscores the extent to which markets are under-pricing climate transition risk.

“One in five of the world’s most valuable companies are impacted by at least 10% in either direction.

“While the market-level effects of an abrupt policy response to climate change may appear manageable, this masks a much more complex and significant story, with some huge winners and losers emerging between sectors and within them.”

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